Manila Electric Co., v. Central Board of Assessment Appeals 114 SCRA 273
DOCTRINE: Oil storage tanks were held to be taxable realty. For purposes of taxation, the term "real property" may include things which should generally be regarded as personal property.
FACTS:
The case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company in Batangas which it leased in 1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery compound, and 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. Hence, it is not attached to its foundation.
On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals (CBAA) states that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks.
The CBAA ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and other appurtenances constitute taxable improvements.
Meralco filed a motion for reconsideration which the Board denied. They elevated the case to the SC.
ISSUE:
WON the storage tanks are considered “improvements” on real property such that it is subject to real property tax. -- YES
HELD:
Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land owned by Meralco.
The issue raised by Meralco has to be resolved in the light of the provisions of the Assessment Law, Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which took effect on June 1, 1974.
Section 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 section 3 thereof. This provision is reproduced with some modification in the Real Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. — They shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted.
The Code contains the following definition in its section 3:
k) Improvements — is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes.
The SC holds 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.
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. 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).
Lopez v. Orosa [G.R. Nos. L-10817-18. February 28, 1958.]
En Banc, Felix (J): 10 concur.
Facts: Enrique Lopez is a resident of Balayan, Batangas, doing business as Lopez-Castelo Sawmill. Sometime in May 1946, Vicente Orosa, Jr. invited Lopez to make an investment in the theatre business (Plaza Theatre, Inc.). Although Lopez expressed his unwillingness to invest in the business, he agreed to supply the lumber necessary for the construction of the proposed theatre and at Orosa’s behest and assurance that the latter would be personally liable for any account that the said construction might incur, Lopez further agreed that payment therefor would be on demand and not cash on delivery basis. Pursuant to said verbal agreement, Lopez delivered the lumber for the theater on 17 May 1946, up to 4 December of the same year. The Plaza
Theatre was erected on a piece of land with an area of 679.17 m2 formerly owned by Vicente Orosa, Jr., and was acquired by the corporation on 25 September 1946. The total cost of the materials amounted to P62,255.85, of which Lopez was paid only P20,848.50, thus leaving a balance of P41,771.35. Orosa and Belarmino Rustia, corporation president, promised Lopez to obtain a bank loan to satisfy the balance, to which assurance Lopez had to accede. Unknown to him, however, as early as November 1946, the corporation already got a loan for P30,000 from the PNB with the Luzon Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in favor of said company as counter-security. As the land at that time was not yet brought under the operation of the Torrens System, the mortgage on the same was registered on 16 November 1946, under Act 3344. Subsequently, when the corporation applied for the registration of the land under Act 496, such mortgage was not revealed and thus OCT O-391 was correspondingly issued on October 25, 1947, without any encumbrance appearing thereon.
Vicente Orosa, Jr. executed, on 17 March 1947, an alleged “deed of assignment” of his 420 shares of stock of the Plaza Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the creditor, and as the obligation still remained unsettled, Lopez filed on 12 November 1947, a complaint with the CFI Batangas (Civil Case 4501, later R-57) against Vicente Orosa Jr. and Plaza Theatre, Inc., praying that defendants be sentenced to pay him jointly and severally the sum of P41,771.35 with legal interest from the filing of the action; that in case defendants fail to pay the same, that the building and the land covered by OCT O-391 owned by the corporation be sold at public auction and the proceeds thereof be applied to said indebtedness; or that the 420 shares of the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff also caused the annotation of a notice of lis pendens on said properties with the Register of Deeds.
The surety company, in the meantime, upon discovery that the land was already registered under the Torrens System and that there was a notice of lis pendens thereon, filed on 17 August 1948, or within the 1-year period after the issuance of the certificate of title, a petition for review of the decree of the land registration court dated 18 October 1947, in order to annotate the lights and interests of the surety company over said properties. Opposition thereto was offered by Lopez, asserting that the amount demanded by him constituted a preferred lien
over the properties of the obligors; that the surety company was guilty of negligence when it failed to present an opposition to the application for registration of the property; and that if any annotation of the rights and interest of said surety would ever be made, same must be subject to the lien in his favor.
The two cases were heard jointly and in a decision dated 30 October 1952, the lower Court held that Orosa and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of the building and the plaintiff thus acquired the materialman’s lien over the same; the lien being merely confined to the building and did not extend to the land on which the construction was made.
The lower Court, after making an exhaustive and detailed analysis of the respective stands of the parties and the evidence adduced at the trial, held that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of the building and the plaintiff thus acquired the materialman's lien over the same. In making the pronouncement that the lien was merely confined to the building and did not extend to the land on which the construction was made.
Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of therein defendants was joint instead of solidary and that the lien did not extend to the land, but same was denied by order of the court of 23 December 1952. The matter was thus appealed to the Court of Appeals, which affirmed the lower court’s ruling, and then to the Supreme Court.
Issue: whether a materialman's lien for the value of the materials used in the construction of a building attaches to said structure alone and does not extend to the land on which the building is adhered to?
Held: Yes. We cannot subscribe to this view, 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, separate and distinct from the land, in the enumeration of what may constitute real properties1 could mean only one thing — that a building is by itself an immovable property, a doctrine already pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in view of the absence of any specific provision of law 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.
Considering the conclusion thus arrived at, i.e., that the materialman's lien could be charged only to the building for which the credit was made or which received the benefit of refection, the lower court was right in, holding at the interest of the mortgagee over the land is superior and cannot be made subject to the said materialman's lien. Benguet Corporation Vs. CBAA
Facts: This petition for certiorari now seeks to reverse the ruling of the CBAA.
The principal contention of the petitioner is that the tailings dam is not subject to realty tax because it is not an "improvement" upon the land within the meaning of the Real Property Tax Code. More particularly, it is claimed —
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and independent of the mine; hence, by itself it cannot be considered an improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner corporation in the area, the tailings dam will benefit the local community by serving as an irrigation facility;
(d) that the building of the dam has stripped the property of any commercial value as the property is submerged under water wastes from the mine;
(e) that the tailings dam is an environmental pollution control device for which petitioner must be commended rather than penalized with a realty tax assessment;
(f) that the installation and utilization of the tailings dam as a pollution control device is a requirement imposed by law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as they cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be based on its incidental use by petitioner as a water reservoir and not on the alleged cost of construction of the dam and the annual build-up expense;
(c) that the "residual value formula" used by the Provincial Assessor and adopted by respondent CBAA is arbitrary and erroneous; and
(3) as regards the petitioner's liability for penalties for
non-declaration of the tailings dam and the submerged lands for realty tax purposes:
(a) that where a tax is not paid in an honest belief that it is not due, no penalty shall be collected in addition to the basic tax;
(b) that no other mining companies in the Philippines operating a tailings dam have been made to declare the dam for realty tax purposes.
The Provincial Assessor of Zambales assessed the said properties as taxable improvements. The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. On August 24, 1988, the appeal was dismissed mainly on the ground of the petitioner's "failure to pay the realty taxes that fell due during the pendency of the appeal."
ISSUE: W/N the tailings dam be considered as immovable property? HELD: YES. Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to the soil; xxx xxx xxx
(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.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the real property, including land, buildings, machinery and other improvements" not specifically exempted in Section 3 thereof. A reading of that section shows that the tailings dam of the petitioner does not fall under any of the classes of exempt real properties therein enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines improvement as follows:
(k) Improvements — is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adopt it for new or further purposes.
From the definitions and the cases cited above, it would appear that whether a structure constitutes an improvement so as to partake of the status of realty would depend upon the degree of permanence intended in its construction and use. The expression "permanent" as applied to an improvement does not imply that the
improvement must be used perpetually but only until the purpose to which the principal realty is devoted has been accomplished. It is sufficient that the improvement is intended to remain as long as the land to which it is annexed is still used for the said purpose.
The Court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent in character and it enhances both the value and utility of petitioner's mine. Moreover, the immovable nature of the dam defines its character as real property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax Code.
Tumalad 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 Vicencio and Simeon, defendants-appellants, executed a chattel mortgage in favor of the Tumalads, plaintiff-appellees over their house of strong materials located at 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot 6-B and 7-B, Block 2554, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The
mortgage was executed to guarantee a loan of P4,800.00 received from the Tumalads, payable within one year at 12% per annum. The mode of payment was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also agreed that default in the payment of any of the amortizations would cause the remaining unpaid balance to become immediately due and payable, the Chattel Mortgage enforceable, and the Sheriff of Manila authorized the Mortgagor’s property after necessary publication. When Vicencio and Simeon defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, the Tumalads were issued the corresponding certificate of sale.
On 18 April 1956, the Tumalads commenced Civil Case 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for Vicencio and Simeon to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. On 21 September 1956, the municipal court rendered its decision in favor of the Tumalads. Having lost therein, appealed to the court a quo (Civil Case 30993) which also rendered a decision against them.
On appeal, the case was certified to the Supreme Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are involved. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood.
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.
The Supreme Court reversed the decision appealed from and entered another dismissing the complaint, with costs against plaintiffs-appellees.
Leung Yee v. Strong Machinery [G.R. No. L-11658. February 15, 1918.] First Division, Carson (J): 5 concur, 3 took no part.
Facts: The “Compañia Agricola Filipina” bought rice- cleaning machinery from the machinery company, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated in the same registry on 29 December 1913. On 14 January 1914, the “Compañia Agricola Filipina” executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered and made no reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects which might be found to exist in the machinery company’s title to the building under the sheriff’s certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is to say, the month of December 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery company, the “Compañia Agricola Filipina” executed another mortgage to Leung Yee upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to Leung Yee under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured by the mortgage, Leung Yee secured judgment for that amount, levied execution upon the building, bought it in at the sheriff’s sale on or about the 18 December 1914, and had the sheriff’s certificate of sale duly registered in the
land registry of the Province of Cavite. At the time when the execution was levied upon the building, the machinery company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, Leung Yee executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff’s sale.
The current action was instituted to recover possession of the building from the machinery company. The Court gave judgment in favor of the machinery company, relying upon Article 1473 and the fact that the company had its title to the building registered prior to the date of the registry of plaintiff’s certificate. Hence the appeal.
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.
This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in accordance with the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of the La Revista de los Tribunales, 13th edition.)
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.
STANDARD OIL CO. OF NEW YORK VS JARAMILLO
Facts: On 27 November 1922, Gervasia de la Rosa Vda. de Vera was the lessee of a parcel of land situated in the City of Manila and owner of the house of strong materials built thereon, upon which date she executed a document in the form of a chattel mortgage, purporting to convey to Standard Oil Company of New York by way of mortgage both the leasehold interest in said lot and the building which stands thereon. After said document had been duly acknowledged and delivered, Standard Oil caused the same to be presented to Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded in the book of record of chattel mortgages. Upon examination of the instrument, Jaramillo opined that it was not chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only.
The point submitted to us in this case was determined on September 8, 1914, in an administrative ruling promulgated by the Honorable James A. Ostrand, now a Justice of this Court, but acting at that time in the capacity of Judge of the fourth branch of the Court of First Instance of the Ninth Judicial District, in the City of Manila; and little of value can be here added to the observations contained in said ruling. We accordingly quote therefrom as follows:
It is unnecessary here to determine whether or not the property described in the document in question is real or personal; the discussion may be confined to the point as to whether a register of deeds has authority to deny the registration of a document purporting to be a chattel mortgage and executed in the manner and form prescribed by the Chattel Mortgage Law.
The cause was brought to the Supreme Court upon demurrer interposed by Joaquin Jaramillo, register of deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, seeking a peremptory mandamus to compel the respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of New York.
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.
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.
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.
CLATEX VS CBAA
FACTS: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described the said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any is placed in one corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached in the wall of the shed or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or less, a few meters away from the shed. This is done to prevent conflagration because gasoline and other combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is commonly placed or constructed under the shed.
As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the tenement we consider in this particular case are (is) the pavement covering the entire lot which was constructed by the owner of the gasoline station and the improvement which holds all the properties under question, they are attached and affixed to the pavement and to the improvement.
The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution of January 12, 1978, denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision. CBAA hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code.
ISSUE: WON the pieces of gas station equipment and machinery permanently affixed by Caltex to its gas station form part of immovable or real property?
HELD: That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and installed by the lessee on leased land should be regarded as real property for purposes of execution of a judgment against the lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as realty).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles 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 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 is imposition of the realty tax on Caltex's gas station and equipment.
SERG’S PRODUCTS VS PCI LEASING
FACTS: In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon City (Branch 218)[6] issued a Writ of Seizure.[7] The March 18, 1998 Resolution[8] denied petitioners Motion for Special Protective Order, praying that the deputy sheriff be enjoined from seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal and to return to their original place whatever immobilized machineries or equipments he may have removed.[9]
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.”
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest.
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals- The Petition is not meritorious. HENCE, THE PETITION
ISSUE: W/N the Court will resolve whether the said machines are personal, not immovable, property which may be a proper subject of a writ of repleviN?
HELD: ART. 415. The following are immovable property:
(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;
In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the industry.[16] In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code.
The Court has held that contracting parties may validly stipulate that a real property be considered as personal.[18] After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein.
In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal property. Specifically, Section 12.1 of the Agreement
Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.
Ago v. CA [G.R. No. L-17898. October 31, 1962.] En Banc, Labrador (J): 9 concurring, 1 took no part
Facts: In 1957, Pastor D. Ago bought sawmill machineries and equipments from Grace Park Engineering, Inc., executing a chattel mortgage over said machineries and equipments to secure the payment of a balance of the price remaining unpaid of P32,000.00, which Ago agreed to pay on installment basis. Ago defaulted in his payments and so, in 1958, Grace Park Engineering, Inc. instituted extrajudicial foreclosure proceedings of the mortgage. To enjoin said foreclosure, Ago instituted Special Civil Case 53 in the CFI Agusan. The parties to the case arrived at a compromise agreement and submitted the same in court in writing, signed by Ago and the Grace Park Engineering. Judge Ortiz of the CFI Agusan dictated a decision in open court on 28 January 1959. Still, Ago continued to default in his payments as provided in the judgment by compromise, so Grace Park Engineering filed with the lower court a motion for execution, which was granted by the court on 15 August 1959. A writ of execution, dated 23 September 1959, later followed.
The Provincial Sheriff of Surigao, acting upon the writ of execution, levied upon and ordered the sale of the sawmill machineries and equipments in question. These machineries and equipments had been taken to and installed in a sawmill building located in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill to whom he had sold them or assigned them in payment of his subscription to the shares of stock of said corporation on 16 February 1959 (a date after the decision of the lower court but before levy by the Sheriff). Thereafter the sawmill machineries and equipments were installed in a building and permanently attached to the ground. Having been advised by the sheriff that the public auction sale was set for 4 December 1959, Ago, on 1 December 1959, filed the petition for certiorari and prohibition with preliminary injunction with the CA.
The Court of Appeals on 8 December 1959, issued a writ of preliminary injunction against the sheriff but it turned out that the latter had already sold at public auction the machineries in question as scheduled. Grace Park Engineering was the only bidder for P15,000.00, although the certificate of sale was not yet executed. The CA instructed the sheriff to suspend the issuance of a certificate of sale of the said sawmill machineries and equipment until the final decision of the case. On 9 November 1960, the CA dismissed the petition for certiorari and dissolved the writ of preliminary injunction, with costs against the petitioner.
ISSUE: W/N the nature of the machineries in question is movables or immovables?
HELD: Immovables. The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill machineries and equipments he assigned the same to the Golden Pacific Sawmill, Inc. in payment of his subscription to the shares of stock of said corporation. Thereafter the sawmill machinery and equipments were installed in a building and permanently attached to the ground. By reason of such installment in a building, the said sawmill machineries and equipment became real estate properties in accordance with the provision of Art. 415 (5) of the Civil Code, thus:
ART. 415. The following are immovable property: xxx xxx xxx
(5) Machinery, receptacles, instruments or implements tended 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;
This Court in interpreting a similar question raised before it in the case of Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil. 683, held that the installation of the machine and equipment in the central of the Mabalacat Sugar Co., Inc. for use in connection with the industry carried by the company, converted the said machinery and equipment into real estate by reason of their purpose. And therefore, the machiniries in question are immovable.
The decision of the Court of Appeals sought to be reviewed is hereby set aside and We declare that the issuance of the writ of execution in this case against the sawmill machineries and equipments purchased by petitioner Pastor D. Ago from the Grace Park Engineering, Inc., as well as the sale of the same by the Sheriff of Surigao, are null and void.
Berkenkotter v. Cu Unjieng [G.R. No. 41643. July 31, 1935.] En Banc, Villa-real (J): 4 concur
Facts: On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on 2 parcels of land “with all its buildings, improvements, sugar-cane mill, steel
railway, telephone line, apparatus, utensils and whatever forms part or is a necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future exist in said lots.”
On 5 October 1926, the Mabalacat Sugar Company decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional machinery and equipment was P100,000. In order to carry out this plan, B. A. Green, president of said corporation, proposed to the B. H. Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional loan from the mortgagees, Cu Unjieng e Hijos, and that in case B. A. Green should fail to obtain an additional loan from Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said B. A. Green binding himself not to mortgage nor encumber them to anybody until Berkenkotter be fully reimbursed for the corporation’s indebtedness to him.. Having agreed to said proposition made in a letter dated 5 October 1926, B. H. Berkenkotter, on 9 October 1926, delivered the sum of P1,710 to B. A. Green, the total amount supplied by him to B. A. Green having been P25,750. Furthermore, B. H. Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment.
On 10 June 1927, B. A. Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by said B. A. Green and installed in the sugar central after the execution of the original mortgage deed, on 27 April 1927, together with whatever additional equipment acquired with said loan. B. A. Green failed to obtain said loan.
The appellant contends that the installation of the machinery and equipment claimed by him in the sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character
<The case facts do not provide for the instance when the case was filed with the lower court, and details of such controversy>
The CFI Manila dismissed Berkenkotter’s complaint, with costs. Hence, the appeal.
ISSUE: whether or not the lower court erred in declaring that the additional machinery and equipment, as improvement incorporated with the central are subject to the mortgage deed executed in favor of the defendants Cu Unjieng e Hijos?
HELD: NO. Article 1877 of the Civil Code provides as follows.
ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when the obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations established by law, whether the estate continues in the possession of the person who mortgaged it or whether it passes into the hands of a third person.
If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent.
For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for the payment of the latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said machinery and equipment with the central; and (3) that the sale of the machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the appellant. ______________________________________________________________________________
JAIME SANCHEZ, JR., Petitioner, vs. ZENAIDA F. MARIN, JESUS NICASIO F. MARIN, JOSE DAVID F. MARIN, MARIABERNADETTE F. MARIN, PAUL PETER F. MARIN and PHILIP LUIS F. MARIN, Respondents.
FACTS: David Felix owned a fishpond. Jaime Sanchez was instituted as a tenant on the said fishpond, with a 50/50 sharing agreement. After a few years, Felix sold and transferred ownership of the subject fishpond to the Marins. As new owners of the fishpond, they entered into a civil law agreement with their mother, Zenaida, which was renewable yearly. Zenaida then made an arrangement with Sanchez wherein Sanchez would receive a regular salary and a 20%share in the net profit of the fishpond. When her lease agreement with her children expired, Zenaida ordered Sanchez to vacate the premises. Sanchez refused, asserting that he was a tenant of the fishpond and not a mere contractual worker; hence, he had the right to its peaceful possession and security of tenure. On 21 July 1986, the petitioner filed a Complaint before the Regional Trial Court (RTC) of Lucena City, in which he asked the court to declare him as a tenant of the subject fishpond. On 20 July 1987, the RTC of Lucena City rendered a Decision in favor of the petitioner, As Sanchez was already declared as an agricultural tenant of the fishpond, he filed a petition to the Provincial Agrarian Reform Adjudicator (PARAD) for the fixing of leasehold rentals for his use of the fishpond. However, Zenaida countered this application by filing a case with the PARAD to eject Sanchez for failure to pay the rent and for failure to render an accounting. The PARAD consolidated the 2 cases and ruled in favor of Sanchez. Zenaida appealed to the DARAB, which affirmed the PARAD decision. The CA reversed the ruling, stating that the DARAB lacked jurisdiction over the case. It stated that Sec. 2 of RA 7881, which amended Sec. 10 of RA 6657, excluded private lands actually, directly, and exclusively used for prawn farms and fishponds from the coverage of the CARL, so that the operation of a fishpond is no longer considered an agricultural activity. Since the cases are not agrarian disputes, then the DARAB could not have validly acquired jurisdiction over the case
Issues:
1. Whether or not a fishpond is an agricultural land.
2. Whether or not a tenurial arrangement exists between sanchez and zenaida marin. 3. W/N the DARAB has jurisdiction over the case.
Held.
1. No. by virtue of sec 2, ra 7881, the operation of fishponds is no longer considered an agricultural activity, and a parcel of land devoted to fishpond is no longer an agricultural land.
2. Yes. Although the fishpond is not covered by the CARL, it bears empahasis that Sanches status as a tenant in the subject fishpond and his right to security of tenure were already previously settled. Having been declared as a tenant with the right to security of tenure as provided in Section 35[22] of Republic Act No. 3844 in relation to Section 7 of Republic Act No. 1199, the law enforced at the time of the filing of the Complaint before the RTC of Lucena City, the petitioner has acquired a vested right over the subject fishpond, which right or interest has become fixed and established and is no longer open to doubt or controversy.[23]Therefore, even if fishponds, like the subject matter of this case, were later excluded/exempted from the coverage of the CARL as expressly provided in Section 10 of Republic Act No. 6657, as amended by Republic Act No. 7881,
and despite the fact that no CLOA has been issued to the petitioner, the same cannot defeat the aforesaid vested right already granted and acquired by the petitioner long before the passage of Republic Act No. 7881. And being in the nature of a substantive law, the amendments introduced by Republic Act No. 7881 to Republic Act No. 6657 in the year 1995 cannot be given a retroactive application as to deprive the petitioner of his rights under the previous agrarian legislation
3. YES. The present case was instituted as early as 1991 when the law applicable was still RA 6657, and fishponds and prawn farms were not yet exempted/excluded from the CARL coverage. At that time, there was an agrarian dispute between the parties. Prior to the enactment of RA 7881 in 1995, the case was already pending appeal before the DARAB. And being in the nature of a substantive law, the amendments introduced by Republic Act No. 7881 to Republic Act No.6657 in the year 1995 cannot be given a retroactive application as to deprive the petitioner of his rights under the previous agrarian legislation. Hence, the aforesaid amendments cannot be made to apply to divest the DARAB of its jurisdiction of the case. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case.
___________________________________________________________________________
DIGEST: Heirs of Proceso Bautista vs Sps. Barza G.R. No. 79167 / May 7, 1992
FACTS:
On October 25, 1946, Proceso Bautista applied for a fishpond permit over a 30 hectare parcel of public land located in Sitio Central, Lupon, Davao. On November 9, 1948, the Division of Fisheries rejected Bautista’s application because the area applied for was needed for firewood production as certified by the Bureau of Forestry. Between the date of his application and the date of its rejection, Bautista occupied an area which extended beyond the boundary of the one he had applied for and introduced improvements thereon.
On September 23, 1948, Ester Barza filed a fishpond application covering an area of 14.85 hectares at Sitio Bundas, Lupon, Davao. The area applied for by Barza overlapped the area originally applied for by Bautista.
On February 8, 1949, Bautista filed another fishpond application.
The records of the Bureau of Fisheries further show that the 14.85 hectares applied for by Barza was released by the Bureau of Forestry as available for fishpond purposes while the 49 hectares applied for by Bautista was not released by the said bureau.
An administrative case arose between Bautista and Barza before the Director of Fisheries and the latter ruled in favor of Barza subject however to reimbursement of the value of the improvements made by Bautista. Bautista appealed to the Secretary of Agriculture and Natural Resources and the latter affirmed the ruling of the Director of Fisheries. Meanwhile, the Director of Fisheries required Barza to remit the amount representing the value of the improvements made by Bautista. However, the parties could not agree on the amount of reimbursement. Bautista moved for the rejection of the fishpond application of Barza in view of her non-compliance with the order of the Director of Fisheries. Barza consigned the sum of P1,789.18 with the then Justice of the Peace of Lupon, Davao. Bautista, however, refused to accept the same. The final reappraisal of the value of the improvements amounted to P9,514.33.
Barza filed an action in the Court of First Instance (CFI) against Bautista for the recovery of possession over the area she applied for. Bautista died while the case was pending for resolution. He was substituted by his heirs as defendants. The CFI ruled that the Barzas had not acquired a vested right to possess the areas concerned as they had not complied with the "condition precedent" to such possession - the reimbursement of the value of the improvements made by Bautista. Barza appealed to the Court of Appeals (CA). The CA reversed the decision of the CFI, it gave great weight to the decision of the Secretary of Agriculture on Barza’s right over the area. Hence, this appeal.
Whether Bautista has better right over the area considering that his application was made ahead the application of Barza.
RULING: NO, Barza has a better right over the area than Bautista.
It should be remembered that until timber or forest lands are released as disposable or alienable, neither the Bureau of Lands nor the Bureau of Fisheries has authority to lease, grant, sell, or otherwise dispose of these lands for homesteads, sales patents, leases for grazing purposes, fishpond leases and other modes of utilization.
On October 25, 1946 when Bautista applied for a Fishpond permit, the area applied for could not yet be granted to him as it was yet to be released for public utilization. The situation, however, changed when Barza filed Fishpond Application, for the area had, by then, been opened for fishpond purposes.
Thus, even if Bautista were ahead of Barza by two years in terms of occupation, possession and introduction of substantial improvements, he was not placed in a better position than Barza. The priority rule under Fisheries Administrative Order No. 14 applies only to public lands already released by the Bureau of Fisheries. Until such lands had been properly declared available for fishpond purposes, any application is ineffective because there is no disposable land to speak of. Accordingly, Bautista's application was premature and the ruling of the Director of Fisheries on this matter was, therefore, correct.
It should be stressed that the function of administering and disposing of lands of the public domain in the manner prescribed by law is not entrusted to the courts but to executive officials. Matters involved in the grant, cancellation, reinstatement and revision of fishpond licenses and permits are vested under the executive supervision of the appropriate department head, in this case is the Secretary of Agriculture and Natural Resources. ___________________________________________________________________________
JG Summit Holdings Inc. vs. CA G.R. No. 124293, November 20, 2000
JG Summit Holdings Inc. vs. CA
G.R. No. 124293, November 20, 2000
FACTS:
The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. for the construction, operation and management of the Subic National Shipyard, Inc., later became the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, NIDC and Kawasaki would maintain a shareholding proportion of 60%-40% and that the parties have the right of first refusal in case of a sale. Through a series of transfers, NIDC’s rights, title and interest in PHILSECO eventually went to the National Government. In the interest of national economy, it was decided that PHILSECO should be privatized by selling 87.67% of its total outstanding capital stock to private entities. After negotiations, it was agreed that Kawasaki’s right of first refusal under the JVA be “exchanged” for the right to top by five percent the highest bid for said shares. Kawasaki that Philyards Holdings, Inc. (PHI), in which it was a stockholder, would exercise this right in
its stead.
During bidding, Kawasaki/PHI Consortium is the losing bidder. Even so, because of the right to top by 5% percent the highest bid, it was able to top JG Summit’s bid. JG Summit protested, contending that PHILSECO, as a shipyard is a public utility and, hence, must observe the 60%-40% Filipino-foreign capitalization. By buying 87.67% of PHILSECO’s capital stock at bidding, Kawasaki/PHI in effect now owns more than 40% of the stock. ISSUE:
* Whether or not PHILSECO is a public utility
* Whether or not Kawasaki/PHI can purchase beyond 40% of PHILSECO’s stocks HELD:
In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit relied on sec. 13, CA No. 146. On the other hand, Kawasaki/PHI argued that PD No. 666 explicitly stated that a “shipyard” was not a “public utility.” But the SC stated that sec. 1 of PD No. 666 was expressly repealed by sec. 20, BP Blg. 391 and when BP Blg. 391 was subsequently repealed by EO 226, the latter law did not revive sec. 1 of PD No. 666. Therefore, the law that
states that a shipyard is a public utility still stands.
A shipyard such as PHILSECO being a public utility as provided by law is therefore required to comply with the 60%-40% capitalization under the Constitution. Likewise, the JVA between NIDC and Kawasaki manifests an intention of the parties to abide by this constitutional mandate. Thus, under the JVA, should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even beyond 60% of the capitalization as the
Constitution clearly limits only foreign capitalization.
Kawasaki was bound by its contractual obligation under the JVA that limits its right of first refusal to 40% of the total capitalization of PHILSECO. Thus, Kawasaki cannot purchase beyond 40% of the capitalization of the joint venture on account of both constitutional and contractual proscriptions.
Rubiso vs. Rivera [GR L-11407, 30 October 1917] En Banc, Torres [J]: 5 concur, 1 took no part
Facts: Bonifacio Gelito sold his share in the pilot boat Valentina, consisting of 2/3 interest therein, to the Chinaman Sy Qui, the co-owner of the other 1/3 interest in said vessel; wherefore this vendor is no longer entitled to exercise any action whatever in respect to the boat in question. Gelito was one of the partnership owners of the Valentina, as in fact his name appears in the certificate of protection issued by the Bureau of Customs, and the rights he held are evidenced by the articles of partnership; but, the whole ownership in the vessel having been consolidated in behalf of the Chinaman Sy Qui, this latter, in the use of his right as the sole owner of the Valentina, sold this boat to Florentino E. Rivera for P2,500, on 4 January 1915, which facts are set forth in a deed ratified on the same date before a notary. This document was registered in the Bureau of Customs on 17 March 1915.
After the sale of the boat to the defendant Rivera, suit having been brought in the justice of the peace court against the Chinaman Sy Qui to enforce payment of a certain sum of money, the latter’s creditor Fausto Rubiso. Rubiso later acquired said vessel at a public auction sale and for the sum of P55.45. The certificate of sale and adjudication of the boat in question was issued by the sheriff on behalf of Fausto Rubiso, in the office of the Collector of Customs, on 27 January 1915 and was also entered in the commercial registry on 14 March 1915. On 10 April 1915, the plaintiffs brought suit in the CFI and alleged in the complaint that his clients were the owners of the pilot boat named Valentina, which had been in bad condition since 1914 and was stranded in Tingloy, Bauan, Batangas; and that Florentino E. Rivera took charge or possession of said vessel without the knowledge or consent of the plaintiffs and refused to deliver it to them, under claim that he was the owner thereof. After the hearing of the case and the introduction of documentary evidence, the judgment of 6 September 1915, was rendered, , in which the defendant and appellant was ordered to place at the disposal of the Fausto Rubiso the pilot boat in litigation. No special finding was made for costs. The defendant appealed and moved for a new trial. This motion was denied and appellant excepted.
ISSUE: WON it is Rubiso or Rivera who has a better right to the boat? -- Rubiso has a better right
HELD: Article 573 of the Code of Commerce provides in its first paragraph that merchant vessels constitute property which may be acquired an transferred by any of the means recognized by law. The acquisition of a vessel must be included in a written instrument, which shall not produce any effect with regard to third persons if not recorded in the commercial registry. With the enactment of Act 1900 on 18 May 1909, said article was amended and appears as Section 2 of that Act; amending solely in charging the Insular Collector of Customs with
