Board of Assessment Appeals v.

MERALCO
[G.R. No. L-15334. January 31, 1964
En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no
part.
Facts: On 20 October 1902, the Philippine Commission
enacted Act 484 which authorized the Municipal Board of
Manila to grant a franchise to construct, maintain and
operate an electric street railway and electric light, heat and
power system in the City of Manila and its suburbs to the
person or persons making the most favorable bid. Charles M.
Swift was awarded the said franchise on March 1903, the
terms and conditions of which were embodied in Ordinance
44 approved on 24 March 1903. Meralco became the
transferee and owner of the franchise. Meralcos 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 constructed
by respondent at intervals, from its hydroelectric plant in the
province of Laguna to the City of Manila. Meralco has
constructed 40 of these steel towers within Quezon City, on
land belonging to it.
On 15 November 1955, City Assessor of Quezon City declared
the aforesaid steel towers for real property tax under Tax
Declaration 31992 and 15549. After denying Meralcos
petition to cancel these declarations an appeal was taken by
Meralco to the Board of Assessment Appeals of Quezon City,
which required Meralco to pay the amount of P11,651.86 as
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 which rendered
a decision on 29 December 1958, ordering the cancellation of
the said tax declarations and the City Treasurer of Quezon
City to refund to Meralco the sum of P11,651.86. The motion
for reconsideration having been denied, on 22 April 1959, the
petition for review was filed.

Issue: Whether or not the steel towers of an electric

company constitute real property for the purposes of real
property tax.
Held: The steel towers of an electric company dont
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.
The steel towers or supports do not come within the objects
mentioned in paragraph 1, because they do not constitute
buildings or constructions adhered to the soil. They are not
constructions analogous to buildings nor adhering 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.
Each of these steel towers or supports consists of steel bars
or metal strips, joined together by means of bolts, which can
be disassembled by unscrewing the bolts and reassembled
by screwing the same.
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.
The Supreme Court affirmed the decision appealed from, with
costs against the petitioners.

his house as chattel, a conduct that may conceivably stop

him from subsequently claiming otherwise.

TUMALAD vs. VICENCIO, G.R. No. L-30173,

September 30, 1971
TUMALAD V. VICENCIO 41 SCRA 143
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

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.

PUNSALAN, JR. V. VDA. DE LACSAMANA

G.R. No. L-55729 March 28, 1983
FACTS:
Punsalan was the owner of a piece of land, which he
mortgaged in favor of PNB. Due to his failure to pay, the
mortgage was foreclosed and the land was sold in a public
auction to which PNB was the highest bidder.
On a relevant date, while Punsalan was still the possessor of
the land, it secured a permit for the construction of a
warehouse.
A deed of sale was executed between PNB and Punsalan. This
contract was amended to include the warehouse and the
improvement thereon. By virtue of these instruments,
respondent Lacsamana secured title over the property in her
name.
Petitioner then sought for the annulment of the deed of sale.
Among his allegations was that the bank did not own the
building and thus, it should not be included in the said deed.
Petitioners complaint was dismissed for improper venue. The
trial court held that the action being filed in actuality by
petitioner is a real action involving his right over a real
property.
ISSUE:

W/N the trial court erred in dismissing the case on the ground
of improper venue.
W/N the warehouse is an immovable and must be tried in the
province where the property lies.
HELD:
Warehouse claimed to be owned by petitioner is an
immovable or real property. Buildings are always immovable
under the Code. A building treated separately from the land
on which it is stood is immovable property and the mere fact
that the parties to a contract seem to have dealt with it
separate and apart from the land on which it stood in no wise
changed its character as immovable property.

Makati Leasing and Finance

Wearever Textile Mills, Inc.,
122 SCRA 296
GR No. L-58469

Corp.,

vs

May 16, 1983

FACTS
Wearever Textile Mills, Inc. executed a chattel mortgage
contract in favor of Makati Leasing and Finance Corporation
covering certain raw materials and machinery. Upon default,
Makati Leasing fi led a petition for judicial foreclosure of the
properties mortgaged. Acting on Makati Leasings application
for replevin, the lower court issued a writ of seizure. Pursuant
thereto, the sheriff enforcing the seizure order seized the
machinery subject matter of the mortgage. In a petition for
certiorari and prohibition, the Court of Appeals ordered the
return of the machinery on the ground that the same can-not
be the subject of replevin because it is a real property
pursuant to Article415 of the new Civil Code, the same being
attached to the ground by means of bolts and the only way
to remove it from Wearever textiles plant would be to drill
out or destroy the concrete fl oor. When the motion for
reconsideration of Makati Leasing was denied by the Court of
Appeals, Makati Leasing elevated the matter to the Supreme
Court.

ISSUE
Whether the machinery in suit is real or personal property
from the point of view of the parties.
HELD
There is no logical justification to exclude the rule out the
present case from the application of the pronouncement in
Tumalad v Vicencio, 41 SCRA 143. If a house of strong
materials, like what was involved in the 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 the denying the existence of the
chattel mortgage.
In rejecting petitioners assertion on the applicability of the
Tumalad doctrine, the CA lays stress on the fact that the
house involved therein was built on a land that did not
belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which
the house is built and We should not lay down distinctions
not contemplated by law.
It must be pointed out that the characterization by the
private respondent is indicative of the intention and
impresses upon the property the character determined by
the parties. As stated in Standard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the parties to a
contract may, by agreement, treat as personal property that
which by nature would be a real property as long as no
interest of third parties would be prejudiced thereby.
The status of the subject matter as movable or immovable
property was not raised as an issue before the lower court
and the CA, except in a supplemental memorandum in
support of the petition filed in the appellate court. There is no
record showing that the mortgage has been annulled, or that

steps were taken to nullify the same. On the other hand,

respondent has benefited from the said contract.
Equity dictates that one should not benefit at the expense of
another.
As such, private respondent could no longer be allowed to
impugn the efficacy of the chattel mortgage after it has
benefited therefrom.
Therefore, the questioned machinery should be considered as
personal property.

Meralco Securities v. Central Board of

Assessment Appeals
G.R. No. L-46245 May 31, 1982
Aquino, J.:
Facts:
Petitioner questions the decision of the respondent which
held that petitioners pipeline is subject to realty tax.
Pursuant to a concession, petitioner installed a pipeline
system from Manila to Batangas. Meanwhile, the provincial
assessor of Laguna treated the pipeline as real property. So,
petitioner appealed the assessments to the Board of
Assessment Appeals of Laguna. The board upheld the
assessments and the decision became final and executory
after the lapse of fifteen days from the date of receipt of a
copy of the decision by the appellant. Meralco Securities
contends that the Court of Tax Appeals has no jurisdiction to
review the decision of the Central Board of Assessment

Appeals and no judicial review of the Board's decision is

provided for in the Real Property Tax Code. Hence, the
petitioners recourse to file a petition for certiorari.
Held:
It was held that certiorari was properly availed of in this case.
It is a writ issued by a superior court to an inferior court,
board or officer exercising judicial or quasi-judicial functions
whereby the record of a particular case is ordered to be
elevated for review and correction in matters of law.
The rule is that as to administrative agencies exercising
quasi-judicial power there is an underlying power in the
courts to scrutinize the acts of such agencies on questions of
law and jurisdiction even though no right of review is given
by the statute. The purpose of judicial review is to keep the
administrative agency within its jurisdiction and protect
substantial rights of parties affected by its decisions. The
review is a part of the system of checks and balances which
is a limitation on the separation of powers and which
forestalls arbitrary and unjust adjudications. Judicial review of
the decision of an official or administrative agency exercising
quasi-judicial functions is proper in cases of lack of
jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative decision is corrupt,
arbitrary or capricious.

The steel sides of the tank are directly supported underneath

by a circular wall made of concrete, eighteen inches thick, to
prevent the tank from sliding. Hence, according to Meralco,
the tank is not attached to its foundation. 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 tank merely sits on its foundation. Each
empty tank can be floated by flooding its dike-inclosed
location with water four feet deep.
Meralco filed this special civil action of certiorari to annul the
Board's decision and resolution. It contends that the Board
acted without jurisdiction and committed a grave error of law
in holding that its storage tanks are taxable real property.
Issue: WON the said fuel tanks are subject to Realty Tax.
Held: The tanks are considered real properties subject to
Realty Tax. We hold that while 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.

MERALCO vs. CBAA GR# L-47943/ May 31,

1982 114 SCRA 273
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. They are used for storing fuel oil for
Meralco's power plants. According to Meralco, the storage
tanks are made of steel plates welded and assembled on the
spot. Their bottoms rest on a foundation consisting of
compacted earth as the outermost layer, a sand pad as the
intermediate layer and a two-inch thick bituminous asphalt
stratum as the top layer. The bottom of each tank is in
contact with the asphalt layer.

Oil storage tanks were held to be taxable realty in Standard

Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may
include things which should generally be regarded as
personal property (84 C.J.S. 171, Note 8). 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. 630, 633).
The case of Board of Assessment Appeals vs. Manila Electric
Company, 119 Phil. 328, wherein Meralco's steel towers were
held not to be subject to realty tax, is not in point because in
that case the steel towers were regarded as poles and under
its franchise Meralco's poles are exempt from taxation.

Moreover, the steel towers were not attached to any land or

building. They were removable from their metal frames.

in good condition as when received, ordinary wear and tear

excepted.

Nor is there any parallelism between this case and Mindanao

Bus Co. vs. City Assessor, 116 Phil. 501, where the tools and
equipment in the repair, carpentry and blacksmith shops of a
transportation company were held not subject to realty tax
because they were personal property.

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.
However, the City Board of Tax Appeals ruled that they are
personalty. The Assessor appealed to the Central Board of
Assessment Appeals.
The Board held on June 3, 1977 that the said machines are
real property within the meaning of Ses. 3(k) & (m) and 38 of
the Real Property Tax Code, PD 464, and that the Civil Code
definitions of real and personal property in Articles 415 and
416 are not applicable in this case.
ISSUE
WON the pieces of gas station equipment and machinery
permanently affixed by Caltex to its gas station and
pavement should be subject to realty tax.

Caltex vs Central Board of Assessment

Appeals & City Assessor of Pasay
GR No. L-50466
May 31, 1982
This case is about the realty tax on machinery and
equipment installed by Caltex (Philippines) Inc., in its gas
stations located on leased land.
FACTS
Caltex loaned machines and equipment to gas station
operators under an appropriate lease agreement or receipt.
The lease contract stipulated that upon demand, the
operators shall return to Caltex the machines and equipment

HELD
Sec.2 of the Assessment Law provides that the realty tax is
due on real property, including land, buildings, machinery,
and other improvements not specifically exempted in Sec.3
thereof.
Sec.3 of the Real Property Tax Code provides the following
definitions:
k) Improvements a valuable addition made to property or
an amelioration in its conditionmore than mere repairs or
replacement of wasteintended to enhance its value,
beauty, or utility
m) Machinery machines, mechanical contrivances,
instruments, appliances, and apparatus attached to the real

estateincludes the physical facilities available for

productioninstallation and appurtenant service facilities.
The subject machines and equipment are taxable
improvement and machinery within the meaning of the
Assessment Law and the Real Property Tax Code, because
the same are necessary to the operation of the gas station
and have been attached/affixed/embedded permanently to
the gas station site.

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.

Improvements on land are commonly taxed as realty even

though they might be considered personalty. It is a familiar
phenomenon to see things classified as real property for
purposes of taxation which on general principle might be
considered personal property (Standard Oil Co., vs Jaramillo,
44 PHIL 630).

The Secretary of Agriculture then issued a Miscellaneous

Sales Patent over the land which was later on mortgaged to
the bank.

This case is also easily distinguishable from Board of

Assessment Appeals vs. Manila Electric Co., (119 Phil. 328)
where Meralco's steel towers were exempted from taxation.
The steel towers were considered personalty because they
were attached to square metal frames by means of bolts and
could be moved from place to place when unscrewed and
dismantled.
Nor are Caltex's gas station equipment and machinery the
same as the tools and equipment in the repair shop of a bus
company which were held to be personal property not
subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116
Phil. 501).
The Central Board of Assessment Appeals did not commit a
grave abuse of discretion in upholding the City Assessor's
imposition of the realty tax on Caltex's gas station and
equipment.

PRUDENTIAL BANK V. PANIS

153 SCRA 390
FACTS:

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 RE 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.

ZAMBALES,
PROVINCIALASSESSOR
OF
ZAMBALES,
PROVINCE OF ZAMBALES, and MUNICIPALITY OFSAN
MARCELINO, respondents.
[January 29, 1993, G.R. No. 106041]

FACTS:
On 1985, Provincial Assessor of Zambales assessed the said
properties in issue as taxable improvements. The assessment
was appealed to the Board of Assessment Appeals of the
Province of Zambales. However, 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 elevated the matter to the Central Board of
Assessment Appeals, one of the herein respondents. In its
decision dated March 22, 1990, the Board reversed the
dismissal of the appeal but, agreed that the tailings dam and
the lands submerged thereunder shall be subject to realty
tax.
For purposes of taxation the dam is considered as real
property as it comes within the object mentioned in Article
415 of the New Civil Code, It is a construction adhered to the
soil which cannot be separated or detached without breaking
the material or causing destruction on the land upon which it
is attached. The immovable nature of the dam as an
improvement which determines its character as real
property, hence taxable under Section 38 of the Real
Property Tax Code.
ISSUES:
1. Whether or not the tailings dam is subject to realty tax?
2. Whether or not it be considered as immovable property?
HELD:Yes, it is subject to realty tax and it is considered an
immovable property.

BENGUET CORPORATION, petitioner, vs. CENTRAL BOARD OF

ASSESSMENTAPPEALS, BOARD OF ASSESSMENT APPEALS OF

The petitioner does not dispute that the tailings dam may be
considered realty within the meaning of Article 415. It insists,
however, that the dam cannot be subjected to realty tax as a
separate and independent property because it does not
constitute an "assessable improvement" on the mine

although a considerable sum may have been spent in

constructing and maintaining it.
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, applying Article 415 of the
Civil Code, which states that the following are considered
immovables: Section No. 1 Lands, buildings and
constructions of all kinds adhered to the soil; Section no. 3
Everything attached to an immovable in a fixed manner, in
such a way that it cannot be separated therefrom without
breaking the material or deterioration of the object.
Even without the tailings dam, the petitioner's mining
operation can still be carried out because the primary
function of the dam is merely to receive and retain the
wastes and water coming from the mine. There is no
allegation that the water coming from the dam is the sole
source of water for the mining operation so as to make the
dam an integral part of the mine. In fact, as a result of the
construction of the dam, the petitioner can now impound and
recycle water without having to spend for the building of a
water reservoir.
And as the petitioner itself points out, even if the petitioner's
mine is shut down or ceases operation, the dam may still be
used for irrigation of the surrounding areas.
From the definitions and the cases cited in relation to this
case, 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.
Hence, petition was dismissed by the Supreme Court.

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.

The machines are personal property and they are proper

subjects of the Writ of Replevin

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.

Tsai v. Court of Appeals G.R. No. 120098

October 2, 2001
A chattel mortgage shall be deemed to cover only the
property described therein and not like or substituted
property thereafter acquired by the mortgagor and placed in
the same depository as the property originally mortgaged
Facts: Ever Textile Mills, Inc. (EVERTEX) obtained a loan from
petitioner Philippine Bank of Communications (PBCom). As
security for the loan, EVERTEX executed in favor of PBCom, a
deed of Real and Chattel Mortgage over the lot where its
factory stands, and the chattels located therein as
enumerated in a schedule attached to the mortgage
contract. PBCom granted a second loan to EVERTEX. The
loan was secured by a Chattel Mortgage over personal
properties enumerated in a list attached thereto. The listed
properties were similar to those listed in the first mortgage
deed. Due to business reverses, EVERTEX filed insolvency
proceedings docketed. The CFI issued an order on declaring
the corporation insolvent. All its assets were taken into the
custody of the Insolvency Court, including the collateral, real
and
personal,
securing
the
two
mortgages
as
abovementioned.

Upon EVERTEXs failure to meet its obligation to PBCom, the

latter commenced extrajudicial foreclosure proceedings
against EVERTEX. PBCom was the highest bidder. Thus,
PBCom consolidated its ownership over the lot and all the
properties in it and leased the entire factory premises to
petitioner Ruby L. Tsai. PBCom sold the factory, lock, stock
and barrel to Tsai, including the contested machineries.
EVERTEX filed a complaint for annulment of sale,
reconveyance, and damages with the Regional Trial Court
against PBCom, alleging inter alia that the extrajudicial
foreclosure of subject mortgage was in violation of the
Insolvency Law. EVERTEX claimed that no rights having been
transmitted to PBCom over the assets of insolvent EVERTEX,
therefore Tsai acquired no rights over such assets sold to her,
and should reconvey the assets. EVERTEX averred that
PBCom, without any legal or factual basis, appropriated the
contested properties, which were not included in the Real
and Chattel Mortgages.
Issue: Whether or not the foreclosure on after acquired
properties of EVERTEX is valid.
Held: Inasmuch as the subject mortgages were intended by
the parties to involve chattels, insofar as equipment and

machinery were concerned, the Chattel Mortgage Law

applies, which provides in Section 7 thereof that: a chattel
mortgage shall be deemed to cover only the property
described therein and not like or substituted property
thereafter acquired by the mortgagor and placed in the same
depository as the property originally mortgaged, anything in
the mortgage to the contrary notwithstanding. And, since
the disputed machineries were acquired in 1981 and could
not have been involved in the 1975 or 1979 chattel
mortgages, it was consequently an error on the part of the
Sheriff to include subject machineries with the properties
enumerated in said chattel mortgages. As the auction sale of
the subject properties to PBCom is void, no valid title passed
in its favor. Consequently, the sale thereof to Tsai is also a
nullity under the elementary principle of nemo dat quod non
habet, one cannot give what one does not have
Assuming arguendo that the properties in question are
immovable by nature, nothing detracts the parties from
treating it as chattels to secure an obligation under the
principle of estoppel. An immovable may be considered a
personal property if there is a stipulation as when it is used
as security in the payment of an obligation where a chattel
mortgage is executed over it, as in the case at bar.