B. H.

BERKENKOTTER, plaintiff and appellant,

vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY,
MABALACAT SUGAR COMPANY and THE PROVINCIAL SHERIFF OF PAMPANGA, defendants
and appellees.
[No. 41643. July 31, 1935]
Digest Author: Jude Fanila
Topic: Classifications of Property – Based on Movability
Petitioners: BH Berkenkotter
Respondents: Cu Unjieng E Hijos, Yek Tong Lin Fire, Marine Insurance Company, Mabalacat Sugar
Company and Provincial Sheriff of Pampanga

Doctrine: The Civil Code gives the character of real property to "machinery, liquid containers, instruments or
implements intended by the owner of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of such trade or industry."

Facts
1. Appeal by petitioner – CFI Manila dismissed complaint against respondent -
2. April 26 1926 – respondent, Mabalacat Sugar obtained from co-respondent CU Unjieng a loan
secured by a mortgage over two-parcels of land owned by Mabalacat. With the following terms:
a. with all its 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 the future exist in
said lots."
3. October 5 1926 – After mortgage, Mabalacat purchased additional machinery and equipment to
increase capacity of the sugar central (from 150 tons to 250 tons milling per day).
a. Estimated cost of machinery was P100,000 – led to Mabalacat proposing to petitioner to
advance payments.
b. Berkentoter advanced payments for machinery and equipment with a promise to be
reimbursed upon Mabalacat securing an additional loan from the Mortgagees (Cu
Unjieng).
c. Same day, Berkenkotter agreed gave a loan of P25,570 + P22,000 in credit (for unpaid
salary)
i. Led to Mabalacat purchasing equipment and machinery
4. June 10 1927 – Mabalacat applied for an additional P75,000 loan with Cu Unjieng, offering
machinery and equipment as security.
a. April 27, 1927 – loan was denied.
5. Led to current case, petitioner argues that machineries not part of the mortgage; That Mabalacat
president in the letter bound himself to not mortgage nor encumber machineries until he could be
fully reimbursed.
a. Argues that because machineries not part of mortgage, Mabalacat was the owner, thus
could not have offered them as security and that said machineries were not incorporated
into the land which was mortgaged and subsequently transferred to Cu Unjieng.
Issues
1. W/N installed machineries real property? – YES
a. Under Art. 344 of the Civil Code, machines become immovables by destination &
incorporation once fixed upon the premises by the owner if they are indispensable for that
 industry. Thus, under Art. 1877 they become part of the mortgage between Mabalacat
and Cu Unjieng.
i. The fact that Mabalacat agreed with Berkenkotter not to encumber or alienate the
equipment until the latter was reimbursed is not incompatible with the
incorporation of the same; Nothing could prevent Mabalacat from giving them as
security under a second mortgage.
b. Thus, incorporation of machinery led to the transfer of the right to redemption of the
purchaser (Mabalacat) to the mortgagor (Cu Unjieng) upon the enforcement of the
mortgage.
i. The sale of the machinery and equipment to Berkenkotter is valid, the
incorporation does not vest Cu Unjieng with ownership but instead only the right
to redemption.

Ruling
Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with
costs to the appellant. So ordered
Notes

1. "ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents
not collected when the obligation falls due, and the amount of any indemnities paid or due the
owner by the insurers of the mortgaged property or by virtue of the exercise of the power of
eminent domain, with the declarations, amplifications, and limitations established by law,
whether the estate continues in the possession of the person who mortgaged it or whether it
passes into the hands of a third person."

2. Article 334, paragraph 5, of the Civil Code gives the character of real property to "machinery,
liquid containers, instruments or implements intended by the owner of any building or land for
use in connection with any industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade or industry."

CALTEX (PHILIPPINES) INC., petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF
PASAY, respondents.
Doctrine - Equipment and machinery, as appurtenances to the gas station building or shed owned are fixtures
necessary to the operation of the gas station, for without them the gas station would be useless, and hence within the
meaning of the Assessment Law and the Real Property Tax Code - and therefore, taxable as real property.

Facts
1. Machine and equipment – consisting of tanks, pumps, car hoists, washers, compressors, etc. in a
gasoline station situated on leased land.
 a. Caltex owns land, leases land for gasoline station. Leases the machines and equipment to
the gas station operators.
2. City Assessor of Pasay – ruled that equipment was taxable realty – realty tax amounting to
P4,541 annually.
a. Machines and equipment were real property under the Real Property Tax Code, the
definitions of Real Property under the Civil Code do not apply for the purposes of
taxation.
b. Specifics of Gas station:
c. Gas station is a piece of lot where a building and shed are erected, where a water tank placed in a corner, 2
car hoists in the shed, and an air compressor on the wall.
d. Underground tank is 6 feet under and connected with a steel pipe to the gas pumps.
e. Footing of pump is a cement pad which is embedded in the pavement. 
f. All these form the entire gas station and are ATTACHED to the tenement, even the tank, because it is still
connected to the main gas station which is attached to the pavement.
3. City Board of Tax appeals – reversed the finding of the city assessor – machines and equipment
were movables, therefore not subject to tax.
4. June 3 1977 - Central Board of Assessment appeals (respondent) reversed City Board, affirmed
the City Assessor.
a. Basis – machines and equipment were considered real property under Sec. 3(k) and 3(m)
and Sec. 38 of the Real Property Tax Code
i. Therefore, real property classification under Civil Code inapplicable.
5. May 2 1979 – current petition for certiorari – arguing that equipment personal property not
subject to tax.
Issues
1. W/N machines and equipment real property? – YES
a. Real Property Tax Code – Sec. 38 provides that machinery and other improvements
affixed or attached to real property are taxable unless specifically exempted. 1 The gas
station building, owned by Caltex is considered as real property. The machinery and
equipment, contributing to the industry of the gas station is therefore considered as
taxable real property under the real property tax code.
b. Davao Sawmill ruling inapplicable, as there the machinery classification as real property
being dependent on being placed by the owner was based off of the Civil Code for the
purposes of the execution of a judgment against the lessee. In the present case,
classification comes from Real Property Tax code for taxation purposes.
i. Improvements on land are commonly taxed as realty though they might be
considered as real property.
c. Meralco v. bd. Of Appeal similarly inapplicable, as there the steel towers were considered
as personalty because they were attached to square metal frames which could be moved
form place to place when unscrewed or dismantled; more importantly there was a specific

1
k) Improvements - is a valuable addition made to property or an amelioration in its condition, amounting to more
than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or
utility or to adapt it for new or further purposes
m Machinery - shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to
the real estate. It includes the physical facilities available for production, as well as the installations and appurtenant
service facilities, together with all other equipment designed for or essential to its manufacturing, industrial or
agricultural purposes (See sec. 3[f], Assessment Law).
 exemption from real tax by virtue of Par. 9 of the franchise. Here, no such exemption
exists.

Ruling
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are
affirmed. The petition for certiorari is dismissed for lack of merit. No costs. SO ORDERED..

Tantoco v. Municipal Council (1990) – J. Villamor

VIUDA DE TAN Toco, plaintiff and appellant,

vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant, and appellee.

Facts
1. Petitioner, Tan widow of Tantoco sued municipal council of Iloilo for non-payment of eminent
domain case covering two strips of land which was appropriated to widen a street. Aggregate
amount of P42, 966.0
a. Lack of funds in spite of writ of execution - led to sheriff levying some municipal
property, auto trucks for street sprinkling + police patrol mobile + police stations along
Mabini + Molo and Mandurriao streets and lots which were used as markets.
2. Fiscal of Iloilo challenged attachment, argued it was void – CFI ruled that it was dissolved
attachment. Led to current appeal.
Issues
1. W/N property is exempt from execution? – YES
a. Under Sec. 2165 of the Administrative codes, Municipalities are corporations, thus
juridical entities. Under Art. 343 of CC properties of municipalities that are for public use
are considered as part of the public domain.
i. Covers roads, foot-paths, squares, streets, fountains and public waters, drives and
public improvements of general benefit.
b. Public use determined by the usage and purposes by which property is held. If property is
held for public uses which means generally governmental purposes, then public domain.
However, even if such property is temporarily used for private purposes if public use is
not abandoned it still cannot be subject to execution.
i. Public domain includes taxes and public revenues because the same are essential
for governmental work.

By virtue of all the foregoing, the judgment appealed from should be and is hereby
affirmed with costs against the appellant. So ordered.
Province of Zamboanga v. City of Zamboanga (1968) – J. JP Bengzon

THE PROVINCE OF ZAMBOANGA DEL NORTE,

plaintiff-appellee, vs. CITY OF ZAMBOANGA,
SECRETARY OF FI-NANCE and COMMISSIONER OF
INTERNAL REVENUE, defendants-appellants.

Facts
1. 1936 - Commonwealth Act 39 – converted Municipality of Zamboanga into Zamboanga City.
Prior to this, it was the provincial capital of the then Zamboanga province.
a. Under CA 39 – Buildings and properties of the province that will be abandoned shall be
acquired and paid for by the City of Zamboanga pursuant too the price fixed by the
Auditor General.
i. Properties covered 50 lots and some buildings on them
2. June 16 1948 - RA 286 approved, creating municipality of Molave which then made it the capital
of Zamboanga province.
3. May 26 1949 – Auditor General fixed value of properties at P1,294-244.00
4. June 6 1952 – RA 711 – divided Zamboanga into Zamboanda del Norte and Zamboange del sur
a. Sec. 6 of same act provided that properties of former province to be divided equitable by
the President.
5. Jan 11 1955 – assets and obligations were apportioned
a. 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur.
b. Zamboanga del Norte therefore became entitled to 54.39% of P1,294,244.00, the total
value of the lots and buildings in question, or P704,220.05 payable by Zamboanga City
6. March 17 1959 – Exec Sec issue ruling that Zamboanga del Norte had a vested right as owner
(therefore, coowner proindiviso) of properties aforementioned thus they were entitled to the price
thereof, payable by ZG city. This revoked previous cabinet resolution which conveyed all 50 lots
and buildings to Zamboanga City for P1.00
a. Sec. of Finance via Commsr. Of internal revenue authorized the deduction of 25% of
internal revenue for City of Zamboanga  aggregate amount of P57, 737.46 in partial
payment of the P704,220.05 due to Zamboanga del Norte.
7. June 17 1961 – RA 3039 amended CA 39 Sec. 50 – which provided that the transfer of properties
were to be free of charge.
a. Led to return of P43,030.11/P57, 373.46.
8. March 5 1962 – ZG del Norte filed for declaratory relief + WPI via CFI of ZG De Norte
a. Wanted RA 3039 – Unconstitutional for deprivation of property without just
compensation and due process
b. Plaintiffs rights and obligations under the law be declared
c. Sec. of Finance and Commsr of Internal Revenue be enjoined from reimbursing P57,373
d. That ZG city be ordered to continue the quarterly payment of the P704,220 balance
9. Aug. 12 1963 – CFI declared RA 3039 unconstitutional
 a. Deprived ZG del Norte of private properties – Ordered payment in full – transfer of deed
upon full payment only.
i. Plaintiff via motion to reconsider obtained a ruling that ZG city pay the amount
due in lump sum with 6% /annum interest.
10. Led to current appeal.

Issues
1. W/N the RA 3039 valid? | W/N 50 lots and buildings are under the public domain? – NO
a. If properties are owned and used for public and governmental purposes, Congress has
absolute control. If patrimonial property, there can be no taking without just
compensation as private properties.
b. Following the ruling in Hinunangan v. Director of lands, Viuda De Tantoco v. Municipal
City Council of Iloilo and Municipality of Batangas v. Cantos properties which are
devoted for public service, even if not for public use fall under the control of Congress. It
is enough that property be held and devoted for governmental purposes like local
administration, public education, public health, etc.
i. Under this classification 24 lots + buildings are considered as public property.
The buildings, being accessories to the land follow the nature of the principal i.e.
they become public too.
1. The buildings, though located in ZG city being for public use can also be
availed of by the ZG province residents thus not deprived of benefits.
2. This classification follows the Law of Municipal Corporations rather
than the Civil Code. Art. 424 of CC provides that the classification of
patrimonial properties of municipalities s those for public use was
without prejudice to special laws, therefore principles of Municipal Law
applies.
a. Under the NCC classification, properties not devoted for public
use (e.g. those limited strictly to public service) are considered
patrimonial properties.
ii. The other 26 lots and buildings are considered patrimonial property for they are
not used for governmental purposes. Also, they are registered under ZG Del
Norte. Although registration not enough to convert public property to private.
c. No estoppel by laches – Cause of action under CA 39 Sec. 50 arose 1949 after fixing of
value of properties, 1951 reconsideration of transfer of properties without charge. 1952 –
old province dissolved, Successor-in-interest ZG del Norte obtained reconsideration in
1959, obtained partial payments til 1961. Suit in 1962, thus no laches.
i. No lump sum payment as relief sought was quarterly payments also, no complete
delivery of lots yet thus no lump sum under Art. 1169.

WHEREFORE, the decision appealed from is hereby set aside and another judgment is
hereby entered as follows:
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del
Norte in lump sum the amount of P43,030.11 which the former took back from the latter
out of the sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever
balance remains of plaintiff's 54.39% share in the 26 patrimonial properties, after
deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated
March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of
quarterly payments from the allotments of defendant City, in the manner originally
adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No
costs. So ordered.