PROPERTY (Article 415)

1. Prudential Bank vs. Panis 153 SCRA 390

FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real
estate mortgage over a residential building. The mortgage included also the right to occupy the
lot and the information about the sales patent applied for by the spouses for the lot to which the
building stood. After securing the first loan, the spouses secured another from the same bank. To
secure payment, another real estate mortgage was executed over the same properties. The
Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later
on mortgaged to the bank. The spouses then failed to pay for the loan and the REM was
extrajudicially foreclosed and sold in public auction despite opposition from the spouses. The
respondent court held that the REM was null and void.

ISSUE:
Whether or not a valid REM mortgage can be constituted on the building erected on the belonging
to another.

HELD: A real estate mortgage can be constituted on the building erected on the land belonging
to another. The inclusion of building distinct and separate from the land in the Civil Code can only
mean that the building itself is an immovable property. 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. As to the second mortgage, it was done after the sales patent was
issued and thus prohibits pertinent provisions of the Public Land Act.

2. Leung Yee vs. F.L. Strong Machinery Co. And Williamson, 37 SCRA 644

FACTS:

Compania Agricola Filipina bought rice-cleaning machinery from the machinery company and
this was secured by a chattel mortgage on the machinery and the building to which
it was installed. Upon failure to pay, the chattel mortgage was foreclosed, the building and
machinery sold in public auction and bought by the machinery company. Then Compania Agricola
Filipina executed a deed of sale over the land to which the building stood in favor of the machinery
company. This was done to cure any defects that may arise in the machinery company’s
ownership of the building.
On or about the date to which the chattel
mortgage was executed, Compania executed a real estate
mortgage over the building in favor of Leung Yee, distinct and separate from the land.
This is to secure payment for its indebtedness for the construction of the building. Upon failure
to pay, the mortgage was foreclosed.
The machinery company then filed a case, demanding that it be
declared the rightful owner of the building. The trial court held that it was the machinery
company which was the rightful
owner as it had its title before the building was registered prior to the date of registry of
Leung Yee’s certificate.

ISSUE: Whether or not the building in question is an immovable?

HELD:

The building made out of strong materials in which the machinery was installed is real property.
The mere fact that the parties dealt with it as separate and apart from the land (or as personal
property) does not change its character as real property. In this case, it follows that neither the
original registry in the chattel mortgage of the building and the machinery installed therein, nor
the annotation in the registry of the sale of the mortgaged property had any legal effect.

3. JULIAN YAP vs SANTIAGO TANADA

One of his arguments was that the sale was made without the notice required by Sec. 18, Rule 29 of the
New Rules of Court, “i.e. notice by publication in case of execution of sale of real property, the pump and
its accessories being immovable because attached to the ground with the character of permanency.” Such
motion was denied by the CFI.

Whether or not the pump and its accessories are immovable property

HELD: No. The water pump and its accessories are NOT immovable properties. The argument of Yap that
the water pump had become immovable property by its being installed in his residence is untenable.
Article 415, par. 3 of the Civil Code considers and immovable property as “everything attached to an
immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the
material or deteriorating the object.” The pump does not fit this description. It could be, and was, in fact,
separated from Yap’s premises without being broken of suffering deterioration. Obviously, the separation
or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of
other fasteners.
4. NAVARRO VS. PINEDA
9 SCRA 631

FACTS:
Pineda and his mother executed real estate and chattel mortgages in favor of Navarro, to
secure a loan they got from the latter. The REM covered a parcel of land owned by the mother
while the chattel mortgage covered a
residential house. Due to the failure to pay the loan, they asked for extensions to pay for
the loan. On the second extension, Pineda executed a promise wherein in case of default in
payment, he wouldn’t ask for any additional extension and there would be no need for any formal
demand. In spite of this, they still failed to pay. Navarro then filed for the foreclosure of the
mortgages. The court
decided in his favor.

ISSUE:
Whether or not the deed of real estate mortgage and chattel mortgage appended to the
complaint is valid notwithstanding the fact that the house was made subject of chattel mortgage
for the reason that it is erected on a land that belongs to a third person.

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

5. LUNA vs ENCARNACION

FACTS:

A chattel mortgage was executed by petitioner Jose Luna covering his house with mixed
materials to respondent Trinidad Reyes to secure payment for a promissory note.

Luna failed to pay the promissory note and as such, Trinidad requested the sheriff to sell the
property through an extra judicial foreclosure to satisfy the obligation.

Luna contends that the foreclosure is invalid because the property is under chattel mortgage
and as such, it is not covered by RA3135 that only speaks of real estate mortgage.
ISSUE:

WON the mortgaged property can be covered by chattel mortgage even though it is a real
property.

HELD:

Even though the property is a real property, it may be covered by a chattel mortgage for as long
as it was agreed upon by the parties. Hence, the foreclosure is invalid because it is only
applicable for real properties. The remedy of the respondent is to file an action for recovery of
possession and not a writ of possession.

6. MERALCO vs BOARD OF ASSESSMENT APPEAL

FACTS:

This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by
Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex
(Phil.), Inc. The tanks are within the Caltex refinery compound.

It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any
part of the foundation by bolts, screws or similar devices.

The municipal treasurer required Meralco to pay realty taxes on both tanks.

ISSUE:

WON the tanks should be considered as real property.

HELD:

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

7. DAVAO SAWMILL V. CASTILLO

FACTS:
Davao Sawmill Co., operated a sawmill. However, the land upon which the business was
conducted was leased from another person. On the land, Davao Sawmill erected a building which
housed the machinery it used. Some of the machines were mounted and placed on foundations
of cement.. The contract of lease stated that on the expiration of the period agreed upon, all the
improvements and buildings introduced and erected by Davao sawmill 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, a writ of execution was issued against the company and the properties in
question were levied upon. The company assailed the said writ contending that the machineries
and accessories were personal in nature, hence, not subject to writ of execution. The trial judge
ruled in favour of the company.

ISSUE: Whether or not the machineries and equipment were personal property

HELD
Yes, the subject properties are personal in nature.
Art.415 (NCC) provides that real property consists of (5) Machinery, receptacles, instruments
or implements intended by the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly to meet the needs of the
said industry or works. Machinery is naturally movable. However, machinery only becomes
immovable when placed in a land by the owner of the property or land but not when so placed
by a tenant or any person having only a temporary right, unless such person acted as the
agent of the owner. In the case at bar, the machinery is intended not by the owner of the land but
by the saw mill company for use in connection with its trade.

8. AGO v CA

FACTS:

Pastor D. Ago bought sawmill machineries and equipments from Grace Park Engineering, Inc.,
executing a chattel mortgage over said machineries and equipment to secure the payment of a
balance of the price remaining unpaid of P32,000.00, which Ago agreed to pay on installment
basis. Ago defaulted in his payments and so, in 1958, Grace Park Engineering, Inc. instituted
extrajudicial foreclosure proceedings of the mortgage.

The Provincial Sheriff of Surigao, acting upon the writ of execution, levied upon and ordered the
sale of the sawmill machineries and equipment in question.

HELD:

By reason of installment in a building, the said sawmill machineries and equipments became real
estate properties in accordance with the provision of Art. 415(5) of the Civil Code. It is interpreted
similarly to the case of Berkenkotter vs. Cu Unjieng e Hijos, where the Court held that the
installation of the machinery and equipment in the central of the Mabalacat Sugar Company for
use in connection with the industry carried by that company, converted the said machinery and
equipment into real estate by reason of their purpose. In the present case, the installation of
the sawmill machineries in the building of the Golden Pacific Sawmill, Inc., for use in the sawing
of logs carried on in said building, the same became a necessary and permanent part of the
building or real estate on which the same was constructed, converting the said machineries and
equipments into real estate within the meaning of Article 415(5) of the Civil Code of the
Philippines.
9. BOARD OF ASSESSMENT APPEALS V. MERALCO

G.R. No. L-15334. January 31, 1964

FACTS:
Meralco’s electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna
and is transmitted to the City of Manila by means of electric transmission wires, running from the
province of Laguna to the said City. These electric transmission wires which carry high voltage
current, are fastened to insulators attached on steel towers. Meralco has constructed 40 of these
steel towers within Quezon City, on land belonging to it.

The QC City Assessor declared the MERALCO's steel towers subject to real property tax. After
the denial of MERALCO's petition to cancel these declarations, an appeal was taken to the QC
Board of Assessment Appeals, which required respondent to pay real property tax on the said
steel towers for the years 1952 to 1956.

MERALCO paid the amount under protest, and filed a petition for review in the Court of Tax
Appeals (CTA) which rendered a decision ordering the cancellation of the said tax declarations
and the refunding to MERALCO by the QC City Treasurer.

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

HELD:
NO. The steel towers of an electric company do not constitute real property for the purposes of
real property tax. Steel towers are not immovable property under paragraph 1, 3 and 5 of
Article 415 (NCC) because they do not constitute buildings or constructions adhered to the soil.
As per description, given by the lower court, they are removable and merely attached to a square
metal frame by means of bolts, which when unscrewed could easily be dismantled and moved
from place to place.
They cannot be included under paragraph 3, as they are not attached to an immovable in a fixed
manner, and they can be separated without breaking the material or causing deterioration upon
the object to which they are attached. These steel towers or supports do not also fall under
paragraph 5, for they are not machineries or receptacles, instruments or implements, and even if
they were, they are not intended for industry or works on the land.

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

10. Makati Leasing and Finance Corporation vs Wennever Texttile Mills

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.

11. Serg’s Products and Gaquiloy vs. PCI Leasing and Finance 338 SCRA 499

FACTS:
PCI filed a case for collection of a sum of money as well as a writ of replevin for the
seizure of machineries, subject of a chattel mortgage executed by petitioner in favor of PCI.
Machineries of petitioner were seized and petitioner filed a motion for special protective
order. It asserts that the machineries were real property and could not be subject of a chattel
mortgage.

Issue: Whether or not the machineries become real property by virtue of immobilization.

HELD:
The machineries in question have become immobilized by destination because they are
essential and principal elements in the industry, and thus have become immovable in nature.
Nonetheless, they are still proper subjects for a chattel mortgage. Contracting parties may validly
stipulate that a real property be considered as personal. After agreement, they are
consequently estopped from claiming otherwise.

12. Tumalad vs. Vicencio

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.

REPUBLIC V. COURT OF APPEALS

281 SCRA 639

FACTS:

Morato filed for a patent on a parcel of land located in Calauag, Quezon, which
was approved, provided that the land shall not be encumbered or alienated within a period of five
years from the date of the issuance of the patent. Later on, the land was established to be a
portion of Calauag Bay, which was five to six feet deep during high tides and three feet deep on
low tides. The water level rose because of the ebb and flow of tides from the bay and the storms
that frequently passed through the area. Furthermore, it was observed by the Director of Lands
from his investigation, that the land of Morato was leased to Advincula and it was also mortgaged
to Co. The government sought for the revocation of the patent issued. The trial court and appellate
court decided in favor of the respondents.

ISSUE:

Whether or not the land granted under patent which was later on leased and mortgaged
should be revert back to the ownership of the State it being a foreshore land.

HELD:

Yes, foreshore lands have been defined to be that part of the land which is between the
high and low water and left dry by the flux and reflux of the tides. This is the strip of land that lies
between the high and low watermarks and that is alternatively wet and dry according to the flow
of the tide. Foreshore lands may not anymore be the subject of issuance of free patents. Under
property of public ownership or dominion are foreshore lands, as provided for in the Civil Code.

It is to be noted that when the sea moved towards the estate and the tide invaded it, the invaded
property became foreshore land and passed to the realm of public domain. In accordance with
this land reclassification, the land can no longer be subject to a pending patent application and
must be returned to the State.
21. IGNACIO V. DIRECTOR OF LANDS

108 PHIL 335

FACTS:

Ignacio filed for the registration of title over a mangrove to which he later said that he
acquired right to the mangrove through accretion.

ISSUE:

Whether or not Ignacio has the right to declare that such land can be subject to registration
and does not anymore form part of the public dominion.

HELD:

No, only the executive and possibly the legislative departments have the authority and
power to make the declaration that any land so gained by the sea is not necessary for purposes
of public utility, or for the establishment of special industries or for Coast Guard Service otherwise,
the property continues to be property of public dominion ,further, it cannot be subject to acquisitive
prescription notwithstanding the fact that it is not actually devoted for such use or service. If no
such declaration has been made by said departments, the lot in question forms part of the public
domain. Under Art. 4 of the Spanish Law of Waters of Aug. 3, 1866. “lands added to the shores
by accretions and alluvial deposits caused by the action of the sea, form part of the public domain.”
Since alluvial formation along the seashore is part of the public domain, it is not open to acquisition
by adverse possession by private persons.

21. Faustino Ignacio vs Director of Lands GR No. L-12958 May 30, 1960

Facts:
Ignacio applied for the registration of a parcel of a mangrove land in Rizal. It was stated in
the application that he owned the parcelby right of accretion. The director of land opposed the
registration for the reason that the land to be registered is an area of public domain and that the
applicant nor his predecessor-in-interes possessed sufficient title for the land. The parcel of land
appliedwas acquired from the government by the virtue of a free patent title. However, the land in
question was formed by accretion and alluvial deposists caused by the action of the Manila bay.
The petition was denied by the lower court and decided that the land to be registered are part of
the public domain. Faustino, however, contended that the court could have declared the land not
to be part of the public domain.
Issue:
Whether or not the courts have the power to reclassify a land

Ruling:
No, the courts do not have the power to reclassify a land. The courts are primarily called
upon to determine whether a land is to be used for public purpose. However, it is only limited
there. A formal declaration of reclassification of land should come from the government,
specifically from the executive department or the legislature. These bodies should declare that a
land in question is no longer needed for public use, some public use or for the improvement of
national wealth.

13. Lopez vs. Orosa and Plaza Theatre, 103 SCRA 98

FACTS:

Orosa invited Lopez to invest with him in building a theatre. Lopez supplied lumber for the
construction of the said theatre. The materials totaled 62k but Orosa was only able to pay 20k
thus leaving a balance of almost 42k. Later on respondents acquired a bank loan of 30k, with
Luzon Surety Company as their surety and the land and building were mortgaged as counter-
security. Petitioner sued to collect the unpaid amount for the materials and was able to get a
judgment against the respondents making them jointly liable to pay the remaining amount. Also,
he was able to obtain a materialman’s lien on the building of the theatre. The stocks amounting
to 42k shall be sold in public auction in case the respondents default. Petitioner wasn’t happy
because he also wanted a lien on the land, urging that the judgment lien should include it since
the building and the land are inseparable.

ISSUE: Whether or not the building and the land are inseparable?

HELD:

No. The contention that the lien embraces both the land and the building or structure adhering
thereto is without merit. 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 (Article 415 of the new
Civil Code) could mean only one thing — that a building is by itself an immovable property.
Moreover, and in view of the absence of any specific provision of law to the contrary, a building
is an immovable property, irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.