A.

Corporeal
1. Immovable Property
2. Movable Property

Cases:

US vs Tambunting

Facts: This appeal was instituted for the purpose of reversing a judgment of the Court of First
Instance of the city of Manila, finding the accused, Manuel Tambunting, guilty of stealing a quantity of
gas belonging to the Manila Gas Corporation, and sentencing him to undergo imprisonment for two
months and one day, of arresto mayor, with the accessories prescribed by law; to indemnify the said
corporation in the sum of P2, with subsidiary imprisonment in case of insolvency; and to pay the
costs.

The evidence submitted in behalf of the prosecution shows that in January of the year 1918, the
accused and his wife became occupants of the upper floor of the house situated at No. 443, Calle
Evangelista, in the city of Manila. In this house the Manila Gas Corporation had previously installed
apparatus for the delivery of gas on both the upper and lower floors, consisting of the necessary
piping and a gas meter, which last mentioned apparatus was installed below. When the occupants at
whose request this installation had been made vacated the premises, the gas company disconnected
the gas pipe and removed the meter, thus cutting off the supply of gas from said premises.

Upon June 2, 1919, one of the inspectors of the gas company visited the house in question and found
that gas was being used, without the knowledge and consent of the gas company, for cooking in the
quarters occupied by the defendant and his wife: to effect which a short piece of iron pipe had been
inserted in the gap where the gas meter had formerly been placed, and piece of rubber tubing had
been used to connect the gas pipe of rubber tubing had been used to connect the gas pipe in kitchen
with the gas stove, or plate, used for cooking.

At the time this discovery was made, the accused, Manuel Tambunting, was not at home, but he
presently arrived and admitted to the agent to the gas company that he had made the connection with
the rubber tubing between the gas pipe and the stove, though he denied making the connection
below. He also admitted that he knew he was using gas without the knowledge of the company and
that he had been so using it for probably two or three months.

Issue: WON gas can be considered in larceny?

Held: Yes. Gas can be considered in larceny, for the very reason that it is considered as property
being able to be capable of appropriation. Thus having monetary value. There was evidence before
the court showing that the general average of the monthly bills paid by consumers throughout the city
for the use of gas in a kitchen equipped like that used by the accused is from P18 to 20, while the
average minimum is about P8 per month. We think that the facts above stated are competent
evidence; and the conclusion is inevitable that the accused is at least liable to the extent of the
minimum charge of P2 per month. The market value of the property at the time and place of the theft
is of court the proper value to be proven (17 R.C.L., p. 66); and when it is found that the least amount
that a consumer can take costs P2 per months, this affords proof that the amount which the accused
took was certainly worth that much. Absolute certainty as to the full amount taken is of course
impossible, because no meter wad used; but absolute certainty upon this point is not necessary,
when it is certain that the minimum that could have been taken was worth a determinable amount.
Berkenkotter vs Cu Unjieng

Facts: that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar central situated in
Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first
mortgage constituted on two parcels and land "with all its buildings, improvements, sugar-cane mill,
steel railway, telephone line, apparatus, utensils and whatever forms part or is necessary complement
of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future exist is
said lots."

On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc.,
decided to increase the capacity of its sugar central by buying additional machinery and equipment.
The estimated cost of said additional machinery and equipment was approximately P100,000. In
order to carry out this plan, B.A. Green, president of said corporation, proposed to the plaintiff, B.H.
Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment,
promising to reimburse him as soon as he could obtain an additional loan from the mortgagees, the
herein defendants Cu Unjieng e Hijos. Having agreed to said proposition made in a letter dated
October 5, 1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same year, delivered the sum of
P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the total amount supplied by him to
said B.A. Green having been P25,750. Furthermore, B.H. 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 now in litigation.

On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e
Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment
acquired by said B.A. Green and installed in the sugar central after the execution of the original
mortgage deed, on April 27, 1927, together with whatever additional equipment acquired with said
loan. B.A. Green failed to obtain said loan.

The appellant contends that the installation of the machinery and equipment claimed by him in the
sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as
B.A. Green, in proposing to him to advance the money for the purchase thereof, made it appear in the
letter, Exhibit E, that in case B.A. Green should fail to obtain an additional loan from the defendants
Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said B.A. Green
binding himself not to mortgage nor encumber them to anybody until said plaintiff be fully reimbursed
for the corporation's indebtedness to him.

Upon acquiring the machinery and equipment in question with money obtained as loan from the
plaintiff-appellant by B.A. Green, as president of the Mabalacat Sugar Co., Inc., the latter became
owner of said machinery and equipment, otherwise B.A. Green, as such president, could not have
offered them to the plaintiff as security for the payment of his credit.

Issue: WON the installation of machinery constitutes a real property or a personal property?

Held: Real Property. For the foregoing considerations, we are of the opinion and so hold: (1) That the
installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less
capacity, for the purpose of carrying out the industrial functions of the latter and increasing
production, constitutes a permanent improvement on said sugar central and subjects said machinery
and equipment to the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the
purchaser of the new machinery and equipment has bound himself to the person supplying him the
purchase money to hold them as security for the payment of the latter's credit, and to refrain from
mortgaging or otherwise encumbering them does not alter the permanent character of the
incorporation of said machinery and equipment with the central; and (3) that the sale of the machinery
and equipment in question by the purchaser who was supplied the purchase money, as a loan, to the
person who supplied the money, after the incorporation thereof with the mortgaged sugar central,
does not vest the creditor with ownership of said machinery and equipment but simply with the right of
redemption.

Philippine Refining Co Inc vs Jarque

Facts: Coming now to the merits, it appears that on varying dates the Philippine Refining Co., Inc.,
and Francisco Jarque executed three mortgages on the motor vessels Pandan and Zaragoza. These
documents were recorded in the record of transfers and incumbrances of vessels for the port of Cebu
and each was therein denominated a "chattel mortgage". Neither of the first two mortgages had
appended an affidavit of good faith. The third mortgage contained such an affidavit, but this mortgage
was not registered in the customs house until May 17, 1932, or within the period of thirty days prior to
the commencement of insolvency proceedings against Francisco Jarque; also, while the last
mentioned mortgage was subscribed by Francisco Jarque and M. N. Brink, there was nothing to
disclose in what capacity the said M. N. Brink signed. A fourth mortgage was executed by Francisco
Jarque and Ramon Aboitiz on the motorship Zaragoza and was entered in the chattel mortgage
registry of the register of deeds on May 12, 1932, or again within the thirty-day period before the
institution of insolvency proceedings. These proceedings were begun on June 2, 1932, when a
petition was filed with the Court of First Instance of Cebu in which it was prayed that Francisco Jarque
be declared an insolvent debtor, which soon thereafter was granted, with the result that an
assignment of all the properties of the insolvent was executed in favor of Jose Corominas.

On these facts, Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages, but on
the contrary sustained the special defenses of fatal defectiveness of the mortgages. In so doing we
believe that the trial judge acted advisedly.

Issue: WON vessel should be considered as personal property?

Held: Yes. Vessels are considered personal property under the civil law. (Code of Commerce, article
585.) Similarly under the common law, vessels are personal property although occasionally referred
to as a peculiar kind of personal property. (Reynolds vs. Nielson [1903], 96 Am. Rep., 1000; Atlantic
Maritime Co vs. City of Gloucester [1917], 117 N. E., 924.) Since the term "personal property"
includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage
Law. (Act No. 1508, section 2.) Indeed, it has heretofore been accepted without discussion that a
mortgage on a vessel is in nature a chattel mortgage. (McMicking vs. Banco Espaol-Filipino [1909],
13 Phil., 429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.) The only difference between a chattel
mortgage of a vessel and a chattel mortgage of other personalty is that it is not now necessary for a
chattel mortgage of a vessel to be noted n the registry of the register of deeds, but it is essential that
a record of documents affecting the title to a vessel be entered in the record of the Collector of
Customs at the port of entry. (Rubiso and Gelito vs. Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de
Sane, supra.) Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its
requisites and validity. (58 C.J., 92.)

The Chattell Mortgage Law in its section 5, in describing what shall be deemed sufficient to constitute
a good chattel mortgage, includes the requirement of an affidavit of good faith appended to the
mortgage and recorded therewith. The absence of the affidavit vitiates a mortgage as against
creditors and subsequent encumbrancers. (Giberson vs. A. N. Jureidini Bros. [1922], 44 Phil., 216;
Benedicto de Tarrosa vs. F. M. Yap Tico & Co. and Provincial Sheriff of Occidental Negros [1923], 46
Phil., 753.) As a consequence a chattel mortgage of a vessel wherein the affidavit of good faith
required by the Chattel Mortgage Law is lacking, is unenforceable against third persons.
Mindanao Bus Company vs City Assessor

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

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

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

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

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

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

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

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

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

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

"G".

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

That these machineries have never been or were never used as industrial equipments to produce
finished products for sale, nor to repair machineries, parts and the like offered to the general public
indiscriminately for business or commercial purposes for which petitioner has never engaged in, to
date.

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a
motion for reconsideration, petitioner brought the case to this Court

Issue: WON that said tools, equipments or machineries are immovable taxable real properties?

Held: No. So that movable equipments to be immobilized in contemplation of the law must first be
"essential and principal elements" of an industry or works without which such industry or works would
be "unable to function or carry on the industrial purpose for which it was established." We may here
distinguish, therefore, those movable which become immobilized by destination because they
are essential and principal elements in the industry for those which may not be so considered
immobilized because they are merely incidental, not essential and principal.

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

Sergs Product vs PCI

Facts: On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed
with the RTC-QC a complaint for [a] sum of money (Annex E), with an application for a writ of replevin
docketed as Civil Case No. Q-98-33500.

On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of
replevin (Annex B) directing its sheriff to seize and deliver the machineries and equipment to PCI
Leasing after 5 days and upon the payment of the necessary expenses.

On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized
one machinery with [the] word that he [would] return for the other machineries.

On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the
power of the court to control the conduct of its officers and amend and control its processes, praying
for a directive for the sheriff to defer enforcement of the writ of replevin.

This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still
personal and therefore still subject to seizure and a writ of replevin.

the appellate court held that the subject machines were personal property

Issue: WON the subject machiniries are personal property?

Held: Yes by stipulation. In the present case, the machines that were the subjects of the Writ of
Seizure were placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although each of them
was movable or personal property on its own, all of them have become immobilized by destination
because they are essential and principal elements in the industry. [16] In that sense, petitioners are
correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of
the Civil Code.

Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be
considered as personal.[18] After agreeing to such stipulation, they are consequently estopped
from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily
precluded from denying the truth of any material fact found therein.

Davao Sawmill vs Castillo

Facts: The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the
Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of
Davao, Province of Davao. However, the land upon which the business was conducted belonged to
another person. On the land the sawmill company erected a building which housed the machinery
used by it. Some of the implements thus used were clearly personal property, the conflict concerning
machines which were placed and mounted on foundations of cement. In the contract of lease
between the sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings
introduced and erected by the party of the second part shall pass to the exclusive ownership of
the party of the first part without any obligation on its part to pay any amount for said
improvements and buildings; also, in the event the party of the second part should leave or
abandon the land leased before the time herein stipulated, the improvements and buildings
shall likewise pass to the ownership of the party of the first part as though the time agreed
upon had expired: Provided, however, That the machineries and accessories are not included
in the improvements which will pass to the party of the first part on the expiration or
abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw,
Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action
against the defendant in that action; a writ of execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No third party claim was filed for such
properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.
Indeed the bidder, which was the plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession of the machinery and other properties
described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has
on a number of occasions treated the machinery as personal property by executing chattel mortgages
in favor of third persons. One of such persons is the appellee by assignment from the original
mortgages.

Issue: WON the machineries are to be considered as real property?

Held: No. Exception to Art. 415. United States Supreme Court, it was held that machinery
which is movable in its nature only becomes immobilized when placed in a plant by the owner
of the property or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of the owner.

Prudential Bank vs Panis

Facts: on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale
secured a loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of
this loan, plaintiffs executed in favor of defendant on the aforesaid date a deed of Real Estate
Mortgage over the following described properties:

l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces

containing a total floor area of 263 sq. meters, more or less, generally constructed of
mixed hard wood and concrete materials, under a roofing of cor. g. i. sheets; declared
and assessed in the name of FERNANDO MAGCALE under Tax Declaration No. 21109,
issued by the Assessor of Olongapo City with an assessed value of P35,290.00. This
building is the only improvement of the lot.
 2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of
occupancy on the lot where the above property is erected

On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the
parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor
of plaintiffs. On the basis of the aforesaid Patent, and upon its transcription in the Registration Book
of the Province of Zambales, Original Certificate of Title No. P-2554 was issued in the name of
Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on May 15, 1972.

For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon
application of said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were
extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties therein
mortgaged to defendant as the highest bidder in a public auction sale conducted by the defendant
City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite written
request from plaintiffs through counsel dated March 29, 1978, for the defendant City Sheriff to desist
from going with the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0,
Rollo, pp. 29-31).

Respondent Court, in a Decision dated November 3, 1978 declared the

deeds of Real Estate Mortgage as null and void.

Issue: WON the deed of Real Estate Mortgage is valid?

Held: In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court
ruled that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said
provision of law can only mean that a building is by itself an immovable property." (Lopez vs. Orosa,
Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38,
May 30,1958).

Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the
improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on
which it has been built. Such a mortgage would be still a real estate mortgage for the building would
still be considered immovable property even if dealt with separately and apart from the land (Leung
Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that
possessory rights over said properties before title is vested on the grantee, may be validly transferred
or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).

Caltex vs Central Board of Assessment

Facts: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines)
Inc. in its gas stations located on leased land.

The machines and equipment consists of underground tanks, elevated tank, elevated water tanks,
water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air
compressors and tireflators.

The said machines and equipment are loaned by Caltex to gas station operators under an
appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators, upon
demand, shall return to Caltex the machines and equipment in good condition as when received,
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 equipment and machinery
as taxable realty. The realty tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The
city board of tax appeals ruled that they are personalty. The assessor appealed to the Central Board
of Assessment Appeals.

Issue: WON the pieces of gas station equipment and machinery already enumerated are subject to
realty tax?

Held: Yes. We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are
necessary to the operation of the gas station, for without them the gas station would be useless, and
which have been attached or affixed permanently to the gas station site or embedded therein, are
taxable improvements and machinery within the meaning of the Assessment Law and the Real
Property Tax Code.

Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless such person acted as the agent of
the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).

Improvements on land are commonly taxed as realty even though for some purposes they might be
considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon to see things
classed as real property for purposes of taxation which on general principle might be considered
personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 60, 633).

Benguet Corporation vs Central Board of Assessment

Facts: The realty tax assessment involved in this case amounts to P11,319,304.00. It has been
imposed on the petitioner's tailings dam and the land thereunder over its protest.

The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said
properties as taxable improvements. The assessment was appealed to the Board of Assessment
Appeals of the Province of Zambales. On August 24, 1988, the appeal was dismissed mainly on the
ground of the petitioner's "failure to pay the realty taxes that fell due during the pendency of the
appeal."

The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals, 1 one of
the herein respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the
appeal but, on the merits, agreed that "the tailings dam and the lands submerged thereunder (were)
subject to realty tax."

This petition for certiorari now seeks to reverse the above ruling.

Issue: WON tailing dams are subject to realty tax?

Held: The petitioner does not dispute that the tailings dam may be considered realty within the
meaning of Article 415.

The Real Property Tax Code does not carry a definition of "real property" and simply says that the
realty tax is imposed on "real property, such as lands, buildings, machinery and other improvements
affixed or attached to real property." In the absence of such a definition, we apply Article 415 of the
Civil Code
From the definitions and the cases cited above, it would appear that whether a structure constitutes
an improvement so as to partake of the status of realty would depend upon the degree
of permanence intended in its construction and use . The expression "permanent" as applied to an
improvement does not imply that the improvement must be used perpetually but only until the
purpose to which the principal realty is devoted has been accomplished. It is sufficient that the
improvement is intended to remain as long as the land to which it is annexed is still used for the said
purpose.

The Court is convinced that the subject dam falls within the definition of an "improvement" because it
is permanent in character and it enhances both the value and utility of petitioner's mine. Moreover,
the immovable nature of the dam defines its character as real property under Article 415 of the Civil
Code and thus makes it taxable under Section 38 of the Real Property Tax Code.

Tumalad vs Vicencio

Facts: It appears on the records that on 1 September 1955 defendants-appellants executed a chattel
mortgage in favor of plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3,
Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were being
rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of
Manila on 2 September 1955. The herein mortgage was executed to guarantee a loan of P4,800.00
received from plaintiffs-appellees, payable within one year at 12% per annum. The mode of payment
was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was
payable on or before August, 1956. It was also agreed that default in the payment of any of the
amortizations, would cause the remaining unpaid balance to become immediately due and Payable

When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on
27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder,
plaintiffs-appellees were issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956,
plaintiffs-appellant commenced Civil Case No. 43073 in the municipal court of Manila, praying, among
other things, that the house be vacated and its possession surrendered to them, and for defendants-
appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is
surrendered. 4 On 21 September 1956, the municipal court rendered

Defendants-appellants, in their answers in both the municipal court and court a quo impugned the
legality of the chattel mortgage,

Issue: WON the subject matter of the mortgage is a house of strong materials, and, being an
immovable, it can only be the subject of a real estate mortgage and not a chattel mortgage?

Held: No. Certain deviations, however, have been allowed for various reasons. In the case
of Manarang and Manarang vs. Ofilada , 17 this Court stated that "it is undeniable that the parties to a
contract may by agreement treat as personal property that which by nature would be real property",
citing Standard Oil Company of New York vs. Jaramillo. 18 In the latter case, the mortgagor conveyed
and transferred to the mortgagee by way of mortgage "the following described personal
property." 19The "personal property" consisted of leasehold rights and a building. Again, in the case
of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel Mortgage was a house
of mixed materials, and this Court hold therein that it was a valid Chattel mortgage because it was
so expressly designated and specifically that the property given as security "is a house of mixed
materials, which by its very nature is considered personal property."

In the contract now before Us, the house on rented land is not only expressly designated as Chattel
Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage 23 the property together with its leasehold rights over the lot
on which it is constructed and participation ..." 24Although there is no specific statement referring to
the subject house as personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey 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. Moreover, the subject house stood on a rented lot to which
defendats-appellants merely had a temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the house as personalty.
Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L.
Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel
mortgage, 27 it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the
validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as personalty.

Sergs Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000

FACTS:
PCI Leasing and Finance filed a complaint for sum of money, with an application for a writ of
replevin.

Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and
equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses.
The sheriff proceeded to petitioner's factory, seized one machinery, with word that he would return for
other machineries.
Petitioner (Sergs Products) filed a motion for special protective order to defer enforcement of
the writ of replevin.
PCI Leasing opposed the motion on the ground that the properties were still personal and
therefore can still be subjected to seizure and writ of replevin.
Petitioner asserted that properties sought to be seized were immovable as defined in Article
415 of the Civil Code.
Sheriff was still able to take possession of two more machineries
In its decision on the original action for certiorari filed by the Petitioner, the appellate court,
Citing the Agreement of the parties, held that the subject machines were personal property, and that
they had only been leased, not owned, by petitioners; and ruled that the "words of the contract are
clear and leave no doubt upon the true intention of the contracting parties."

ISSUE: Whether or not the machineries became real property by virtue of immobilization.

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

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

Article 415 (5) of the Civil Code provides that machinery, receptacles, instruments or implements
intended by the owner of the tenement for an industry or works which may be carried on in a building
or on a piece of land, and which tend directly to meet the needs of the said industry or works

In the present case, the machines that were the subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land.They were essential and principal elements of their
chocolate-making industry.Hence, although each of them was movable or personal property on its
own, all of them have become immobilized by destination because they are essential and principal
elements in the industry.

However, contracting parties may validly stipulate that a real property be considered as personal.
After agreeing to such stipulation, they are consequently estopped from claiming otherwise.Under the
principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any
material fact found therein.

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

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