7/28/2019 Property (Midterms) http://slidepdf.com/reader/full/property-midterms 1/31 LADERA VS. HODGES Doctrine: Article 315 of the Civil Code (now Article 415, New Civil Code) makes no distinction as to whether the owner of the land is or is not the owner of the building. Facts: Ladera entered into a contract with Hodges whereby the latter promised to sell a lot subject to certain terms and conditions. In case of failure of the purchaser to make a monthly payment within 60 days after it fell due, ―this contract may be taken and considered as rescinded and annulled,‖ in which case all sums of money paid would be considered rentals and the vendor shall be at liberty to dispose of the parcel of land with all the improvements theron to any other person in a manner as if this contract had never been made. After the execution of the contract, Ladera built on a lot a house of mixed materials assessed at P4500. Unfortunately, Ladera failed to pay the agreed installments, whereupon the appellant rescinded the contract and filed an action for ejectment. The MTC rendered a decision upon agreement of the parties- Ladera to vacate and surrender possession of the lot and pay P10 a month until delivery of the premises. The court issued an alias writ of execution and pursuant thereto the sheriff levied upon all rights, interests, and participation over your house standing on the lot. The sheriff posted the notices of the sale but did not publish the same in a newspaper of general circulation. At the auction sale Ladera did not attend because she had gone to Manila and the sheriff sold the property to Avelina Magno as the highest bidder. On July 6, 1948, Hodges sold the lot to Manuel Villa and on the same day the latter purchased the house from Magno for P200 but this last transaction was not recorded. Ladera returned to Iloilo after the sale and learned of its results. She went to see the sheriff and upon the latter‘s representation that she could redeem the property, she paid him P230 and the sheriff issued a receipt. It does not appear, however, that this money was turned over to Hodges. Thereupon, Ladera spouses filed an action against Hodges, the sheriff, and the judgment sale purchasers, Magno and Villa to set aside the sale and recover the house. The lower court ruled in favor of Ladera. Hodges et al contend that the house being
Doctrine: Article 315 of the Civil Code (now Article 415, New Civil Code) makesno distinction as to whether the owner of the land is or is not the owner of thebuilding.Facts: Ladera entered into a contract with Hodges whereby the latter promisedto sell a lot subject to certain terms and conditions. In case of failure of thepurchaser to make a monthly payment within 60 days after it fell due, ―thiscontract may be taken and considered as rescinded and annulled,‖ in which caseall sums of money paid would be considered rentals and the vendor shall be atliberty to dispose of the parcel of land with all the improvements theron to anyother person in a manner as if this contract had never been made. After theexecution of the contract, Ladera built on a lot a house of mixed materials
assessed at P4500.Unfortunately, Ladera failed to pay the agreed installments, whereupon theappellant rescinded the contract and filed an action for ejectment. The MTCrendered a decision upon agreement of the parties- Ladera to vacate andsurrender possession of the lot and pay P10 a month until delivery of thepremises. The court issued an alias writ of execution and pursuant thereto thesheriff levied upon all rights, interests, and participation over your house standingon the lot. The sheriff posted the notices of the sale but did not publish the samein a newspaper of general circulation.
At the auction sale Ladera did not attend because she had gone to Manila andthe sheriff sold the property to Avelina Magno as the highest bidder. On July 6,1948, Hodges sold the lot to Manuel Villa and on the same day the latter purchased the house from Magno for P200 but this last transaction was notrecorded.
Ladera returned to Iloilo after the sale and learned of its results. She went to seethe sheriff and upon the latter‘s representation that she could redeem theproperty, she paid him P230 and the sheriff issued a receipt. It does not appear,however, that this money was turned over to Hodges. Thereupon, Laderaspouses filed an action against Hodges, the sheriff, and the judgment salepurchasers, Magno and Villa to set aside the sale and recover the house. Thelower court ruled in favor of Ladera. Hodges et al contend that the house being
built on land owned by another person should be regarded in law as movable or personal property.
Issue: Whether the house being built on land owned by another should be
regarded as movable property.Held: According to Article 334 of the Civil Code (now 415), Immovable propertyare the following: ―Lands, building, roads, and constructions of all kinds adheringto the soil;‖ Applying the principle Ubi lex non distinguit nec nos distingueredebemu, the law makes no distinction as to whether the owner of the land is or isnot the owner of the building. In view of the plain terms of the statute, the onlypossible doubt could arise in the case of a house sold for demolition.In the case of immovables by destination, the code requires that they be placedby the owner of the tenement, in order to acquire the same nature or consideration of real property. In cases of immovable by incorporation, the codenowhere requires that the attachment or incorporation be made by the owner of the land. The only criterion is union or incorporation with the soil.
Ladera did not declare his house to be a chattel mortgage. The object of the levyor sale was real property. The publication in a newspaper of general circulationwas indispensible. It being admitted that no publication was ever made, theexecution sale was void and conferred no title on the purchaser.
The alleged purchaser at the auction sale, Magno, is a mere employee of thecreditor Hodges and the low bid made by her as well as the fact that she sold thehouse to Villa on the same day that Hodges sold him the land, proves that shewas merely acting for and in behalf of Hodges.
It should be noted that in sales of immovables, the lack of title of the vendor taints the rights of subsequent purchasers. Unlike in sales of chattels andpersonalty, in transactions covering real property, possession in good faith is not
equivalent to title.
TUMALAD VS. VICENCIOFacts:On 1 September 1955 Vicencio and Simeon,defendants-appellants, executed achattel mortgage in favor of the Tumalads, plaintiff-appellees over their house of strong materials over a lot in Quiapo, which were being rented from Madrigal &
Company, Inc. The mortgage was executed to guarantee a loan of P4,800.00received from the Tumalads, payable within one year at 12% per annum. The mode of payment was P150.00 monthly, It was also agreedthatdefault in the payment of any of the amortizations would cause the remainingunpaid balance to become immediately due and payable, the Chattel Mortgageenforceable, and the Sheriff of Manila authorized to sel l theMortgagor‘s propertyafter necessary publication. When Vicencio and Simeondefaulted in paying, themortgage was extrajudicially foreclosed, and on 27 March1956, the house wassold at public auctionpursuant to the said contract. As highestbidder, theTumalads were issued the corresponding certificate of sale. On 18 April 1956,the Tumalads commenced case in the municipal court of Manila, praying that thehouse be vacated and its possession surrendered to them, and for Vicencio andSimeon to pay rent of P200.00 monthly up to the time the possession issurrendered. The municipal court rendered its decision in favor of the Tumalads.
Defendant-appellants impugned the legality of the chattel mortgage claiming thatthey are still the owner of the house but waived their rights to introduce evidence.Nearly a year after the foreclosure sale the mortgaged house had beendemolished on 14and 15 January 1957 by virtue of a decision obtained by thelessor of the land on which the house stood for non-payment of rentals.Issues:1.WON the subject matter of the mortgage which is a house of strong materialcan be subject of real estate mortgage or a chattel mortgage.2.Whether or not the defendants are legally bound to pay rentals to the plaintiffsduring the period of 1 year provided by law for the redemption of the
extrajudicially foreclosed house.Held:The inclusion of the building separate and distinct from the land in the
enumeration of what may constitute real property, that the building is by itself animmovable property.However deviations have been allowed for various reasonsspecially if it is stipulated in the subject of contract. In the case at bar, althoughthere is no specific statement referring to the subject house as a personalproperty, yet by ceding, selling or transferring a property by way of chattelmortgage, defendants-appellants could only have meant to convey the house asa chattel.Hence if a house belonging to a person stands on a rented landbelonging to another person, it may be mortgaged as a personal property as sostipulated in the document of mortgage. It should be noted that the principle ispredicated on statements by the owner declaring his house to be chattel. Party ina chattel mortgage cannot question the validity of the chattel mortgage enteredinto. The doctrine of estoppels therefore applies to the defendant-appellants.Since the defendant-appellants were occupying the house at the time the auctionof sale, they are entitled to remain in possession during the period of redemptionor within one year from the date of auction sale and to collect the rents or profitsduring the said period. And since the plaintiff-appellees right to possess was not
yet born at the filing of the complaint, there could be no violation or breachthereof.
LEUNG YEE VS. STRONG MACHINERY COMPANY
FACTS The Compania Agricola Filipina (CAF) purchased from Strong Machinery Co. rice –cleaning machines which CAF installed in one of its buildings.
As security for the purchase price, CAF executed a chattel mortgage onthe machines and the building on which they had been installed.When CEF failed to pay, the registered mortgage was foreclosed and Strong Machinery Co. purchased the building. This sale was annotated in the Chattel Mortgage Registry.Later, Strong Machinery Co. also purchased from Agricola the lot on which the buildingwas constructed. The sale wasn't registered in the Registry of Property BUT Strong
Machinery Co. took possession of the building and the lot.However, the same building had been previously purchased by Leung Yee, a creditor of Agricola , at a sheriff's sale despite his knowledge of the prior sale in favor of Strong Machinery Co. . The sale to Leung Yee was registered in the Registry of Property.ISSUES 1. Was the property's nature changed by its registration in the Chattel MortgageRegistry?2. Who has a better right to the property?HELD 1. Where the interest conveyed is of the nature of real property, the placing of thedocument on record in the Chattel Mortgage Registry is a futile act.Chattel Mortgage refers to the mortgage of Personal Property executed in themanner and form prescribed in the statute. Since the building is REAL PROPERTY , its sale as annotated in the Chattel MortgageRegistry cannot be given the legal effect of registration in the Registry of Real Property.The mere fact that the parties decided to deal with the building as personal property does not change its character as real property.
Neither the original registry in the chattel mortgage registry, nor the annotation in saidregistry of the sale of the mortgaged property had any effect on the building.
1. Art. 1473 of the New Civil Code provides the following rules on determiningownership of property which has been sold to different vendees:
If Personal Property – grant ownership to person who 1st possessed it ingood faith
If Real Property – grant ownership to person who 1st recorded it in theRegistry
If no entry – grant to person who 1st possessed in good faith If no proof of possession – grant to person who presents oldest title
Since Leung Yee purchased the property despite knowledge of the previous purchaseof the same by Strong Machinery Co. , it follows that Leung Yee was not a purchaser ingood 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. The same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and investigation asmight be necessary to acquaint him with the defects in the title of his vendor.‖
Good Faith , or the want of it, is a “state or condition of m ind which can only be judged of by actual or fancied tokens or signs.” (Wilder vs. Gilman, 55Vt., 504, 505;Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs.Bromley, 119Mich., 8, 10, 17.)Honesty Of Intention is the honest lawful intent constituting good faith . It impliesa freedom from knowledge and circumstances which ought to put a person on
inquiry . As such, proof of such knowledge overcomes the presumption of good faith. Following the rule on possessory rights provided in Art. 1473 , Strong Machinery Co. has a better right to the property since it first purchased the same ahead of LeungYee, the latter not being a purchaser in good faith.
YAP VS. TANADADoctrine: Article 415, par. 3 of the Civil Code considers and immovable propertyas ―everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deteriorating theobject.‖ The pump does not fit this description. It could be, and was, inf act,separated from Yap‘s premises without being broken of sufferingdeterioration. Obviously, the separation or removal of the pump involved nothingmore complicated that the loosening of bolts or dismantling of other fasteners.
Facts: The case began in the City Court of Cebu with the filing of Goulds PumpsInternational (Phil), Inc. of a complaint against Yap and his wife seeking recoveryof P1,459.30, representing the balance of the price and installation cost of awater pump in the latter‘s premises. The Court rendered judgment in favor of
herein respondent after they presented evidence ex-parte due to failure of petitioner Yap to appear before the Court. Petitioner then appealed to the CFI,particularly to the sale of Judge Tanada. For again failure to appear for pre-trial,Yap was declared in default. He filed for a motion for reconsideration which wasdenied by Judge Tanada. On October 15, 1969, Tanada granted Gould‘s Motionfor Issuance of Writ of Execution. Yap forthwith filed an Urgent Motion for Reconsideration of the said Order. In the meantime, the Sheriff levied on thewater pump in question and by notice scheduled the execution sale thereof. Butin view of the pendency of Yap‘s motion, suspension of sale was directed by
Judge Tanada. It appears, however, that this was not made known to the Sheriff whocontinued with the auction sale and sold the property to the highest bidder,Goulds. Because of such, petitioner filed a Motion to Set Aside Execution Saleand to Quash Alias Writ of Execution. One of his arguments was that the salewas made without the notice required by Sec. 18, Rule 29 of the New Rules of Court, ―i.e. notice by publication in case of execution of sale of real property, thepump and its accessories being immovable because attached to the ground withthe character of permanency.‖ Such motion was denied by the CFI. Issue: Whether or not the pump and its accessories are immovable propertyHeld: No. The water pump and its accessories are NOT immovable properties.The argument of Yap that the water pump had become immovable property by itsbeing installed in his residence is untenable. Article 415, par. 3 of the Civil Codeconsiders and immovable property as ―everything attached to an immovable in afixed manner, in such a way that it cannot be separated therefrom withoutbreaking the material or deteriorating the object.‖ The pump does not fit thisdescription. It could be, and was, in fact,separated from Yap‘s premises withoutbeing broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners.
STANDARD OIL COMPANY OF NEW YORK VS. JARAMILLAThe Power of the Registry of Deeds is Ministerial, and The absolute criterion todetermine between real and personal property is NOT supplied by the civil code.Parties may agree what to treat as personal property and what to treat as real
FACTS: Gervasia dela Rosa executed a document in the form of a Chattel Mortgagepurporting to convey to Standard Oil Co. by way of mortgage both the leaseholdinterest of the land she leases in Manila and the building which stands thereon.
The clauses in said document describe the property as personal including theright, title and interest of the mortgagor in and to the contract of lease and alsothe building of the said premises therein.
After said document had been duly acknowledge and delivered, the petitioner presented it to Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded. The respondent opined that it was nota chattel mortgage for the interests mortgaged did not appear to be personalproperty within the meaning of the Chattel Mortgage Law and registration wasrefused on this ground only.ISSUE:
1. Whether or not said property could be a subject for mortgage.2. Whether the respondent is clothe with authority to determine such.. RULING: The duties of a register of deeds in respect to the registration of chattelmortgages are of purely ministerial character and no provision of law can be citedwhich confers upon him any judicial or quasi-judicial power to determine thenature of any document of which registration is sought as a chattel mortgage.The efficacy of the act of recording a chattel mortgage consists in the fact that itoperates as constructive notice of the existence of the contract, and the legaleffects of the contract must be discovered in the instrument itself in relation withthe fact of notice. Registration adds nothing to the instrument, considered as asource of title, and affects nobody‘s rights except as a species of notice.
The parties to a contract may by agreement treat as personal property that whichby nature would be real property and it is a familiar phenomenon to see thingsclassed as real property for purposes of taxation which on general principle mightbe considered personal property.
It is unnecessary to determine whether or not the property described in thedocument is real or personal. The issue is to be determined by the Court and notby the register of deeds.
BURGOS, SR. VS. CHIEF OF STAFFFacts: Petitioners assail the validity of 2 search warrants issued on December 7, 1982by respondent Judge Cruz-Pano of the then Court of First Instance of Rizal, under which the premises known as No. 19, Road 3, Project 6, Quezon City, and 784 Units C& D, RMS Building, Quezon Avenue, Quezon City, business addresses of the"Metropolitan Mail" and "We Forum" newspapers, respectively, were searched, and
office and printing machines, equipment, paraphernalia, motor vehicles and other articles used in the printing, publication and distribution of the said newspapers, as wellas numerous papers, documents, books and other written literature alleged to be in thepossession and control of petitioner Jose Burgos, Jr. publisher-editor of the "We Forum"newspaper, were seized. As a consequence of the search and seizure, these premises
were padlocked and sealed, with the further result that the printing and publication of said newspapers were discontinued. Respondents contend that petitioners should havefiled a motion to quash said warrants in the court that issued them before impugning thevalidity of the same before this Court. Respondents also assail the petition on ground of laches (Failure or negligence for an unreasonable and unexplained length of time to dothat which, by exercising due diligence, could or should have been done earlier. It isnegligence or omission to assert a right within a reasonable time, warranting apresumption that the party entitled to assert it either has abandoned it or declined toassert it). Respondents further state that since petitioner had already used as evidencesome of the documents seized in a prior criminal case, he is stopped from challengingthe validity of the search warrants.
Petitioners submit the following reasons to nullify the questioned warrants:1. Respondent Judge failed to conduct an examination under oath or affirmation of the applicant and his witnesses, as mandated by the above-quotedconstitutional provision as well as Sec. 4, Rule 126 of the Rules of Court.2. The search warrants pinpointed only one address which would be theformer abovementioned address.3. Articles belonging to his co-petitioners were also seized although thewarrants were only directed against Jose Burgos, Jr.4. Real properties were seized.5. The application along with a joint affidavit, upon which the warrants wereissued, from the Metrocom Intelligence and Security Group could not haveprovided sufficient basis for the finding of a probable cause upon which a warrantmay be validly issued in accordance with Section 3, Article IV of the 1973Constitution.
Respondents justify the continued sealing of the printing machines on the ground thatthey have been sequestered under Section 8 of Presidential Decree No. 885, asamended, which authorizes sequestration of the property of any person engaged insubversive activities against the government in accordance with implementing rules andregulations as may be issued by the Secretary of National Defense.
Issue: Whether or Not the 2 search warrants were validly issued and executed.
Held: In regard to the quashal of warrants that petitioners should have initially filed tothe lower court, this Court takes cognizance of this petition in view of the seriousnessand urgency of the constitutional Issue raised, not to mention the public interestgenerated by the search of the "We Forum" offices which was televised in Channel 7and widely publicized in all metropolitan dailies. The existence of this specialcircumstance justifies this Court to exercise its inherent power to suspend its rules. With
the contention pertaining to laches, the petitioners gave an explanation evidencing thatthey have exhausted other extra-judicial efforts to remedy the situation, negating thepresumption that they have abandoned their right to the possession of the seizedproperty.
On the enumerated reasons:1. This objection may properly be considered moot and academic, aspetitioners themselves conceded during the hearing on August 9, 1983, that anexamination had indeed been conducted by respondent judge of Col. Abadillaand his witnesses.2. The defect pointed out is obviously a typographical error. Precisely, twosearch warrants were applied for and issued because the purpose and intentwere to search two distinct premises. It would be quite absurd and illogical for respondent judge to have issued two warrants intended for one and the sameplace.3. Section 2, Rule 126, of the Rules of Court, does not require that theproperty to be seized should be owned by the person against whom the searchwarrant is directed. It may or may not be owned by him.4. Petitioners do not claim to be the owners of the land and/or building onwhich the machineries were placed. This being the case, the machineries inquestion, while in fact bolted to the ground, remain movable property susceptibleto seizure under a search warrant.5. The broad statements in the application and joint affidavit are mereconclusions of law and does not satisfy the requirements of probable cause.Deficient of such particulars as would justify a finding of the existence of probablecause, said allegation cannot serve as basis for the issuance of a search warrantand it was a grave error for respondent judge to have done so. In Alvarez v.Court of First Instance, this Court ruled that "the oath required must refer to thetruth of the facts within the personal knowledge of the petitioner or his witnesses,because the purpose thereof is to convince the committing magistrate, not theindividual making the affidavit and seeking the issuance of the warrant, of theexistence of probable cause." Another factor which makes the search warrantsunder consideration constitutionally objectionable is that they are in the nature of general warrants. The description of the articles sought to be seized under thesearch warrants in question are too general.
With regard to the respondents invoking PD 885, there is an absence of anyimplementing rules and regulations promulgated by the Minister of National Defense.Furthermore, President Marcos himself denies the request of military authorities tosequester the property seized from petitioners. The closure of the premises subjected tosearch and seizure is contrary to the freedom of the press as guaranteed in our fundamental law. The search warrants are declared null and void.
Doctrine: Movable equipment, to be immobilized in contemplation of Article 415of 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 thebusiness 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 toanother, the tools and equipment in its repair shop which appear movable aremerely incidentals and may not be considered immovables , and, hence, notsubject to assessment as real estate for purposes of the real estate tax.
Facts: Respondent City Assessor of Cagayan de Oro City assessed at P4,400petitioner‘s equipment in its repair or service shop. Petitioner appealed t heassessment to the respondent Board of Tax Appeals on the ground that thesame 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 therespondent city assessor‘s 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 Article415 of the New Civil Code, and holding that pursuant thereto, the movableequipments 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 Article415 of the Civil Code, must be the essential and principal elements of an industryor works which are carried on in a building or on a piece of land. Thus, where thebusiness is one of transportation, which is carried on without a repair or serviceshop, and its rolling equipment is repaired or serviced in a shop belonging toanother, the tools and equipments in its repair shop which appear movable aremerely incidentals and may not be considered immovables, and, hence, notsubject 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 petitioner‘s business of transporting passengers and cargoes by motor trucks. They are merelyincidentals – acquired as movables and used only for expediency to facilitateand/or improve its service. Even without such tools and equipment, its businessmay be carried on, as petitioner has carried on without such equipments, beforethe war. The transportation business could be carried on without the repair or
Ruling/ Rationale:Yes. The Supreme Court affirmed the decision of the lower court.
Machinery which is movable in its nature only becomes immobilized when placedin 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 suchperson acted as the agent of the owner. A tenant placed machines for use in a sawmill on the landlord's land.
FACTS Davao Sawmill Co., operated a sawmill. The land upon which the business wasconducted was leased from another person. On the land, Davao Sawmill erected abuilding which housed the machinery it used. Some of the machines were mounted andplaced on foundations of cement. In the contract of lease, Davo Sawmill agreed to turnover free of charge all improvements and buildings erected by it on the premises withthe exception of machineries, which shall remain with the Davao Sawmill. In an actionbrought by the Davao Light and Power Co., judgment was rendered against DavaoSawmill. A writ of execution was issued and the machineries placed on the sawmill werelevied upon as personalty by the sheriff. Davao Light and Power Co., proceeded topurchase the machinery and other properties auctioned by the sheriff.ISSUE
Are the machineries real or personal property?
HELD Art.415 of the New Civil Code provides that Real Property consists of:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
(5) Machinery, receptacles, instruments or implements intended by the owner pf thetenement for an industry ot works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
Appellant should have registered its protest before or at the time of the sale of theproperty. While not conclusive, the appellant's characterization of the property aschattels is indicative of intention and impresses upon the property the character determined by the parties.
Machinery is naturally movable. However, machinery may be immobilized by destinationor purpose under the following conditions:
General Rule : The machinery only becomes immobilized if placed in a plant by theowner of the property or plant.
Immobilization cannot be made by a tenant, a usufructuary, or any person havingonly a temporary right.
Exception : The tenant, usufructuary, or temporary possessor acted as agent of theowner of the premises; or he intended to permanently give away the property in favor of the owner.
As a rule, therefore, the machinery should be considered as Personal Property, since itwas not placed on the land by the owner of the said land.
PEOPLE’S BANK VS. DAHICAN LUMBER Facts:
On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginiacorporation licensed to do business in the Philippines sold and assigned all its rights inthe Dahican Lumber concession to Dahican Lumber Company - hereinafter referred toas DALCO - for the total sum of $500,000.00, of which only the amount of $50,000.00was paid. Thereafter, to develop the concession, DALCO obtained various loans fromthe People's Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00. Inaddition, DALCO obtained, through the BANK, a loan of $250,000.00 from the Export-Import Bank of Washington D.C., evidenced by five promissory notes of $50,000.00each, maturing on different dates, executed by both DALCO and the Dahican AmericaLumber Corporation, a foreign corporation and a stockholder of DALCO,
As security for the payment of the abovementioned loans, on July 13, 1950 DALCOexecuted in favor of the BANK a deed of mortgage covering five parcels of land situatedin the province of Camarines Norte together with all the buildings and other improvements existing thereon and all the personal properties of the mortgagor locatedin its place of business in the municipalities of Mambulao and Capalonga, CamarinesNorte. On the same date, DALCO executed a second mortgage on the same propertiesin favor of ATLANTIC to secure payment of the unpaid balance of the sale price of thelumber concession amounting to the sum of $450,000.00. Both deeds contained aprovision extending the mortgage lien to properties to be subsequently acquired by themortgagor.
Both mortgages were registered in the Office of the Register of Deeds of CamarinesNorte. In addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure the same obligation.
Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity,the BANK paid the same to the Export-Import Bank of Washington D.C., and the latter assigned to the former its credit and the first mortgage securing it. Subsequently, theBANK gave DALCO and DAMCO up to April 1, 1953 to pay the overdue promissorynote.c
After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCOpurchased various machineries, equipment, spare parts and supplies in addition to, or inreplacement of some of those already owned and used by it on the date aforesaid.Pursuant to the provision of the mortgage deeds quoted theretofore regarding "after acquired properties," the BANK requested DALCO to submit complete lists of saidproperties but the latter failed to do so. In connection with these purchases, thereappeared in the books of DALCO as due to Connell Bros. Company (Philippines) - adomestic corporation who was acting as the general purchasing agent of DALCO -thesum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.chan
On December 16, 1952, the Board of Directors of DALCO, in a special meeting calledfor the purpose, passed a resolution agreeing to rescind the alleged sales of equipment,spare parts and supplies by CONNELL and DAMCO to it.
On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demandedthat said agreements be cancelled but CONNELL and DAMCO refused to do so. As aresult, on February 12, 1953; ATLANTIC and the BANK, commenced foreclosureproceedings in the Court of First Instance of Camarines Norte against DALCO andDAMCO.
Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the venue of the action to the Court of First Instance of Manila.
On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all themachineries, equipment and supplies of DALCO, and the same were subsequently soldfor a total consideration of P175,000.00 which was deposited in court pending finaldetermination of the action. By a similar agreement one-half (P87,500.00) of thisamount was considered as representing the proceeds obtained from the sale of the"undebated properties" (those not claimed by DAMCO and CONNELL), and the other half as representing those obtained from the sale of the "after acquired properties".
ISSUE:
WON the "after acquired properties" were subject to the deeds of mortgage mentionedheretofore. Assuming that they are subject thereto,WON the mortgages are valid and binding on the properties aforesaid inspite of the factthat they were not registered in accordance with the provisions of the Chattel MortgageLaw.
Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all propertyof every nature and description taken in exchange or replacement, as well as allbuildings, machineries, fixtures, tools, equipments, and other property that the
mortgagor may acquire, construct, install, attach; or use in, to upon, or in connectionwith the premises - that is, its lumber concession - "shall immediately be and becomesubject to the lien" of both mortgages in the same manner and to the same extent as if already included therein at the time of their execution. Such stipulation is neither unlawful nor immoral, its obvious purpose being to maintain, to the extent allowed bycircumstances, the original value of the properties given as security.
Article 415 does not define real property but enumerates what are considered as such,among them being machinery, receptacles, instruments or replacements intended byowner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or
works. MAKATI LEASING VS. WEAREVER TEXTILE
Doctrine: Where a chattel mortgage is constituted on a machinery permanentlyattached to the ground, the machinery is to be considered as personal property.
Facts: Wearever Textile Mills, Inc. discounted and assigned several receivableswith Makati Leasing and Financial Corp. under a Receivable Purchase
Agreement so that the latter would lend money to the former. In order to securethe collection of the receivables assigned, Wearever executed a ChattelMortgage over certain raw materials inventory as well as a machinery (Artos
Aero Dryer Stentering Range). Upon default of Wearever in paying what is due,Makati Leasing filed a petition for extrajudicial foreclosure of the propertiesmortgaged to it. The Sheriff assigned to execute such foreclosure, however,failed to enter the premises of Wearever to effect the seizure of the machinery.
Afterwhich, petitioner filed a complaint for a judicial foreclosure with the RTC of Rizal which was granted even after the motion for reconsideration filed by theprivate respondent. Enforcing then the writ of seizure issued by the lower court,the Sheriff removed the main drive motor of the machinery. Upon appeal, CAreversed the ruling of the RTC and ordered the return of the motor to Wearever since the said machinery cannot be the subject of a replevin and chattelmortgage for it is a real property pursuant to Art. 415 (3) of the NCC. CA arguedthat the machinery is attached to the ground by means of bolts and the only wayto remove it from the respondent‘s plant would be to drill out or destroy the
concrete floor – which is why all that the sheriff could do to enforce the writ wasto take the main drive motor of the machinery. Hence, this petition for certiorari.Issue: Whether the machinery is a personal property.Held: Yes. By destination, it is a real property but by virtue of the intention of the
parties stipulated in their chattel mortgage contract, the machinery was intendedto be a personal property. The Court made reference to its ruling in Tumalad v.Vicencio and Standard Oil Co. of New York v. Jaramillo where it held that a realproperty may be considered as a personal property for purposes of executing achattel mortgage thereon as long as the parties to the contract so agree and noinnocent third party will be prejudiced thereby, and once the parties so agreed,they are already stopped from claiming otherwise. Private respondent contendedthat its characterization of the subject machinery as chattel in their agreementshould not be appreciated against it because it had never represented nor
agreed in such as it was merely required and dictated on by the petitioner to signa chattel mortgage in blank form. The Court was not persuaded by its contentionas the said issue was not duly raised in the lower and appellate courts nor willthe said signing in blank by the respondent make the contract void but merelyvoidable by a proper action in court. Furthermore as it was undeniable that itbenefited from the chattel mortgage, it cannot be allowed to impugn its efficacyfor equity reasons.
BERKENKOTTER VS. CU UNJIENG
On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng eHijos, a loan secured by a first mortgage constituted on 2 parcels of land "with allits buildings, improvements, sugar-cane mill, steel railway, telephone line,apparatus, utensils and whatever forms part or is a necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in thefuture exist in said lots.‖
On 5 October 1926, the Mabalacat Sugar Company decided to increase thecapacity of its sugar central by buying additional machinery and equipment, sothat instead of milling 150 tons daily, it could produce 250. Green proposed to the
Berkenkotter, to advance the necessary amount for the purchase of saidmachinery and equipment, promising to reimburse him as soon as he couldobtain an additional loan from the mortgagees, Cu Unjieng e Hijos, and that incase Green should fail to obtain an additional loan from Cu Unjieng e Hijos, saidmachinery and equipment would become security therefore, said Green bindinghimself not to mortgage nor encumber them to anybody until Berkenkotter befully reimbursed for the corporation's indebtedness to him.
Having agreed to said proposition made in a letter dated 5 October 1926,Berkenkotter, on 9 October 1926, delivered the sum of P1,710 to Green, the totalamount supplied by him to Green having been P25,750. Furthermore,Berkenkotter had a credit of P22,000 against said corporation for unpaid salary.With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co.,Inc., purchased the additional machinery and equipment.
On 10 June 1927, Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment acquired bysaid Green and installed in the sugar central after the execution of the originalmortgage deed, on 27 April 1927, together with whatever additional equipmentacquired with said loan. Green failed to obtain said loan. Hence, abovementioned mortgage was in effect.
Issue:
Are the additional machines also considered mortgaged?Held:
Article 1877 of the Civil Code provides that mortgage includes all naturalaccessions, improvements, growing fruits, and rents not collected when theobligation falls due, and the amount of any indemnities paid or due the owner bythe insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations establishedby law, whether the state continues in the possession of the person whomortgaged it or whether it passes into the hands of a third person. It is a rule, that
in a mortgage of real estate, the improvements on the same are included;therefore, all objects permanently attached to a mortgaged building or land,although they may have been placed there after the mortgage was constituted,are also included.
Article 334, paragraph 5, of the Civil Code gives the character of real property tomachinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carriedon therein and which are expressly adapted to meet the requirements of suchtrade or industry. The installation of a machinery and equipment in a mortgaged
sugar central, in lieu of another of less capacity, for the purpose of carrying outthe industrial functions of the latter and increasing production, constitutes apermanent improvement on said sugar central and subjects said machinery andequipment to the mortgage constituted thereon.
The Supreme Court reversed the decisionappealed from and entered another dismissingthe complaint, with costs against plaintiffs-appellees.
PCI Leasing and Finance filed a complaint for sum of money, with an application for a
writ of replevin.Judge issued a writ of replevin directing its sheriff to seize and deliver the machineriesand equipment to PCI Leasing after 5 days and upon the payment of the necessaryexpenses.The sheriff proceeded to petitioner's factory, seized one machinery, with word that hewould return for other machineries.Petitioner (Serg‘s Products) filed a motion for special protective order to defer enforcement of the writ of replevin.PCI Leasing opposed the motion on the ground that the properties were still personaland therefore can still be subjected to seizure and writ of replevin.Petitioner asserted that properties sought to be seized were immovable as defined in
Article 415 of the Civil Code.Sheriff was still able to take possession of two more machineriesIn its decision on the original action for certiorari filed by the Petitioner, the appellatecourt, Citing the Agreement of the parties, held that the subject machines were personalproperty, and that they had only been leased, not owned, by petitioners; and ruled thatthe "words of the contract are clear and leave no doubt upon the true intention of thecontracting 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 issuedfor 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 maybe carried on in a building or on a piece of land, and which tend directly to meet theneeds of the said industry or works
In the present case, the machines that were the subjects of the Writ of Seizure wereplaced by petitioners in the factory built on their own land. They were essential andprincipal elements of their chocolate-making industry. Hence, although each of themwas movable or personal property on its own, all of them have become ―immobilized bydestination because they are essential and principal elements in the industry.‖
However, contracting parties may validly stipulate that a real property be considered as
personal. After agreeing to such stipulation, they are consequently estopped fromclaiming otherwise. Under the principle of estoppel, a party to a contract is ordinarilyprecluded from denying the truth of any material fact found therein.
Section 12.1 of the Agreement between the parties provides ―The PROPERTY is, and
shall at all times be and remain, personal property notwithstanding that the PROPERTYor any part thereof may now be, or hereafter become, in any manner affixed or attachedto or embedded in, or permanently resting upon, real property or any building thereon,or attached in any manner to what is permanent.‖
The machines are personal property and they are proper subjects of the Writ of Replevin. ( WRIT OF REPLEVIN , practice. The name of a process issued for therecovery of goods and chattels)
LOPEZ VS. OROSADoctrine: In the absence of any specific provision of law to the contrary, a
building is an immovable property, irrespective of whether or not said structureand the land on which it is adhered to belong to the same owner.Facts: Sometime in May, 1946, Vicente Orosa, Jr., invited Lopez to make aninvestment in the theatre business. Although Lopez expressed his unwillingnessto invest of the same, he agreed to supply the lumber necessary for theconstruction of the proposed theatre, and at Orosa‘s request and assurance thatthe latter would be personally liable for any account that the said constructionmight incur, Lopez further agreed that payment therefore would be on demandand not cash on delivery basis. With this, Lopez delivered the lumber which wasused 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 butLopez was only paid P20,848.50, thus leaving a balance of P41,771.35. Orosaand Rustia, corporation president, promised Lopez to obtain a bank loan tosatisfy the balance, to which assurance Lopez had to accede. Unknown toLopez, Orosa and Rustia already secured a loan for P30,000 from the PNB withthe Luzon Surety Company as surety, and the corporation in turn executed amortgage 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 TorrensSystem, the mortgage on the same was registered on 16 November 1946, under
Act 3344. Subsequently, when the corporation applied for the registration of theland under Act 496, such mortgage was not revealed and thus OCT O-391 wascorrespondingly issued on October 25, 1947, without any encumbranceappearing thereon.
Persistent demand from Lopez caused Vicente Orosa, Jr. to execute, on 17March 1947, an alleged ―deed of assignment‖ of his 420 shares of stock of thePlaza 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 jointlyand severally the sum of P41,771.35 with legal interest from the filing of theaction; that in case defendants fail to pay the same, that the building and the landowned by the corporation be sold at public auction and the proceeds thereof beapplied to said indebtedness. Plaintiff also caused the annotation of a notice of lispendens 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 ( a dispute or matter which is the subject of ongoing or pending litigation.) thereon, filed apetition for review of the decree of the land registration court in order to annotatethe lights and interests of the surety company over said properties. Lopezopposed by asserting that the amount demanded by him constituted a preferredlien 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 theunpaid balance of the cost of lumber used in the construction of the building andthe plaintiff thus acquired the materialman‘s lien over the same; the lien beingmerely confined to the building and did not extend to the land on which theconstruction was made.
Issue: Whether materialman‘s lien for the value of the materials used in theconstruction of a building attaches to the building alone and does not extend to
the land on which the building is adhered to.Held: No. While it is true that generally, real estate connotes the land and thebuilding constructed thereon, it is obvious that the inclusion of the building,separate and distinct from the land, in the enumeration of what may constitutereal properties could mean only one thing — that a building is by itself animmovable property ( Leung Yee v. Strong Machinery). In the absence of anyspecific 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 adheredto belong to the same owner.
ASSOCIATED INSURANCE VS. LYA
Spouses Valino were the owners of a house, payable on installments fromPhilippine 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 didn‘t 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 weren‘t 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 buildingas since when the chattel mortgage was secured, the land wasn‘t 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 theland, would create a situation where apermanent 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.
Facts: Adriano Valino and Lucia A. Valino, husband and wife, were the ownersand possessors of a house of strong materials constructed on Lot No. 3, BlockNo. 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchasedoninstallment basis from the Philippine Realty Corporation. On November 6, 1951,
to enable her to purchase on credit price from the NARIC, Lucia A, Valino fileda bond in the sum of P11,000.00 subscribed by the Associated Insurance &SuretyCo., Inc., and ,as counter-guaranty therefor, the spouses Valino executed analleged chattel mortgage on the aforementioned house in favor of the suretycompany, which encumbrance was duly registered with the Chattel MortgageRegister of Rizal on December 6, 1951. It is admitted that at the time saidundertaking took place, the parcel of land on which the house is erected wasstill registered in the name of the Philippine Realty Corporation.On the other hand, as Lucia A. Valino, failed to satisfy her obligation to theNARIC, the surety company was compelled to pay the same pursuant to the
undertaking of the bond.Sometime in July, 1953, the surety company learned of the existence of the realestate mortgage over the lot covered by T.C.T. No. 26884 together with theimprovements thereon; thus, said surety company instituted Civil Case No. 2162of the Court of First Instance of Manila naming Adriano and Lucia Valino andIsabel Iya, the mortgagee, as defendants. The complaint prayed for the exclusionof the residential house from the real estate mortgage in favor of defendant Iyaand the declaration and recognition of plaintiff's right to ownership over thesame in virtue of the award given by the Provincial Sheriff of Rizal during thepublic auction held on December 26, 1952.The two cases were jointly heard upon agreement of the parties, who submittedthe same on a stipulation of facts, after which the Court rendered judgmentdated March 8, 1956, holding that the chattel mortgage in favor of the
Associated Insurance & Surety Co., Inc., was preferred and superior over thereal estate mortgage subsequently executed in favor of Isabel Iya.
Issue: Whether or not the immovable status of a building will be affected bychange of ownership?
Ruling: No. A building is an immovable property irrespective of whether or notsaid structure and the land on which it is adhered to belong to the same owner (Lopez vs. Orosa, supra, p. 98). It cannot be divested of its character of arealty by the fact that the land on which it is constructed belongs to another.If the status of the building were to depend on the ownership of the land, asituation would be created where a permanent fixture changes its nature or character as the ownership of the land changes hands.
A building certainly cannot be divested of its character of a realty by thefact that the land on which it is constructed belongs to another. To hold it theother 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 itsnature or character as the ownership of the land changes hands. In the case atbar, 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, theexecution of the chattel mortgage covering said building is clearly invalid and
a nullity. While it is true that said document was correspondingly registered inthe Chattel Mortgage Register of Rizal, this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, theregistration 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 materialsproduce no effect as far as the building is concerned (Leung Yee vs. StrongMachinery Co., 37 Phil., 644).
BOARD OF ASSESSMENT APPEALS VS. MERALCOFACTS On November 15, 1955, the QC City Assessor declared the MERALCO's steel
towers subject to real property tax. After the denial of MERALCO's petition tocancel these declarations, an appeal was taken to the QC Board of Assessment Appeals, which required respondent to pay P11,651.86 as real property tax onthe said steel towers for the years 1952 to 1956.MERALCO paid the amount under protest, and filed a petition for review in theCourt of Tax Appeals (CTA) which rendered a decision ordering the cancellationof the said tax declarations and the refunding to MERALCO by the QC CityTreasurer of P11,651.86.ISSUE
Are the steel towers or poles of the MERALCO considered real or personalproperties?
HELD Pole – long, comparatively slender, usually cylindrical piece of wood, timber,object of metal or the like; an upright standard to the top of which something isaffixed or by which something is supported.MERALCO's steel supports consists of a framework of 4 steel bars/strips whichare bound by steel cross-arms atop of which are cross-arms supporting 5 high-voltage transmission wires, and their sole function is to support/carry such wires.The exemption granted to poles as quoted from Part II, Par.9 of respondent'sfranchise is determined by the use to which such poles are dedicated.It is evident that the word ―poles‖, as used in Act No. 484 and incorporated in thepetitioner's franchise, should not be given a restrictive and narrow interpretation,as to defeat the very object for which the franchise was granted. The polesshould be taken and understood as part of MERALCO's electric power system for the conveyance of electric current to its consumers.
Art. 415 of the NCC classifies the following as immovable property:(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannotbe separated therefrom without breaking the material or deterioration of the object;
(5) Machinery, receptacles, instruments or implements intended by the owner pf thetenement for an industry ot works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
Following these classifications, MERALCO's steel towers should be considered personal property . It should be noted that the steel towers:(a) are neither buildings or constructions adhered to the soil;
(b) are not attached to an immovable in a fixed manner – they can be separatedwithout breaking the material or deterioration of the object;
The steel towers of an electric company don’t constitute real property for the purposes of real property tax.
MERALCO SECRUTIES VS. BOARD OF ASSESSMENT APPEALS
FACTS:Petitioner owns two oil storage tanks, made of steel plates wielded andassembled on the spot. Their bottoms rest on a foundation consisted of compacted earth, sand pad as immediate layer, and asphalt stratum as top layer. Thetanks merely sit on its foundation.
The municipal treasurer of Batangas made an assessment for realty tax on the twotanks, based on the report of the Board of Assessors. MERALCO wished to opposethis assessment as they averred that the tanks are not real properties.
HELD:While the two storage tanks are not embodied in the land, they maynevertheless be considered as improvements in the land, enhancing itsutility and rendering it useful to the oil industry.
For purposes of taxation, the term real property may include things, whichshould generally be considered as personal property. it is familiar phenomenon to see things classified as real property for purposes of taxation which on general principle may be considered as personalproperty.
Facts: Petitioner questions the decision of the respondent which held that petitioner‘spipeline is subject to realty tax. Pursuant to a concession, petitioner installed a pipelinesystem from Manila to Batangas. Meanwhile, the provincial assessor of Laguna treatedthe pipeline as real property. So, petitioner appealed the assessments to the Board of
Assessment Appeals of Laguna. The board upheld the assessments and the decision
became final and executory after the lapse of fifteen days from the date of receipt of acopy of the decision by the appellant. Meralco Securities contends that the Court of Tax
Appeals has no jurisdiction to review the decision of the Central Board of Assessment Appeals and no judicial review of the Board's decision is provided for in the RealProperty Tax Code. Hence, the petitioner‘s recourse to file a petition for certiorari.
Held: It was held that certiorari was properly availed of in this case. It is a writ issued bya superior court to an inferior court, board or officer exercising judicial or quasi-judicialfunctions whereby the record of a particular case is ordered to be elevated for reviewand correction in matters of law.
The rule is that as to administrative agencies exercising quasi-judicial power there is anunderlying power in the courts to scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of review is given by the statute. The purposeof judicial review is to keep the administrative agency within its jurisdiction and protectsubstantial rights of parties affected by its decisions. The review is a part of the system
of checks and balances which is a limitation on the separation of powers and whichforestalls arbitrary and unjust adjudications. Judicial review of the decision of an officialor administrative agency exercising quasi-judicial functions is proper in cases of lack of
jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case theadministrative decision is corrupt, arbitrary or capricious.
CALTEX VS. BOARD OF ASSESSMENT APPEALSThis case is about the realty tax on machinery and equipment installed by Caltex(Philippines) Inc., in its gas stations located on leased land.
FACTS Caltex loaned machines and equipment to gas station operators under an appropriatelease agreement or receipt. The lease contract stipulated that upon demand, theoperators shall return to Caltex the machines and equipment in good condition as whenreceived, ordinary wear and tear excepted.The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease.
The City Assessor of Pasay City characterized the said items of gas station equipmentand machinery as taxable realty. However, the City Board of Tax Appeals ruled thatthey are personalty. The Assessor appealed to the Central Board of Assessment
The Board held on June 3, 1977 that the said machines are real property within themeaning of Ses. 3(k) & (m) and 38 of the Real Property Tax Code, PD 464, and that theCivil Code definitions of real and personal property in Articles 415 and 416 are notapplicable in this case.
ISSUE WON the pieces of gas station equipment and machinery permanently affixed by Caltexto its gas station and pavement should be subject to realty tax.HELD Sec.2 of the Assessment Law provides that the realty tax is due on real property,including land, buildings, machinery, and other improvements not specificallyexempted in Sec.3 thereof.
Sec.3 of the Real Property Tax Code provides the following definitions: k) Improvements – a valuable addition made to property or an amelioration in its
condition…more than mere repairs or replacement of waste…intended to enhanceits value, beauty, or utility
m) Machinery – machines, mechanical contrivances, instruments, appliances, andapparatus attached to the real estate…includes the physical facilities available for production…installation and appurtenant service facilities.
The subject machines and equipment are taxable improvement and machinery withinthe meaning of the Assessment Law and the Real Property Tax Code, because thesame are necessary to the operation of the gas station and have beenattached/affixed/embedded permanently to the gas station site.
Improvements on land are commonly taxed as realty even though they might beconsidered personalty. ―It is a familiar phenomenon to see things classified as realproperty for purposes of taxation which on general principle might be consideredpersonal property‖ (Standard Oil Co., vs Jaramillo, 44 PHIL 630). This case is also easily distinguishable from Board of Assessment Appeals vs. Manila
Electric Co., (119 Phil. 328) where Meralco's steel towers were exempted from taxation.The steel towers were considered personalty because they were attached to squaremetal frames by means of bolts and could be moved from place to place whenunscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as the tools andequipment in the repair shop of a bus company which were held to be personal propertynot subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretionin upholding the City Assessor's imposition of the realty tax on Caltex's gas station and equipment.
SIBAL VS. VALDEZ
For the purpose of a t tachment and execut ion , and for th e purposes of the
Chat tel Mortgage Law, "ung athered pro ducts" have the na ture of personal
proper ty.
FACTS:(this case has a lot of confusing facts, just read the original if this digest fails to
compress everything) The Deputy Sheriff of the Province of Tarlac, by virtue of a
writ of execution issued by the Court of First Instance of Pampanga, attached
and sold to the defendant Emiliano J. Valdez the sugar cane planted by the
plaintiff and his tenants on seven parcels of land. Included also in those attached
were real properties wherein 8mout of the 11 parcels of land, house and camarin
which was first acquired by Macondray & Co and then later on bought by Valdez
in an auction. First Cause for petitioner: That Within one year from the date of theattachment and sale the plaintiff offered to redeem said sugar cane and tendered
to the defendant Valdez the amount sufficient to cover the price paid by the latter,
the interest thereon and any assessments or taxes which he may have paid
thereon after the purchase, and the interest corresponding thereto and that
Valdez refused to accept the money and to return the sugar cane to the plaintiff.
Second Cause for petitioner: That Valdez was trying to harvest palay from four
out of seven parcels of land. Petitioner filed for preliminary injunction to stop
defendant from 1) distributing the lands 2) harvesting and selling the sugar canes, and 3) harvesting and selling the palay. The writ was issued which
prevented defendant from planting and harvesting the lands. Defendant later
appealed claiming that he was the owner of many of the alleged land thus he
also owns the crops of it. The court awarded the defendant 9,439.08 because the
petitioner unduly denied the defendant to plant in his land thus preventing him to
profit thereto.
ISSUE:
Whether the sugar cane is personal o real property? (The relevance of the issue
is with regards to the sugar cane of the Petitioner which came from the land that
now belongs to the defendant)
RULING:
It is contended that sugar cane comes under the classification of real property as
"ungathered products" in paragraph 2 of article 334 of the Civil Code. Said
paragraph 2 of article 334 enumerates as real property the following: Trees,plants, and ungathered products, while they are annexed to the land or form an
integral part of any immovable property." That article, however, has received in
recent years an interpretation by the Tribunal Supremo de España, which holds
that, under certain conditions, growing crops may be considered as personal
property.
In some cases "standing crops" may be considered and dealt with as personal
property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418)
the Supreme Court said: "True, by article 465 of the Civil Code it is provided that'standing crops and the fruits of trees not gathered and trees before they are cut
down . . . are considered as part of the land to which they are attached, but the
immovability provided for is only one in abstracto and without reference to rights
on or to the crop acquired by others than the owners of the property to which the
crop is attached. . . . The existence of a right on the growing crop is a
mobilization by anticipation, a gathering as it were in advance, rendering the crop
movable quoad the right acquired therein. Our jurisprudence recognizes the
possible mobilization of the growing crop."For the purpose of attachment and execution, and for the purposes of the Chattel
Mortgage Law, "ungathered products" have the nature of personal property. SC
lowered the award for damages to the defendant to 8,900.80 by acknowledging
the fact that some of the sugar canes were owned by the petitioner and by
year in jail. Mr. Carlos contested saying that electrical energy can‘t be stolen (how can
one steal an incorporeal thing?). He filed an appeal on such grounds and the court of
first instance affirmed the decision. The case reached the supreme court.
ISSUE:
Whether or not larceny can be committed against an intangible such as electricity.
HELD:
Yes, larceny of incorporeal objects is possible. The right of ownership of electrical
current was secured by
Art 517 and 518 of the Penal Code which applies to gas.
Analogically, electricity can be considered as ‗gas‘ which can be stolen. However, the
true test of what constitutes the proper subject of larceny is not whether the subject iscorporeal or incorporeal, but whether is is capable of appropriation by another other
than the owner. It is a valuable article of merchandise, a force of nature brought under
the control of science. Mr. Carlos secretly and with intent to deprive the company of its
rightful property, used jumper cables to appropriate the same for his own use. This
constitutes larceny. ( Larceny is a crime involving the wrongful acquisition of the
personal property of another person.)
HONGKONG & SHANGHAI BANK VS. ALDECOA
Aldecoa and Co. obtained a credit worth P450,000 from HSBC secured by amortgage of shares and real properties. On Dec. of 1906, the firm of Aldecoa andCo. went into liquidation and obtained another P50,000 from the bank upon thecondition that this would be covered by the previous mortgage. In October 1908,Joaquin and Zoilo Ibañez de Aldecoa filed an action against the bank for thepurpose of annulling the mortgages executed by them on the grounds that theywere minors at the time incapable of creating a valid mortgage upon their realproperty. The Court of First Instance dismissed the complaint as to Joaquin uponthe ground that he had ratified those mortgages after becoming of age, butentered a judgment annulling said mortgages with respect to Zoilo. Both partiesappealed from this decision and the case was still pending in the Supreme Courtwhen HSBC filed an action against Aldecoa and Co. and its partners for thecollection of a sum of money and foreclosure of the mortgaged properties.Judgement was entered in favor of the bank.
ISSUE:Whether or not the action filed by the bank should be dismissed on theground of lis pendens.
RULING:No. A plea of the pendency of a prior action is not available unless theprior action is of such a character that, had a judgment been rendered therein onthe merits, such a judgment would be conclusive between the parties and couldbe pleaded in bar of the second action.
In the instant case, the former suit is to annul the mortgages while the other oneis for the foreclosure. If the final judgment in the former action is that themortgages be annulled, such an adjudication will deny the right of the bank toforeclose the mortgages. But a valid decree will not prevent the bank fromforeclosing them. In such an event, the judgment would not be a bar to theprosecution of the present action. The rule is not predicated upon such acontingency. It is applicable, between the same parties, only when the judgmentto be rendered in the action first instituted will be such that, regardless of whichparty is successful, it will amount to res adjudicata against the second action.
