LEUNG YEE, plaintiff-appellant, This action was instituted by the plaintiff to recover

vs. possession of the building from the machinery

FRANK L. STRONG MACHINERY COMPANY and J. company.
G. WILLIAMSON, defendants-appellees.
Issue: Whether or not the plaintiff can recover
Facts: possession of the building.
The "Compañia Agricola Filipina" bought a Ruling:
considerable quantity of rice-cleaning machinery
company from the defendant machinery company, and Article 1473 of the Civil Code is as follows:
executed a chattel mortgage thereon to secure
If the same thing should have been sold to different
payment of the purchase price. It included in the
vendees, the ownership shall be transfer to the
mortgage deed the building of strong materials in which
person who may have the first taken possession
the machinery was installed, without any reference to
the land on which it stood. The indebtedness secured thereof in good faith, if it should be personal
by this instrument not having been paid when it fell property.
due, the mortgaged property was sold by the sheriff, in Should it be real property, it shall belong to the
pursuance of the terms of the mortgage instrument, person acquiring it who first recorded it in the
and was bought in by the machinery company. The registry.
mortgage was registered in the chattel mortgage
registry, and the sale of the property to the machinery Should there be no entry, the property shall belong
company in satisfaction of the mortgage was annotated to the person who first took possession of it in good
in the same registry on December 29, 1913. faith, and, in the absence thereof, to the person who
A few weeks thereafter, on or about the 14th of presents the oldest title, provided there is good faith.
January, 1914, the "Compañia Agricola Filipina" ---------------------------------------------------------------------
executed a deed of sale of the land upon which the
building stood to the machinery company, but this deed The registry her referred to is of course the registry
of sale, although executed in a public document, was of real property, and it must be apparent that the
not registered. This deed makes no reference to the annotation or inscription of a deed of sale of real
building erected on the land and would appear to have property in a chattel mortgage registry cannot be
been executed for the purpose of curing any defects given the legal effect of an inscription in the registry
which might be found to exist in the machinery of real property. By its express terms, the Chattel
company's title to the building under the sheriff's Mortgage Law contemplates and makes provision
certificate of sale. The machinery company went into for mortgages of personal property; and the sole
possession of the building at or about the time when purpose and object of the chattel mortgage registry
this sale took place, that is to say, the month of is to provide for the registry of "Chattel mortgages,"
December, 1913, and it has continued in possession that is to say, mortgages of personal property
ever since.
executed in the manner and form prescribed in the
At or about the time when the chattel mortgage was statute. The building of strong materials in which the
executed in favor of the machinery company, the rice-cleaning machinery was installed by the
mortgagor, the "Compañia Agricola Filipina" executed "Compañia Agricola Filipina" was real property, and
another mortgage to the plaintiff upon the building, the mere fact that the parties seem to have dealt
separate and apart from the land on which it stood, to with it separate and apart from the land on which it
secure payment of the balance of its indebtedness to stood in no wise changed its character as real
the plaintiff under a contract for the construction of the property. It follows that neither the original registry in
building. Upon the failure of the mortgagor to pay the the chattel mortgage of the building and the
amount of the indebtedness secured by the mortgage, machinery installed therein, not the annotation in
the plaintiff secured judgment for that amount, levied that registry of the sale of the mortgaged property,
execution upon the building, bought it in at the sheriff's had any effect whatever so far as the building was
sale on or about the 18th of December, 1914, and had
concerned.
the sheriff's certificate of the sale duly registered in the
land registry of the Province of Cavite. BOARD OF ASSESSMENT APPEALS, CITY
ASSESSOR and CITY TREASURER OF QUEZON
At the time when the execution was levied upon the
CITY, petitioners, vs.
building, the defendant machinery company, which was
in possession, filed with the sheriff a sworn statement MANILA ELECTRIC COMPANY, respondent.
setting up its claim of title and demanding the release
of the property from the levy. Thereafter, upon demand Facts:
of the sheriff, the plaintiff executed an indemnity bond
The Philippine Commission enacted Act No. 484
in favor of the sheriff in the sum of P12,000, in reliance
upon which the sheriff sold the property at public
which authorized the Municipal Board of Manila to
auction to the plaintiff, who was the highest bidder at grant a franchise to construct, maintain and operate
the sheriff's sale. an electric street railway and electric light, heat and
power system in the City of Manila.
Meralco's electric power is generated by its hydro- consists of steel bars or metal strips, joined together
electric plant located at Botocan Falls, Laguna and is by means of bolts, which can be disassembled by
transmitted to the City of Manila by means of electric unscrewing the bolts and reassembled by screwing
transmission wires, running from the province of the same. These steel towers or supports do not
Laguna to the said City. These electric transmission also fall under paragraph 5, for they are not
wires which carry high voltage current, are fastened machineries, receptacles, instruments or
to insulators attached on steel towers constructed by implements, and even if they were, they are not
respondent at intervals, from its hydro-electric plant intended for industry or works on the land. Petitioner
in the province of Laguna to the City of Manila. The is not engaged in an industry or works in the land in
respondent Meralco has constructed 40 of these which the steel supports or towers are constructed.
steel towers within Quezon City, on land belonging
Note:
to it.
Poles - was used to denote the steel towers of an
The City Assessor of Quezon City declared the
electric company engaged in the generation of
aforesaid steel towers for real property tax under
hydro-electric power generated from its plant.
Tax.
Davao Sawmill Co. vs. Castillo
Respondent paid the amount under protest, and filed
61 SCRA 709
a petition for review in the Court of Tax Appeals
Issue: Facts:
Whether or not the Meralco poles constitute real
The Davao Saw Mill Co., Inc., is the holder of a
properties so as they can be subjected to a real
lumber concession from the Government of the
property tax.
Philippine Islands. It has operated a sawmill in the
Held: sitio of Maa, barrio of Tigatu, municipality of Davao,
Province of Davao. However, the land upon which
The tax law does not provide for a definition of real the business was conducted belonged to another
property; but Article 415 of the Civil Code does, by person. On the land the sawmill company erected a
stating the following are immovable property: building which housed the machinery used by it.
(1) Land, buildings, roads, and constructions of all
kinds adhered to the soil; In another action, wherein the Davao Light & Power
Co., Inc., was the plaintiff and the Davao, Saw, Mill
xxx xxx xxx Co., Inc., was the defendant, a judgment was
rendered in favor of the plaintiff in that action against
(3) Everything attached to an immovable in a fixed
the defendant in that action; a writ of execution
manner, in such a way that it cannot be separated
issued thereon, and the properties now in question
therefrom without breaking the material or
were levied upon as personal property by the sheriff.
deterioration of the object;
No third party claim was filed for such properties at
xxx xxx xxx the time of the sales thereof as is borne out by the
record made by the plaintiff herein.
(5) Machinery, receptacles, instruments or
implements intended by the owner of the tenement Issue:
for an industry or works which may be carried in a Whether or not the machinery mounted on
building or on a piece of land, and which tends foundations of cement and installed by the lessee on
directly to meet the needs of the said industry or a lease land be regarded as real property.
works;
xxx xxx xxx Held:
The machinery which is movable in its nature only
The steel towers or supports in question, do not becomes immobilized when placed in a plant by the
come within the objects mentioned in paragraph 1, owner of the property or plant but not when so
because they do not constitute buildings or placed by a tenant, a usufructuary, or any person
constructions adhered to the soil. They are not having only a temporary right, unless such person
construction analogous to buildings nor adhering to acted as agent of the owner.
the soil. As per description, given by the lower court,
they are removable and merely attached to a square Immobilization by destination or purpose cannot
metal frame by means of bolts, which when generally be made by a person whose possession of
unscrewed could easily be dismantled and moved property is only TEMPORARY, otherwise we will be
from place to place. They can not be included under forced to presume that he intended to give the
paragraph 3, as they are not attached to an property permanently away in favor of the owner of
immovable in a fixed manner, and they can be the premises.
separated without breaking the material or causing
deterioration upon the object to which they are
attached. Each of these steel towers or supports
Serg’s Products and Goquiolay vs. PCI Leasing Issue: WON the said machines are personal, not
and Finance immovable property which may be a proper subject
388 SCRA 499 of a writ of replevin

Ratio: Ruling:
After agreeing to a contract stipulating that a real or Petitioners contend that the subject machines used
immovable property be considered as personal or in their factory were not proper subjects of the Writ
movable, a party is estopped from subsequently issued by the RTC, because they were in fact real
claiming otherwise. Hence, such property is a proper property. Serious policy considerations, they argue,
subject of a writ of replevin obtained by the other militate against a contrary characterization.
contracting party.
Rule 60 of the Rules of Court provides that writs of
Facts: replevin are issued for the recovery of personal
"On February 13, 1998, respondent PCI Leasing and property only.15 Section 3 thereof reads:
Finance, Inc. ("PCI Leasing" for short) filed with the
RTC-QC a complaint for [a] sum of money (Annex "SEC. 3. Order. -- Upon the filing of such affidavit
‘E’), with an application for a writ of replevin and approval of the bond, the court shall issue an
docketed as Civil Case No. Q-98-33500. order and the corresponding writ of replevin
describing the personal property alleged to be
"On March 6, 1998, upon an ex-parte application of wrongfully detained and requiring the sheriff
PCI Leasing, respondent judge issued a writ of forthwith to take such property into his custody."
replevin (Annex ‘B’) directing its sheriff to seize and
deliver the machineries and equipment to PCI On the other hand, Article 415 of the Civil Code
Leasing after 5 days and upon the payment of the enumerates immovable or real property as follows:
necessary expenses.
"ART. 415. The following are immovable property:
"On March 24, 1998, in implementation of said writ,
the sheriff proceeded to petitioner’s factory, seized xxx xxx xxx
one machinery with [the] word that he [would] return
for the other machineries. (5) Machinery, receptacles, instruments or
implements intended by the owner of the tenement
"On March 25, 1998, petitioners filed a motion for for an industry or works which may be carried on in a
special protective order (Annex ‘C’), invoking the building or on a piece of land, and which tend
power of the court to control the conduct of its directly to meet the needs of the said industry or
officers and amend and control its processes, works;
praying for a directive for the sheriff to defer
enforcement of the writ of replevin. xxx xxx x x x"

"This motion was opposed by PCI Leasing (Annex In the present case, the machines that were the
‘F’), on the ground that the properties [were] still subjects of the Writ of Seizure were placed by
personal and therefore still subject to seizure and a petitioners in the factory built on their own land.
writ of replevin. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence,
"In their Reply, petitioners asserted that the although each of them was movable or personal
properties sought to be seized [were] immovable as property on its own, all of them have become
defined in Article 415 of the Civil Code, the parties’ "immobilized by destination because they are
agreement to the contrary notwithstanding. They essential and principal elements in the industry."16
argued that to give effect to the agreement would be In that sense, petitioners are correct in arguing that
prejudicial to innocent third parties. They further the said machines are real, not personal, property
stated that PCI Leasing [was] estopped from treating pursuant to Article 415 (5) of the Civil Code.17
these machineries as personal because the
contracts in which the alleged agreement [were] Be that as it may, we disagree with the submission
embodied [were] totally sham and farcical. of the petitioners that the said machines are not
proper subjects of the Writ of Seizure.
"On April 6, 1998, the sheriff again sought to enforce
the writ of seizure and take possession of the The Court has held that contracting parties may
remaining properties. He was able to take two more, validly stipulate that a real property be considered as
but was prevented by the workers from taking the personal.18 After agreeing to such stipulation, they
rest. are consequently estopped from claiming otherwise.
Under the principle of estoppel, a party to a contract
"On April 7, 1998, they went to [the CA] via an is ordinarily precluded from denying the truth of any
original action for certiorari." material fact found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld
the intention of the parties to treat a house as a
personal property because it had been made the
subject of a chattel mortgage. The Court ruled:

"x x x. Although 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."

Applying Tumalad, the Court in Makati Leasing and

Finance Corp. v. Wearever Textile Mills20 also held
that the machinery used in a factory and essential to
the industry, as in the present case, was a proper
subject of a writ of replevin because it was treated
as personal property in a contract. Pertinent portions
of the Court’s ruling are reproduced hereunder:

"x x x. If a house of strong materials, like what was

involved in the above Tumalad case, may be
considered as personal property for purposes of
executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third
party will be prejudiced thereby, there is absolutely
no reason why a machinery, which is movable in its
nature and becomes immobilized only by destination
or purpose, may not be likewise treated as such.
This is really because one who has so agreed is
estopped from denying the existence of the chattel
mortgage."

In the present case, the Lease Agreement clearly

provides that the machines in question are to be
considered as personal property. Specifically,
Section 12.1 of the Agreement reads as follows:21

"12.1 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."

Clearly then, petitioners are estopped from denying

the characterization of the subject machines as
personal property. Under the circumstances, they
are proper subjects of the Writ of Seizure.

It should be stressed, however, that our holding --

that the machines should be deemed personal
property pursuant to the Lease Agreement – is good
only insofar as the contracting parties are
concerned.22 Hence, while the parties are bound by
the Agreement, third persons acting in good faith are
not affected by its stipulation characterizing the
subject machinery as personal.23 In any event,
there is no showing that any specific third party
would be adversely affected.