IMMOVABLE AND MOVABLE PROPERTY (ART. 415-418)
JRPA Lopez v. Orosa
G.R. Nos. L-10817-18, 103 SCRA 98
DOCTRINE: For while it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building in the enumeration of what may constitute real properties could only mean one thing—that a building is by itself an immovable property
FACTS:
Lopez was engaged in business under the name Lopez-Castelo Sawmill. Orosa, who lived in the same province as Lopez, one day approached Lopez and invited the latter to make an investment in the theatre business. Orosa, his family and close friends apparently were forming a corporation named Plaza Theatre. Lopez expressed his unwillingness to invest. Nonetheless, there was an oral agreement between Lopez and Orosa that Lopez would be supplying the lumber for the construction of the theatre. The terms were the following: one, Orosa would be personally liable for any account that the said construction would incur; two, payment would be by demand and not by cash on delivery.
Pursuant to the agreement, Lopez delivered the lumber for the construction. Lopez was only paid one-third of the total cost. The land on which the building has been erected was previously owned by Orosa, which was later on purchased by the corporation. Due to the incessant demands of Lopez, the corporation mortgaged its properties. On an earlier relevant date, the corporation obtained a loan with Luzon Surety Company as surety and in turn, the corporation executed a mortgage over the land and building. In the registration of the land under Act 496, such mortgage wasn‘t revealed. Also due to the demands of Lopez, Orosa issued a deed of assignment over his shares of stock in the corporation. As there was still an unpaid balance, Lopez filed a case against Orosa and Plaza theatre. He asked that Orosa and Plaza theatre be held liable solidarily for the unpaid balance; and in case defendants failed to pay, the land and building should be sold in public auction with the proceeds to be applied to the balance; or that the shares of stock be sold in public auction. Lopez also had lis pendens be annotated in the OCT. The trial court decided that there was joint liability between defendants and that the material man‘s lien was only confined to the building.
ISSUE:
W/N the material men‘s lien for the value of the materials used in the construction of the building attaches to said structure alone and doesn‘t extend to the land on which the building is adhered to?
HELD:
The contention that the lien executed in favor of the furnisher of materials used for the construction and repair of a building is also extended to land on which the building was constructed is without merit. For while it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building in the enumeration of what may constitute real properties could only mean one thing—that a building is by itself an immovable property. Moreover, in the absence of any specific provision to the contrary, a building is an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.
Appellant invoked Article 1923 of the Spanish Civil Code, which provides—―With respect to determinate real property and real rights of the debtor, the following are preferred: xxx Credits for reflection, not entered or recorded, and only with respect to other credits different from those mentioned in four next preceding paragraphs.‖ Close examination of the abovementioned provision reveals that the law gives preference to unregistered refectionary credits only with respect to the real estate upon which the refectionary or work was made. This being so, the inevitable conclusion must be that the lien so created attaches merely to the immovable property for the construction or repair of which the obligation was incurred. Therefore, the lien in favor of appellant for the unpaid value of the lumber used in the construction of the building attaches only to said structure and to no other property of the obligors.
ABB
Associated Insurance and Surety Company v. Iya 103 SCRA 972
DOCTRINE: A building is an immovable property irrespective of where or not said structure and the land on which it is adhered to belong to the same owner.
FACTS:
Spouses Adriano Valino and Lucia A. Valino own a house of strong materials. They filed a bond of P 11,000.00 subscribed by the Associated Insurance and Surety Co., Inc. and as a counter-guaranty, the spouses Valino executed an alleged chattel mortgage on the aforementioned house in favor of the surety company.
The parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation but was able to obtain the same from them after full payment of the purchase price. The Valinos acquired another loan from Isabel Iya for P12,000.00, executing a real estate mortgage over the house and lot. However, they were unable to pay off their other loan which caused the foreclosure of the chattel mortgage. The surety company was awarded the land as the highest bidder in the auction but later on discovered that the land was subject to a real estate mortgage. The surety company then requested that the house and lot be excluded from the real estate mortgage. Iya, in her answer, said that she had a real right over the property and that the chattel mortgage on which the foreclosure was based should be declared null and void for non-compliance with the form required by law. The CA ruled that the foreclosure of the real estate mortgage is limited to the land alone and they awarded the structure to the surety company saying that the house is a personal property and may be subject to chattel mortgage.
ISSUE:
Which of the mortgages should have preference?
HELD:
It was held in Lopez vs. Orosa that the building is an immovable itself, separate and distinct from the land. A building is an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.
Only personal properties can be the subject of a chattel mortgage and since the structure in this case is an immovable, it cannot subject to a chattel mortgage. Therefore the chattel mortgage and the sale on which it was based should be declared null and void. Also, while it is true that said document was registered in the Chattel Mortgage Register of Rizal, this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the
registration of the document in the registry of chattels is merely a futile act which would produce no legal effect insofar as the building is concerned.
FZC
Bicerra v. Teneza G.R. No. L-16218, 6 SCRA 648
DOCTRINE: A house is classified as immovable property by reason of its adherence to the soil on which it is built (Article 415, paragraph 1, Civil Code). This classification holds true regardless of the fact that the house may be situated on land belonging to a different owner. But once the house is demolished it ceases to exist, hence its character as an immovable likewise ceases.
FACTS:
The Bicerras are supposedly the owners of the house (PhP 20,000) built on a lot owned by them in Lagangilang, Abra which the Tenezas forcibly demolished in January 1957, claiming to be the owners thereof. The materials of the house were placed in the custody of the barrio lieutenant. The Bicerras filed a complaint claiming actual damages of P200, moral and consequential damages amounting to P600, and the costs. The CFI Abra dismissed the complaint claiming that the action was within the exclusive (original) jurisdiction of the Justice of the Peace Court of Lagangilang, Abra.
The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no costs were adjudged.
ISSUE:
WON the house is immovable property even if it is on the land of another HELD:
House is immovable property even if situated on land belonging to a different owner; Exception, when demolished.
LNAC
Evangelista v. Alto Surety & Insurance Co., Inc. G.R. No. L-11139
DOCTRINE: Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character, which the parties have given to it or desire to give it. When the rules speak of personal property, property which is ordinarily so considered is meant; and when real property is spoken of, it means property which is generally known as real property. The regulations were never intended to suit the consideration that parties may have privately given to the property levied upon.
FACTS:
Petitioner Santos Evangelista instituted a Civil Case for a sum of money. He obtained a writ of attachment, which levied upon a house, built by Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding notice of attachment with the Office of the Register of Deeds of Manila. Judgment was rendered in favor of Evangelista, who, bought the house at public auction held in compliance with the writ of execution issued in said case. The definite deed of sale was issued to him upon expiration of the period of redemption. When
Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that he had leased the property to the Alto Surety & Insurance Co., Inc., respondent herein, and that the latter is now the true owner of said property. It appears that a definite deed of sale of the same house had been issued to respondent, as the highest bidder at an auction sale held in compliance with a writ of execution. Hence, Evangelista instituted the present action against respondent and Rivera, for the purpose of establishing his (Evangelista) title over said house, securing possession thereof, apart from recovering damages.
In its answer, respondent alleged that it has a better right to the house, because the sale made, and the definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952, respectively, precede the sale to Evangelista (October 8, 1951) and the definite deed of sale in his favor (October 22, 1952). Rivera, in effect, joined forces with respondent.
CFI rendered judgment for Evangelista, sentencing Rivera and respondent to deliver the house in question to petitioner herein and to pay him, jointly and severally from October, 1952, until said delivery, plus costs.
On appeal taken by respondent, the above decision was reversed by the CA which absolved Alto Surety from the complaint on account that although the writ of attachment in favor of Evangelista had been filed with the Register of Deeds of Manila prior to the sale in favor of Alto Surety, Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house in question were immovable property.
Evangelista now seeks a review by certiorari. ISSUE:
Whether a house, constructed by the lessee of the land on which it is built, should be dealt with, for purpose of attachment, as immovable property, or as personal property.
HELD:
Said house is not personal property, much less a debt, credit or other personal property not capable of manual delivery, but immovable property. As explicitly held, in Laddera vs. Hodges, "a true building (not merely superimposed on the soil) is immovable or real property, whether it is erected by the owner of the land or by usufructuary or lessee.
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal property for purposes of said contract. However, this view is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither this principle, nor said view, is applicable to strangers to said contract. Much less is it in point where there has been no contract whatsoever, with respect to the status of the house involved, as in the case at bar.
The rules on execution do not allow, and, we should not interpret them in such a way as to allow, the special consideration that parties to a contract may have desired to impart to real estate, for example, as personal property, when they are, not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character, which the parties have given to it or desire to give it. When the rules speak of personal property, property which is ordinarily so considered is meant; and when real property is spoken of, it means property which is generally known as real property. The regulations were never intended to suit the consideration that parties may have privately given
to the property levied upon. Enforcement of regulations would be difficult were the convenience or agreement of private parties to determine or govern the nature of the proceedings.
The mere fact that a house was the subject of the chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale of public auction. This ruling is demanded by the need for a definite, orderly and well defined regulation for official and public guidance and would prevent confusion and misunderstanding.
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it similarly affects the public and third persons.
TKDC
Leung Yee v. Strong Machinery Co. G.R. No. L-11658
DOCTRINE: The mere fact that the parties decided to deal with the building as personal property does not change its character as real property. Neither the original registry in the chattel mortgage registry nor the annotation in said registry of the sale of the mortgaged property had any effect on the building.
FACTS:
Compañia Agricola Filipina bought several rice-cleaning machinery from a machinery company, Frank L. Strong Machinery Company and executed a chattel mortgage to secure payment of the purchase price. The deed of mortgage includes the building where the machinery was installed without any reference to the land on which it stood. Since Compañia Agricola Filipina failed to pay when due, the mortgaged property was sold by the sheriff and was bought by the machinery company.
Few weeks later, Compañia Agricola Filipina executed a deed of sale of the land where the building stood to the machinery company. In effect, the machinery company possessed the building when the sale took place and continued its possession ever since.
When the chattel mortgage was executed, Compañia Agricola Filipina executed another mortgage in favor of Yee over the building to pay its debt to the machinery company. Since Compañia Agricola Filipina failed to pay when due, Yee secured a judgment to levy execution upon the building and bought the building at the sheriff‘s sale; Yee secured the sheriff‘s certificate of sale and registered it in the land registry.
When the execution was levied upon the building, the machinery company filed with the sheriff a sworn statement setting up its claim of title and demanding the release of property from the levy. On the other hand, Yee filed an action to recover possession of the building from the machinery company. Trial court ruled in favor of the machinery company on the basis of Article 1473 of the Civil Code; it ruled that the machinery company registered the title to the building prior to the registration date of Yee‘s certificate.
ISSUE:
Whether or not the nature of property is changed by its registration in the Chattel Mortgage Registry. -- NO
HELD:
The registry under Article 1473 of the Civil Code refers to registry of real property and the annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property.
The Chattel Mortgage Law contemplates mortgages of personal property. The sole purpose and object of the chattel mortgage registry is the registration of personal property mortgages executed in the manner and form prescribed in the statute.
In this case, the building where the rice-cleaning machinery was installed was real property. The mere fact that the parties dealt with it as separate and apart from the land on which it stood does not change its character as real property. Neither the original registry of the building in the chattel mortgage nor the annotation of sale of the mortgaged property in the registry had any effect on the building‘s nature as immovable property.
AMD
Standard Oil Co. of New York v. Jaramillo 44 SCRA 630
DOCTRINE: The duties of a register of deeds in respect to the registration of chattel mortgage are of a purely ministerial character; and no provision of law can be cited which confers upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought as a chattel mortgage.
FACTS:
Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in Manila and owner of the house built thereon. She executed a chattel mortgage in favor of Standard Oil Co. to convey both the leasehold interest in said lot and the building. After the document had been duly acknowledge and delivered, petitioner presented it to the respondent, Joaquin Jaramillo, as ROD of Manila, to be recorded in the book of record of chattel mortgages. Upon examination of the instrument, Jaramillo was of the opinion that it was not a chattel mortgage as the interest mortgaged did not appear to be personal property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only. So, petitioner sought for a peremptory mandamus to compel the respondent to record the said document in the register. Jaramillo interposed a demurrer before the SC.
ISSUE:
W/N the ROD can refuse the registration of a Chattel Mortgage? NO HELD:
It is his duty to accept the proper fee and place the instrument on record. The duties of a register of deeds in respect to the registration of chattel mortgage are of a purely ministerial character; and no provision of law can be cited which confers upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought as a chattel mortgage.
The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law (Act No. 1508), as amended by Act No. 2496; but these have been transferred to section 198 of the Administrative Code. There is nothing in any of these provisions conferring upon the register of deeds any authority whatever in respect to the "qualification‖, of chattel mortgage. His duties in respect to such instruments are ministerial only. The efficacy of the act of recording a chattel mortgage consists in the fact that it operates as constructive notice of the existence of
the contract, and the legal effects of the contract must be discovered in the instrument itself in relation with the fact of notice. Registration adds nothing to the instrument, considered as a source of title, and affects nobody's rights except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property and personal property for purpose of the application of the Chattel Mortgage Law. Those articles state rules which, considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under given conditions property may have character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property; and 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.
CRF Sibal v. Valdez G.R. No. L-27532
DOCTRINE: For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. (batasnatin)
FACTS:
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land. That within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.
One of the defenses of the defendant Emiliano J. Valdez is that the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption. The trial court hold that the sugar cane in question was personal property and, as such, was not subject to redemption.
ISSUE:
Whether the sugar cane in question is personal or real property under civil code? Under chattel mortgage law?
HELD:
The court ruled that It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property."
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore,
committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption.
MPF Tsai v. CA G.R. No. 120098
DOCTRINE: Even if the properties are immovable by nature, nothing detracts the parties from treating them as chattels to secure an obligation under the principle of estoppel.
FACTS:
● EVERTEX secured a loan from PBC, guaranteed by real estate and chattel mortgage over a parcel of land where the factory stands, and the chattels located therein, as included in a schedule attached to the mortgage contract. another loan was obtained secured by a chattel mortgage over properties with similar descriptions listed in the first schedule.
● During the date of execution of the second mortgage. EVERTEX purchased machineries and equipment.
● Due to business reverses, EVERTEX filed for insolvency proceedings. It failed to pay its obligation and thus, PBC initiated extrajudicial foreclosure of the mortgages.
● PBC was the highest bidder in the public auctions, making it the owner of the properties. It then leased the factory premises to Tsai.
● Afterwards, EVERTEX sought the annulment of the sale and conveyance of the properties to PBC as it was allegedly a violation of the insolvency law.
● The RTC held that the lease and sale were irregular as it involved properties not included in the schedule of the mortgage contract.
ISSUE:
Whether or not the (immovable) properties in question can be entered into a chattel mortgage. -- YES
HELD:
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. While it is true that the controverted properties appear to be immobile, a perusal of the contract of real estate mortgage and chattel mortgage by the parties gives a contrary indication. Both the trial and appellate courts show that the intention was to treat the machineries as movables or personal property.
Assuming that the properties were considered immovables, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel.
AMDG Yap v. Tanada G.R. No. L-32917
DOCTRINE: The Civil code considers as immovable property among others, anything ―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‖
FACTS:
wife seeking to recover the balance of the price and installation of the water pump in the latter‘s residence. The city court declared Yap and his wife in default and rendered a judgment in favor of Goulds. Yap appealed to the CFI wherein Judge Tanada was residing. Yap was again declared in default and judgment was again rendered in favor of Goulds. Later on, Judge Tanada granted Gould‘s Motion for Issuance of Writ of Execution. Subsequently, the water pump was sold in a public auction in favor of Goulds being the highest bidder. Another writ of execution was issued as regards the removal of the water pump and delivery of such to Goulds. Yap is questioning validity of the auction sale and praying that it be annulled as well as the writ of execution. Yap is alleging that the water pump is considered as an immovable property because it is installed in his residence. He also argued that being an immovable property, a notice must be made before the auction sale pursuant to the Rules of Court. It is noted that
Yap filed several motion of reconsideration to which all were denied.
ISSUE:
Whether or not the water pump is an immovable property -- NO
HELD:
The Civil code considers as immovable property among others, anything ―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‖
The water pump involved in this case does not satisfy the above description. It is highly possible to remove the water pump without it breaking or deteriorating by simply loosening the bolts or dismantling the fasteners that were used to attach or install it in his house.
GCG
Mindanao Bus Co. v. City Assessor and Treasurer G.R. No. L-17870
DOCTRINE: Movable equipment, to be immobilized in contemplation of Article 415 of the Civil Code, must be the essential and principal elements of an industry or works which are carried on in a building or on a piece of land. Thus, where the business is one of transportation, which is carried on without a repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to another, the tools and equipment in its repair shop which appear movable are merely incidentals and may not be considered immovables, and, hence, not subject to assessment as real estate for purposes of the real estate tax.
FACTS:
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.
The petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates.
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,
The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and repair equipment. This was then appealed to the Court of Tax Appeals (CTA) who sustained the respondent city assessor's ruling.
ISSUE:
Whether or not the machineries and the equipments are considered immobilized and thus subject to a realty tax. -- NO
HELD:
The Supreme Court held a decision for the petition for review to be set aside and the equipments in question declared not subject to assessment as real estate for the purposes of the real estate tax.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
x x x x x x x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.
Said equipments are not considered immobilized as they are merely incidental, not essential and principal to the business of the petitioner. The transportation business could be carried on without repair or service shops of its rolling equipment as they can be repaired or services in another shop belonging to another
VCL IV
Fels Energy, Inc. v. Province of Batangas, et al. G.R. No. 168557
though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast‖ are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.
FACTS:
On January 18, 1993, National Power Corporation (NPC) entered into a lease contract with Polar Energy, Inc. over 3×30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement, was for a period of five years. Article 10 states that NPC shall be responsible for the payment of taxes. (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges. Polar Energy then assigned its rights under the Agreement to Fels despite NPC‘s initial opposition.
FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of the Provincial Assessor. NPC filed a petition with the Local Board Assessment Appeals (LBAA). The LBAA ordered Fels to pay the real estate taxes. The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a character of permanency. The LBAA also pointed out that the owner of the barges–FELS, a private corporation–is the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.
Fels appealed to the Central Board Assessment Appeals (CBAA). The CBAA reversed and ruled that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed itself.
ISSUE: Whether or not barges are considered as real property, thus can be subject to real property tax -- YES
HELD:
The CBAA and LBAA power barges are real property and are thus subject to real property tax.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the city‘s motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation.
though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast‖ are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.
FXRL
Davao Sawmill Co. v. Castillo G.R. No. 40411,
DOCTRINE: Generally, machinery becomes immobilized when placed by the owner of the plant or property. This rule does not apply should the machinery be placed by any other person such as a tenant or usufructuary.
FACTS:
● The petitioner company operates a sawmill in barrio Tigatu, Davao.
● Said facility contained both movable and immovable property (machines and other such implements).
● However, the land on which it is situated belongs to another person.
● The parties executed a lease contract providing that upon the expiration or termination of such lease, the following shall happen:
o The ownership of all structures and improvements introduced by the petitioner company shall be transferred to the respondents without any cost or obligation to pay.
o The machines and their accessories shall not be included in said transfer.
● It was noted by the court that in a previous case between the two parties, judgment was rendered against the petitioner company upon which a writ of execution was brought against its machines (as personalty) in favor of Castilllo, et al.
● Additionally, the records of the current case reflected that the petitioner company had treated its machinery as personal property by executing chattel mortgages on them in favor of third persons.
● Petitioner company contends that its machines are immovable under the first and fifth paragraphs of Article 334 (now Article 415) of the Civil Code.
ISSUE:
W/N the machines of the petitioner company are movable or immovable property.
HELD:
The machines are movable.
The court observed that the petitioner company failed to register its protest at the time its machines were sold. Generally, this inaction would be inconclusive but it is indicative of the intention impressed upon the property in question.
This is so because while machines are generally movable property, they may nevertheless be ―immobilized‖ by destination or purpose subject to several conditions.
This conclusion finds its ground under the fifth paragraph of Article 415. Here, machinery becomes immobilized when placed by the owner of the plant or property. This rule does not apply should the machinery be placed by any other person such as a tenant or usufructuary.
Applying the rule to the case on hand, the machinery was placed by the petitioner company who was merely a lessee. As such, the equipment was never immobilized in the first place.
RSDM
Makati Leasing and Financial Corporation v. Wearever Textile Mills, Inc. G.R. No. L-58469
DOCTRINE: 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.
FACTS:
The private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable Purchase Agreement in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it. The Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent's premises and was not able to effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was however subsequently restrained upon private respondent's filing of a motion for reconsideration. After several incidents, the lower court finally issued an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private respondent's filing of a further motion for reconsideration.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ was to take the main drive motor of said machinery. The appellate court rejected petitioner's argument that private respondent is estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.
ISSUE:
Whether or not the property in suit is real property – NO. It is a personal property HELD:
as the appellate court did, the present case from the application of the abovequoted pronouncement. 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 rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals 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 of the subject machinery as chattel by the private respondent is indicative of 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 real property, as long as no interest of third parties would be prejudiced thereby.
MRAM
Board of Assessment Appeals v. MERALCO 10 SCRA 68
DOCTRINE: The steel towers or poles of MERALCO are not real properties because 1) they are not adhered to the soil, 2) they are not attached to an immovable property and can be dismantled without breaking or deteriorating the material and 3) they are not machineries nor instruments or implements intended for the industry or works on the land
FACTS:
Generated by its hydroelectric plant, MERALCO‘s electric power is transmitted from Laguna to Manila through electric transmission wires. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers. MERALCO has constructed 40 of these steel towers within Quezon City, on land belonging to it.
Three steel towers were the subject of this dispute. When inspected, the findings disclose that there was no concrete foundation but there was adobe stone underneath. Further, it could not be ascertained whether said adobe stone was purposely or not.
From this, the City Assessor of Quezon City declared the steel towers subject to real property tax. MERALCO, however, protested the assessment saying that the steel towers are considered poles and according to their franchise, it is exempt from taxation
ISSUE:
Whether or not the steel towers or poles of the MERALCO are considered real properties, hence subject to real property tax?
The Supreme Court held in the negative. The Court said that the steel towers are personal properties. The Court based their ruling on the enumeration of immovable properties in Art. 415 of the Civil Code.
First, the steel towers do not come within the objects mentioned in par. 1, because they do not constitute buildings or constructions adhered to the soil.Moreover, they are not construction analogous to buildings nor adhering to the soil because as per description, 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.
Second, they can not be included under paragraph 3 since they are not attached to an immovable in a fixed manner; they can be separated without breaking the material or causing deterioration upon the object to which they are attached. In fact, each of these steel towers or supports consists of steel bars joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same.
Lastly, they do not fall under paragraph 5, as they are not machineries, receptacles, instruments or implements. SC said that even if they were machineries, receptacles, instruments or implements, they are not intended for industry or works on the land. MERALCO is not engaged in an industry or works in the land in which the steel supports or towers are constructed.
FMM
Machinery & Engineering Supplies, Inc. v. CA G.R. No. L-7057
DOCTRINE: When the machinery and equipment in question appeared to be attached to the land, particularly to the concrete foundation of said premises, in a fixed manner, in such a way that the former could not be separated from the latter "without breaking the material or deterioration of the object or that in order to remove said outfit, it became necessary, not only to unbolt the same, but , also, to cut some of its wooden supports and when, said machinery and equipment were "intended by the owner of the tenement for an industry" carried on said immovable and tended, it becomes immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines.
FACTS:
▪ On 13 March 1953, Machinery & Engineering Supplies, Inc. (the ―Petitioner‖) filed a complaint for replevin in the Court of First Instance (―CFI‖) of Manila for the recovery of the machinery and equipment sold and delivered to Ipo Limestone Co., Inc and Dr. Antonio Villarama (the ―Respondents‖) at their factory in Barrio Bigti, Norzagaray, Bulacan.
▪ Upon application ex-parte of the Petitioner and upon approval of its bond sum of P15,769.00, herein Respondent Judge issued an order directing the Provincial Sheriff of Bulacan to seize and take immediate possession of the properties specified in the said order.
▪ On 19 March 1953, two deputy sheriffs of Bulacan, Ramon S. Roco and a crew of technician and laborers proceeded to Bigti to carry out the CFI‘s order.
▪ Leonardo Contreras, herein Respondent Company‘s Manager met the sheriffs and handed the latter a letter addressed to Atty. Leopoldo C. Paled, ex-officio
Provincial Sheriff of Bulacan, signed by the Respondent Company‘s counsel, protesting against the seizure of the properties on the ground that the same are not personal properties.
▪ Roco and the deputy sheriffs contended that their duty is ministerial and went ahead to the factory. At the factory, Rocco‘s attention was called to the fact that the equipment could not possibly be dismantled without causing damages or injuries to the wooden frames attached to them but Roco insisted in dismantling the same on his own responsibility and alleged that the bond was posted for such eventuality. Thus, the deputy sheriffs directed that some of the machine‘s supports be cut.
▪ On 20 March 1953, the Respondent Company filed an urgent motion, with a counter-bond in the amount of P15,769 for the return of the properties seized by the sheriffs. On the same day, the trial court issued an order, directing the Provincial Sheriff of Bulacan to return the machinery and equipment to the place where they were installed at the time of seizure.
▪ On 2 March 1953, the deputy sheriffs returned the said properties by depositing them along the road near the quarry of the Respondent Company, without inventory and re-installation in its former position and replacing the destroyed posts, which rendered its use impracticable.
▪ On 23 March 1953, Respondents‘ counsel asked the provincial sheriff if the machinery and equipment dumped on the road would be re-installed to their former position and condition. The next day, the provincial sheriff filed an urgent motion in court manifesting the Roco had been asked to furnish the sheriff‘s office with the expenses, laborers, technical men and equipment to carry into effect the courts order, among other things but that Roco absolutely refused and asking the Court that Respondent Company be ordered to provide the required aid or relieve the sheriff of the duty of complying to the said order.
▪ On 30 March 1953, the trial court ordered the provincial sheriff and the Petitioner Company to reinstate the machinery and equipment removed by them in their original condition. An urgent motion of the provincial sheriff dated 15 April 1953 requesting for an extension was denied and on 4 May 1953, the trial court ordered the Petitioner Company to furnish the provincial sheriff with the necessary funds and technical crew and laborers to reinstate the machinery and equipment.
▪ The case was appealed before the Court of Appeals but the latter dismissed the same for lack of merit.
▪ Hence this petition filed before the Supreme Court (the ―SC‖). The Petitioner argued that the respondent judge had completely disregarded his manifestation that the machinery and equipment seized were and still are the Petitioner's property until fully paid for and such never became immovable. The question of ownership and the applicability of Art. 415 of the new Civil Code are immaterial in the determination of the only issue involved in this case.
ISSUE:
Whether the machineries and equipments can be considered as personal properties subject to replevin. -- NO
HELD:
The SC held that the special civil action known as replevin, governed by Rule 62 of Court, is applicable only to "personal property". When the sheriff repaired to the premises of respondent company, the machinery and equipment in question appeared to be attached to the land, particularly to the concrete foundation of said premises, in a fixed manner, in such a way that the former could not be separated from the latter "without breaking the material or deterioration of the object." Hence, in order to remove said outfit, it became necessary, not only to unbolt the same, but, also, to cut some of its wooden supports. Moreover, said machinery and equipment were "intended by the owner of the tenement for an industry" carried on said immovable and tended." For these reasons, they were already immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines, which are substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As such immovable property, they were not subject to replevin.
RGGM
Punsalan, Jr. v. Vda. De Lacsamana 121 SCRA 331
DOCTRINE: Buildings are always immovable under the Civil Code. Separate treatment by the parties of building from the land in which it stood does not change the immovable character of the building.
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.
Petitioner‘s 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:
Whether or not 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 Civil 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 did not change its character as immovable property.
MCSS
Prudential Bank v. Panis 153 SCRA 390
FACTS:
Plaintiff-spouses Magcale secured two loans over a 2-storey residential building.
For failure of the plaintiffs to pay their obligation to defendant Bank after it became due, the deed of the Real Estate Mortgage were extrajudicially foreclosed.
ISSUE: WON a valid real estate mortgage can be constituted on the building. -- YES
HELD:
Inclusion of building separate and distinct from land, in the provision of law can only mean that a building is by itself an immovable property. A building by itself may be mortgaged apart from the land on which it has been built.
NKVS
Tumalad v. Vicencio 41 SCRA 143
DOCTRINE: The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel.‖
FACTS:
On 1 September 1955 defendants executed a chattel mortgage in favor of plaintiffs over their house located at Quiapo, Manila, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The mortgage was executed to guarantee a loan of P4,800.00 received from plaintiffs. 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 and the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No. 3135, and for this purpose, the Sheriff of the City of Manila or any of his deputies is hereby empowered and authorized to sell all the Mortgagor's property after the necessary publication in order to settle the financial debts of P4,800.00, plus 12% yearly interest, and attorney's fees.
When defendants defaulted in paying, the mortgage was extrajudicially foreclosed, and the house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs were issued the corresponding certificate of sale. Thereafter, plaintiffs 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 to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. MTC granted petition.
Defendants, in their answers in both the municipal court and court a quo impugned the legality of the chattel mortgage, claiming that they are still the owners of the house. During the pendency of the appeal to the Court of First Instance, defendants failed to deposit the rent as ordered in the decision of the municipal court. As a result, the court granted plaintiffs motion for execution. However, the judgment regarding the surrender of possession to plaintiffs could not be executed because the subject house had been already demolished pursuant to the order of
the court in a separate civil case for ejectment against the present defendants for non-payment of rentals on the land on which the house was constructed.
ISSUE:
W/N the house may be a subject of a Chattel Mortgage. – YES, it may be the subject of a chattel mortgage.
HELD:
Defendants predicate their theory of nullity of the chattel mortgage on the ground that 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.
The rule about the status of buildings as immovable property is that it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties could only mean one thing — that a building is by itself an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.
It is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property. The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel.‖
In a case, a mortgaged house built on a rented land was held to be a personal property, not only because the deed of mortgage considered it as such, but also because it did not form part of the land for it is now settled that an object placed on land by one who had only a temporary right to the same, such as the lessee or usufructuary, does not become immobilized by attachment. Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property as so stipulated in the document of mortgage. It should be noted, however that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from subsequently claiming otherwise.
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 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 defendants 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, because it is the defendants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case, the doctrine of estoppel therefore applies to the defendants, having treated the subject house as personalty.
AMPS
Serg’s Products and Goquiola v. PCI Leasing and Finance 338 SCRA 499
considered as personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party.
FACTS:
PCI Leasing and Finance, Inc. filed a complaint with the RTC for a sum of money with an application for a writ of replevin. Upon an ex-parte application of PCI Leasing, respondent 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.
Serg‘s filed a motion for special protective order. This motion was opposed by PCI Leasing on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be seized were immovable as defined in Article 415 of the Civil Code, the parties‘ agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing was estopped from treating these machineries as personal because the contracts in which the alleged agreement were embodied were totally sham and farcical.
Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners. It also 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 purchased and imported by SERG‘S became real property by virtue of immobilization.
HELD:
The machineries herein are real properties but are considered personal by the parties‘ agreement.
The Court will resolve whether the said machines are personal, not immovable, property which may be a proper subject of a writ of replevin. Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Section 3 thereof reads:
―SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody.‖
On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:
―ART. 415. The following are immovable property:
x x x...x x x...x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on
a piece of land, and which tend directly to meet the needs of the said industry or works;
x x x...x x x...x x x‖
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.‖ 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. 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.
Hence, in Tumalad v. Vicencio, 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.
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. 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. In any event, there is no showing that any specific third party would be adversely affected.
KGS
Manarang and Manarang v. Ofilada and Esteban 99 SCRA 108
DOCTRINE: House is personal property for purposes of chattel mortgage only; Remains real property. The mere fact that a house was the subject of a chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale at public auction. It is real property within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture on the land, which is real property.
FACTS:
Manarang obtained a loan from Esteban, and executed a chattel mortgage over a house of mixed materials as a security. Upon default, Estaban brought an action to foreclose the property mortgaged. At Manarang‘s request, the house mortgaged was to be sold at public auction to satisfy the debt. However, before the property could be sold, Manarang offered to pay the sum. But the sheriff refused the tender unless the additional amount is also paid representing the publication of the notice in two newspapers. Manarang contended that the house in question should be considered as personal property and the publication of the notice of its sale at public auction in execution considered unnecessary. The Court of First Instance held that although real
property may sometimes be considered as personal property, the sheriff was in duty bound to cause the publication of the notice of its sale in order to make the sale valid or to prevent its being declared void or voidable.
ISSUE:
Can the house of Manarang be classified as personal property since it was considered as such in a chattel mortgage? -- NO
HELD:
The house of mixed materials levied upon on execution, although subject of a contract of chattel mortgage between the owner and a third person, is real property within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture on the land, which is real property.
There cannot be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case it is considered as between the parties as personal property. The matter depends on the circumstances and the intention of the parties.
The general principle of law is that a building permanently fixed to the freehold becomes a part of it, that prima facie a house is real estate, belonging to the owner of the land on which it stands, even though it was erected against the will of the landowner, or without his consent. The general rule is otherwise, however, where the improvement is made with the consent of the landowner, and pursuant to an understanding either expressed or implied that it shall remain personal property. Nor does the general rule apply to a building, which is wrongfully removed from the land and placed on the land of the person removing it.
Among the principal criteria for determining whether property remains personally or becomes realty are annexation to the soil, either actual or construction, and the intention of the parties. Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty, or where it is affixed in the soil to be used for a particular purpose for a short period and then removed as soon as it has served its purpose.
These considerations notwithstanding, we hold that the rules on execution do not allow, and we should not interpret them in such a way as to allow, the special consideration that parties to a contract may have desired to impart to real estate, for example, as personal property, when they are not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character which the parties have given to it or desire to give it. When the rules speak of personal property, property which is ordinarily so considered is meant; and when real property is spoken of, it means property which is generally known as real property. The regulations were never intended to suit the consideration that parties, may have privately given to the property levied upon. Enforcement of regulations would be difficult were the convenience or agreement of private parties to determine or govern the nature of the proceedings. We, therefore, hold that the mere fact that a house was the subject of a chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale at public auction. This ruling is demanded by the need for a definite, orderly and well-defined regulation for official and public guidance and which would prevent confusion and misunderstanding
