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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-4637 June 30, 1952

JOSE A. LUNA,petitioner,vs.DEMETRIO B. ENCARNACION, Judge of First Instance of Rizal, TRINIDAD REYES and THEPROVINCIAL SHERIFF OF RIZAL,respondents.

BAUTISTA ANGELO, J .:

On September 25, 1948, a deed designated as chattel mortgage was executed by Jose A. Luna infavor of Trinidad Reyes whereby the former conveyed by way of first mortgage to the latter a certainhouse of mixed materials stated in barrio San Nicolas, municipality of Pasig, Province of Rizal, tosecure the payment of a promissory note in the amount of P1,500, with interest at 12 per cent perannum. The document was registered in the office of the register of deeds for the Province of Rizal.The mortgagor having filed to pay the promissory note when it fell due, the mortgage requested thesheriff of said province to sell the house at public auction so that with its proceeds the amountindebted may be paid notifying the mortgagor in writing of the time and place of the sale as requiredby law. The sheriff acceded to the request and sold the property to the mortgagee for the amountcovering the whole indebtedness with interest and costs. The certificate of sale was issued by thesheriff on May 28, 1949. After the period for the redemption of the property had expired without themortgagor having exercised his right to repurchase, the mortgagee demanded from the mortgagorthe surrender of the possession of the property, but the later refused and so on October 13, 1950,

she filed a petition in the Court of First Instance of Rizal praying that the provincial sheriff beauthorized to place her in possession of the property invoking in her favor the provisions of Act No.3135, as amended by Act No. 4118.

When the petition came up for hearing before the court on October 25, 1950, Jose A. Luna, themortgagor, opposed the petition on the following grounds: (1) that Act No. 3135 as amended by ActNo. 4118 is applicable only to a real estate mortgage; (2) that the mortgage involved herein is achattel mortgage; and (3) that even if the mortgage executed by the parties herein be considered asreal estate mortgage, the extra-judicial sale made by the sheriff of the property in question was validbecause the mortgage does not contain an express stipulation authorizing the extra-judicial sale ofthe property. After hearing, at which both parties have expressed their views in support of theirrespective contentions, respondent judge, then presiding the court, overruled the opposition andgranted the petition ordering the provincial sheriff of Rizal, or any of this disputives, to immediately

place petitioner in possession of the property in question while at the same time directing themortgagor Jose A. Luna to vacate it and relinquish it in favor of petitioner. It is from this order thatJose A. Luna desires now to obtain relief by filing this petition for certioraricontending that therespondent judge has acted in excess of his jurisdiction.

The first question which petitioner poses in his petition for certiorariis that which relates to thevalidity of the extra-judicial sale made by the provincial sheriff of Rizal of the property in question inline with the request of the mortgagee Trinidad Reyes. It is contended that said extra-judicial salehaving been conducted under the provisions of Act No. 3135, as amended by Act No. 4118, is

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invalid because the mortgage in question is not a real estate mortgage and, besides, it does notcontain an express stipulation authorizing the mortgagee to foreclose the mortgage extra-judicially.

There is merit in this claim. As may be gleaned from a perusal of the deed signed by the parties(Annex "C"), the understanding executed by them is a chattel mortgage, as the parties have soexpressly designated, and not a real estate mortgage, specially when it is considered that the

property given as security is a house of mixed materials which by its very nature is considered aspersonal property. Such being the case, it is indeed a mistake for the mortgagee to consider thistransaction in the light of Act No. 3135, as amended by Act No. 4118, as was so considered by herwhen she requested to provincial sheriff to sell it extra-judicially in order to secure full satisfaction ofthe indebtedness still owed her by the mortgagor. It is clear that Act No. 3135, as amended, onlycovers real estate mortgages and is intended merely to regulate the extra-judicial sale of theproperty mortgaged if and when the mortgagee is given a special power or express authority to doso in the deed itself, or in a document annexed thereto. These conditions do not here obtain. Themortgage before us is not a real estate mortgage nor does it contain an express authority or powerto sell the property extra-judicially.

But regardless of what we have heretofore stated, we find that the validity of the sale in questionmay be maintained, it appearing that the mortgage in question is a chattel mortgage and as such it iscovered and regulated by the Chattel Mortgage Law, Act No. 1508. Section 14 of this Act allows themortgagee through a public officer in almost the same manner as that allowed by Act No. 3135, asamended by Act No. 4118, provided that the requirements of the law relative to notice andregistration are complied with. We are not prepared to state if these requirements of the law hadbeen complied with in the case for the record before us is not complete and there is no showing tothat effect. At any rate, this issue is not how important because the same can be treshed out whenthe opportunity comes for its determination, nor is it necessary for us to consider it in reaching adecision in the present case. Suffice it to state that for the present we are not expressing any opinionon this matter which concerns the validity of the sale in question for the reason that this opinion willonly be limited to a matter of procedure relative to the step taken by the mortgagee in securing thepossession of the property involved.

In the supposition that the sale of the property made by the sheriff has been made in accordancewith law, and the question he is confronted is how to deliver the possession of the property to thepurchaser in case of refusal to surrender its possession on the part of the debtor or mortgagor, theremedy of the purchaser according to the authorities, is to bring an ordinary action for recovery ofpossession (Continental Gin Co. vs. Pannell, 160 P., 598; 61 Okl., 102; 14 C.J.S., pp. 1027, 1028).The purchaser cannot take possession of the property by force either directly or through the sheriff.

And the reason for this is "that the creditor's right of possession is conditioned upon the fact ofdefault, and the existence of this fact may naturally be the subject of controversy" (Bachrah MotorCo. vs. Summers, 42 Phil., 3, 6). The creditor cannot merely file a petition for a writ of possession aswas done by Trinidad Reyes in this case. Her remedy is to file an ordinary action for recovery ofpossession in ordered that the debtor may be given an opportunity to be heard not only in regardingpossession but also regarding the obligation covered by the mortgage. The petition she has filed inthe lower court, which was not even docketed, is therefore improper and should be regarded.

Wherefore, the order subject of the present petition for certiorariis hereby set aside, with costsagainst respondent Trinidad Reyes.

Bengzon, Tuason, Padilla and Pablo, JJ.,concur in the result.

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-26278 August 4, 1927

LEON SIBAL ,plaintiff-appellant,vs.EMILIANO J. VALDEZ ET AL.,defendants.EMILIANO J. VALDEZ,appellee.

J. E. Blanco for appellant.Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J .:

The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th dayof December 1924. The facts are about as conflicting as it is possible for facts to be, in the trialcauses.

As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff ofthe Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance ofPampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by theplaintiff and his tenants on seven parcels of land described in the complaint in the third paragraph ofthe first cause of action; that within one year from the date of the attachment and sale the plaintiffoffered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient tocover the price paid by the latter, the interest thereon and any assessments or taxes which he mayhave 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.

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez wasattempting to harvest the palay planted in four of the seven parcels mentioned in the first cause ofaction; that he had harvested and taken possession of the palay in one of said seven parcels and inanother parcel described in the second cause of action, amounting to 300 cavans; and that all ofsaid palay belonged to the plaintiff.

Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J.Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of theparcels of land described in the complaint; (2) from taking possession of, or harvesting the sugarcane in question; and (3) from taking possession, or harvesting the palay in said parcels of land.Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering

them to consent to the redemption of the sugar cane in question, and that the defendant Valdez becondemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the twoparcels above-mentioned ,with interest and costs.

On December 27, 1924, the court, after hearing both parties and upon approval of the bond forP6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in the complaint.

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The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically eachand every allegation of the complaint and step up the following defenses:

(a) That the sugar cane in question had the nature of personal property and was not,therefore, subject to redemption;

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of thecomplaint;

(c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5.

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminaryinjunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palayin said parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, hesuffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving him from allliability under the complaint; (2) declaring him to be the absolute owner of the sugar cane in question

and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum ofP11,833.76, representing the value of the sugar cane and palay in question, including damages.

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearingthe evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgmentagainst the plaintiff and in favor of the defendants

(1) Holding that the sugar cane in question was personal property and, as such, was notsubject to redemption;

(2) Absolving the defendants from all liability under the complaint; and

(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and MarcosSibal to jointly and severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08as follows:

(a) P6,757.40, the value of the sugar cane;

(b) 1,435.68, the value of the sugar-cane shoots;

(c) 646.00, the value of palay harvested by plaintiff;

(d) 600.00, the value of 150 cavans of palay which the defendant was not able toraise by reason of the injunction, at P4 cavan. 9,439.08 From that judgment the

plaintiff appealed and in his assignments of error contends that the lower court erred:(1) In holding that the sugar cane in question was personal property and, therefore,not subject to redemption;

(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7and 8, and that the palay therein was planted by Valdez;

(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40from the sugar cane and P1,435.68 from sugar-cane shoots (puntas de cana dulce);

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(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant wasunable to raise palay on the land, which would have netted him the sum of P600; and.

(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.

It appears from the record:

(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ ofexecution in civil case No. 20203 of the Court of First Instance of Manila (Macondray & Co.,Inc. vs.Leon Sibal),levied an attachment on eight parcels of land belonging to said LeonSibal, situated in the Province of Tarlac, designated in the second of attachment as parcels1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).

(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at theauction held by the sheriff of the Province of Tarlac, for the sum to P4,273.93, having paid forthe said parcels separately as follows (Exhibit C, and 2-A):

Parcel

1 ..................................................................... P1.00

2 ..................................................................... 2,000.00

3 ..................................................................... 120.93

4 ..................................................................... 1,000.00

5 ..................................................................... 1.00

6 ..................................................................... 1.00

7 with the house thereon .......................... 150.00

8 ..................................................................... 1,000.00==========

4,273.93

(3) That within one year from the sale of said parcel of land, and on the 24th day ofSeptember, 1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc.,for the account of the redemption price of said parcels of land, without specifying theparticular parcels to which said amount was to applied. The redemption price said eightparcels was reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit Cand 2).

The record further shows:

(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Provinceof Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province of Pampanga(Emiliano J. Valdez vs.Leon Sibal 1. the same parties in the present case), attached the

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personal property of said Leon Sibal located in Tarlac, among which was included the sugarcane now in question in the seven parcels of land described in the complaint (Exhibit A).

(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personalproperties of Leon Sibal, including the sugar cane in question to Emilio J. Valdez, who paidtherefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).

(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, alsoattached the real property of said Leon Sibal in Tarlac, including all of his rights, interest andparticipation therein, which real property consisted of eleven parcels of land and a house andcamarin situated in one of said parcels (Exhibit A).

(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin,were bought by Emilio J. Valdez at the auction held by the sheriff for the sum of P12,200.Said eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and11. The house and camarin were situated on parcel 7 (Exhibit A).

(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12,

and 13, were released from the attachment by virtue of claims presented by AgustinCuyugan and Domiciano Tizon (Exhibit A).

(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J.Valdez for P2,579.97 all of its rights and interest in the eight parcels of land acquired by it atpublic auction held by the deputy sheriff of Tarlac in connection with civil case No. 20203 ofthe Court of First Instance of Manila, as stated above. Said amount represented the unpaidbalance of the redemption price of said eight parcels, after payment by Leon Sibal of P2,000on September 24, 1923, fro the account of the redemption price, as stated above. (Exhibit Cand 2).

The foregoing statement of facts shows:

(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels ofland described in the first cause of action of the complaint at public auction on May 9 and 10,1924, for P600.

(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of landsituated in the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923,Leon Sibal paid to Macondray & Co. P2,000 for the account of the redemption price of saidparcels.

(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rightsand interest in the said eight parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest whichLeon Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by thelatter to Macondray.

(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.

The first question raised by the appeal is, whether the sugar cane in question is personal or realproperty. It is contended that sugar cane comes under the classification of real property as

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"ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334enumerates as real property the following: Trees, plants, and ungathered products, while they areannexed to the land or form an integral part of any immovable property." That article, however, hasreceived in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that,under certain conditions, growing crops may be considered as personal property. (Decision of March18, 1904, vol. 97, Civil Jurisprudence of Spain.)

Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the CivilCode, in view of the recent decisions of the supreme Court of Spain, admits that growing crops aresometimes considered and treated as personal property. He says:

No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocantea la venta de toda cosecha o de parte de ella cuando aun no esta cogida (cosa frecuentecon la uvay y la naranja), y a la de lenas, considerando ambas como muebles. El TribunalSupremo, en sentencia de 18 de marzo de 1904, al entender sobre un contrato dearrendamiento de un predio rustico, resuelve que su terminacion por desahucio no extinguelos derechos del arrendario, para recolectar o percibir los frutos correspondientes al aoagricola, dentro del que nacieron aquellos derechos, cuando el arrendor ha percibido a suvez el importe de la renta integra correspondiente, aun cuando lo haya sido por preceptolegal durante el curso del juicio, fundandose para ello, no solo en que de otra suerte se dariaal desahucio un alcance que no tiene, sino en que, y esto es lo interesante a nuestroproposito, la consideracion de inmuebles que el articulo 334 del Codigo Civil atribuge a losfrutos pendientes, no les priva del caracter de productos pertenecientes, como tales, aquienes a ellos tenga derecho, Ilegado el momento de su recoleccion.

x x x x x x x x x

Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 dediciembre de 1909, con las reformas introducidas por la de 21 de abril anterior, la hipoteca,salvo pacto expreso que disponga lo contrario, y cualquiera que sea la naturaleza y formade la obligacion que garantice, no comprende los frutos cualquiera que sea la situacion en

que se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungatheredproducts may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in acase of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather theproducts corresponding to the agricultural year, because said fruits did not go with the land butbelonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, asamended, the mortgage of a piece of land does not include the fruits and products existing thereon,unless the contract expressly provides otherwise.

An examination of the decisions of the Supreme Court of Louisiana may give us some light on thequestion which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to

paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the fruits of trees notgathered, and trees before they are cut down, are likewise immovable, and are considered as part ofthe land to which they are attached."

The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases"standing crops" may be considered and dealt with as personal property. In the case of Lumber Co.vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the CivilCode it is provided that 'standing crops and the fruits of trees not gathered and trees before they arecut down . . . are considered as part of the land to which they are attached, but the immovability

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provided for is only one in abstracto and without reference to rights on or to the crop acquired byothers than the owners of the property to which the crop is attached. . . . The existence of a right onthe growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering thecrop movable quoad the right acquired therein. Our jurisprudence recognizes the possiblemobilization of the growing crop." (Citizens' Bankvs.Wiltz, 31 La. Ann., 244; Porche vs.Bodin, 28La., Ann., 761; Sandel vs.Douglass, 27 La. Ann., 629; Lewis vs.Klotz, 39 La. Ann., 267.)

"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761)that "article 465 of the Revised Code says that standing crops are considered as immovable and aspart of the land to which they are attached, and article 466 declares that the fruits of an immovablegathered or produced while it is under seizure are considered as making part thereof, and incurredto the benefit of the person making the seizure. But the evident meaning of these articles, is wherethe crops belong to the owner of the plantation they form part of the immovable, and where it isseized, the fruits gathered or produced inure to the benefit of the seizing creditor.

A crop raised on leased premises in no sense forms part of the immovable. It belongs to thelessee, and may be sold by him, whether it be gathered or not, and it may be sold by his

judgment creditors. If it necessarily forms part of the leased premises the result would be thatit could not be sold under execution separate and apart from the land. If a lessee obtainsupplies to make his crop, the factor's lien would not attach to the crop as a separate thingbelonging to his debtor, but the land belonging to the lessor would be affected with therecorded privilege. The law cannot be construed so as to result in such absurdconsequences.

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:

If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would bedestructive of the very objects of the act, it would render the pledge of the crop objects of theact, it would render the pledge of the crop impossible, for if the crop was an inseparable partof the realty possession of the latter would be necessary to that of the former; but such is notthe case. True, by article 465 C. C. it is provided that "standing crops and the fruits of trees

not gathered and trees before they are cut down are likewise immovable and are consideredas part of the land to which they are attached;" but the immovability provided for is onlyone in abstracto and without reference to rights on or to the crop acquired by other than theowners of the property to which the crop was attached. The immovability of a growing crop isin the order of things temporary, for the crop passes from the state of a growing to that of agathered one, from an immovable to a movable. The existence of a right on the growing cropis a mobilization by anticipation, a gathering as it were in advance, rendering the cropmovable quoad the right acquired thereon. The provision of our Code is identical with theNapoleon Code 520, and we may therefore obtain light by an examination of the

jurisprudence of France.

The rule above announced, not only by the Tribunal Supremo de Espaa but by the Supreme Court

of Louisiana, is followed in practically every state of the Union.

From an examination of the reports and codes of the State of California and other states we find thatthe settle doctrine followed in said states in connection with the attachment of property andexecution of judgment is, that growing crops raised by yearly labor and cultivation are consideredpersonal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329:Raventas vs.Green, 57 Cal., 254; Norris vs.Watson, 55 Am. Dec., 161; Whipple vs.Foot, 3 Am.Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs.Lampley, 31 Ala., 526; Crine vs.Tifts and

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Co., 65 Ga., 644; Gillitt vs.Truax, 27 Minn., 528; Preston vs.Ryan, 45 Mich., 174; Freeman onExecution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually inexistence, is reasonably certain to come into existence as the natural increment or usual incident ofsomething already in existence, and then belonging to the vendor, and then title will vest in the buyer

the moment the thing comes into existence. (Emerson vs.European Railway Co., 67 Me., 387;Cutting vs.Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have apotential existence. A man may sell property of which he is potentially and not actually possessed.He may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field maygrow in a given time; or the milk a cow may yield during the coming year; or the wool that shallthereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits togrow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold,however, must be specific and identified. They must be also owned at the time by the vendor.(Hull vs.Hull, 48 Conn., 250 [40 Am. Rep., 165].)

It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has beenmodified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the ChattelMortgage Law. Said section 450 enumerates the property of a judgment debtor which may besubjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels,moneys, and other property, both real and personal, * * * shall be liable to execution. Said section450 and most of the other sections of the Code of Civil Procedure relating to the execution of

judgment were taken from the Code of Civil Procedure of California. The Supreme Court ofCalifornia, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held,without variation, that growing crops were personal property and subject to execution.

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property.Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to theprovisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattelmortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain anagreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop

while growing.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that"growing crops" are personal property. This consideration tends to support the conclusionhereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned insaid article of the Civil Code have the nature of personal property. In other words, the phrase"personal property" should be understood to include "ungathered products."

At common law, and generally in the United States, all annual crops which are raised byyearly manurance and labor, and essentially owe their annual existence to cultivation byman, . may be levied on as personal property." (23 C. J., p. 329.) On this question Freeman,

in his treatise on the Law of Executions, says: "Crops, whether growing or standing in thefield ready to be harvested, are, when produced by annual cultivation, no part of the realty.They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that theymay be seized and sold under execution. (Freeman on Executions, vol. p. 438.)

We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified bysection 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose ofattachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products"

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have the nature of personal property. The lower court, therefore, committed no error in holding thatthe sugar cane in question was personal property and, as such, was not subject to redemption.

All the other assignments of error made by the appellant, as above stated, relate to questions of factonly. Before entering upon a discussion of said assignments of error, we deem it opportune to takespecial notice of the failure of the plaintiff to appear at the trial during the presentation of evidence by

the defendant. His absence from the trial and his failure to cross-examine the defendant have lentconsiderable weight to the evidence then presented for the defense.

Coming not to the ownership of parcels 1 and 2 described in the first cause of action of thecomplaint, the plaintiff made a futile attempt to show that said two parcels belonged to AgustinCuyugan and were the identical parcel 2 which was excluded from the attachment and sale of realproperty of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the description ofparcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description of parcels 1 and 2 ofthe complaint will readily show that they are not the same.

The description of the parcels in the complaint is as follows:

1. La caa dulce sembrada por los inquilinos del ejecutado Leon Sibal 1. en una parcela deterreno de la pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban,Tarlac, de unas dos hectareas poco mas o menos de superficie.

2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., Ilamado AlejandroPolicarpio, en una parcela de terreno de la pertenencia del ejecutado, situada en Dalayap,Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco mas o menos." Thedescription of parcel 2 given in the certificate of sale (Exhibit A) is as follows:

2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadradosde superficie, linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. conFrancisco Dizon, Felipe Mau and others; al S. con Alejandro Dayrit, Isidro Santos andMelecio Mau; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, vadoramillarado P4,200 pesos.

On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of thecomplaint were included among the parcels bought by Valdez from Macondray on June 25, 1924,and corresponded to parcel 4 in the deed of sale (Exhibit B and 2), and were also included amongthe parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25, 1924, andcorresponded to parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The description ofparcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:

Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F.de 145,000 metros cuadrados de superficie, lindante al Norte con Road of the barrio ofCulubasa that goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao y Canuto

Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de P2,990.Tax No. 2856.

As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4(Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at thetrial when the defendant offered his evidence, we are inclined to give more weight to the evidenceadduced by him that to the evidence adduced by the plaintiff, with respect to the ownership ofparcels 1 and 2 of the compliant. We, therefore, conclude that parcels 1 and 2 of the complaint

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belong to the defendant, having acquired the same from Macondray & Co. on June 25, 1924, andfrom the plaintiff Leon Sibal on the same date.

It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half of thecrop, or 95 cavans. He should therefore be condemned to pay to the defendant for 95 cavans only,

at P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held by the lower court.

As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds toparcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in thecertificate of sale to Valdez of real property belonging to Sibal, executed by the sheriff as abovestated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interestof both Macondray and Sibal in said parcel.

With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the secondcause of action, it appears from the testimony of the plaintiff himself that said parcel corresponds toparcel 8 of the deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed ofsale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of

said parcel, having acquired the interest of both Macondray and Sibal therein.

In this connection the following facts are worthy of mention:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached undersaid execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923.Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on theredemption of said parcels of land. (See Exhibits B and C ).

Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including thesugar cane in question. (Exhibit A) The said personal property so attached, sold at public auctionMay 9 and 10, 1924. April 29, 1924, the real property was attached under the execution in favor ofValdez (Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A).

June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction onthe 30th day of July, 1923, to Valdez.

As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows thatthe sugar cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); thatsaid area would have yielded an average crop of 1039 picos and 60 cates; that one-half of thequantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; thatduring the season the sugar was selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant,as owner, would have netted P 6,757.40 from the sugar cane in question. The evidence also showsthat the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas decana) and not 1,170,000 as computed by the lower court. During the season the shoots were selling

at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 fromsugar-cane shoots and not P1,435.68 as allowed by the lower court.

As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190cavans, one-half of said quantity should belong to the plaintiff, as stated above, and the other half tothe defendant. The court erred in awarding the whole crop to the defendant. The plaintiff shouldtherefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646 asallowed by the lower court.

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The evidence also shows that the defendant was prevented by the acts of the plaintiff fromcultivating about 10 hectares of the land involved in the litigation. He expected to have raised about600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The lowercourt has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would have nettedhim P600.

In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and hissureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to thedefendant jointly and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lowercourt, as follows:

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;

323.00 for the palay harvested by plaintiff in parcels 1 and 2;

600.00 for the palay which defendant could have raised.

8,900.80============

In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.

Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-15334 January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZONCITY,petitioners,vs.MANILA ELECTRIC COMPANY,respondent.

Assistant City Attorney Jaime R. Agloro for petitioners.Ross, Selph and Carrascoso for respondent.

PAREDES, J.:

From the stipulation of facts and evidence adduced during the hearing, the following appear:

On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized theMunicipal Board of Manila to grant a franchise to construct, maintain and operate an electric streetrailway and electric light, heat and power system in the City of Manila and its suburbs to the personor persons making the most favorable bid. Charles M. Swift was awarded the said franchise onMarch 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved onMarch 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee andowner of the franchise.

Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Lagunaand is transmitted to the City of Manila by means of electric transmission wires, running from the

province of Laguna to the said City. These electric transmission wires which carry high voltagecurrent, are fastened to insulators attached on steel towers constructed by respondent at intervals,from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralcohas constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph ofone of these steel towers is attached to the petition for review, marked Annex A. Three steel towerswere inspected by the lower court and parties and the following were the descriptions given there ofby said court:

The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. Thefindings were as follows: the ground around one of the four posts was excavated to a depthof about eight (8) feet, with an opening of about one (1) meter in diameter, decreased toabout a quarter of a meter as it we deeper until it reached the bottom of the post; at thebottom of the post were two parallel steel bars attached to the leg means of bolts; the tower

proper was attached to the leg three bolts; with two cross metals to prevent mobility; therewas no concrete foundation but there was adobe stone underneath; as the bottom of theexcavation was covered with water about three inches high, it could not be determined withcertainty to whether said adobe stone was placed purposely or not, as the place aboundswith this kind of stone; and the tower carried five high voltage wires without cover or anyinsulating materials.

The second tower inspected was located in Kamuning Road, K-F, Quezon City, on landowned by the petitioner approximate more than one kilometer from the first tower. As in the

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first tower, the ground around one of the four legs was excavate from seven to eight (8) feetdeep and one and a half (1-) meters wide. There being very little water at the bottom, itwas seen that there was no concrete foundation, but there soft adobe beneath. The leg waslikewise provided with two parallel steel bars bolted to a square metal frame also bolted toeach corner. Like the first one, the second tower is made up of metal rods joined together bymeans of bolts, so that by unscrewing the bolts, the tower could be dismantled and

reassembled.

The third tower examined is located along Kamias Road, Quezon City. As in the first twotowers given above, the ground around the two legs of the third tower was excavated to adepth about two or three inches beyond the outside level of the steel bar foundation. It wasfound that there was no concrete foundation. Like the two previous ones, the bottomarrangement of the legs thereof were found to be resting on soft adobe, which, probably dueto high humidity, looks like mud or clay. It was also found that the square metal framesupporting the legs were not attached to any material or foundation.

On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towersfor real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent'spetition to cancel these declarations, an appeal was taken by respondent to the Board of

Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid theamount under protest, and filed a petition for review in the Court of Tax Appeals (CTA for short)which rendered a decision on December 29, 1958, ordering the cancellation of the said taxdeclarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum ofP11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instantpetition for review was filed.

In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term"poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise;(2) the steel towers are personal properties and are not subject to real property tax; and (3) the CityTreasurer of Quezon City is held responsible for the refund of the amount paid. These are assigned

as errors by the petitioner in the brief.

The tax exemption privilege of the petitioner is quoted hereunder:

PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings,plant (not including poles, wires, transformers, and insulators), machinery and personalproperty as other persons are or may be hereafter required by law to pay ... Said percentageshall be due and payable at the time stated in paragraph nineteen of Part One hereof, ... andshall be in lieu of all taxes and assessments of whatsoever nature and by whatsoeverauthority upon the privileges, earnings, income, franchise, and poles, wires, transformers,and insulators of the grantee from which taxes and assessments the grantee is herebyexpressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise; emphasis

supplied.)

The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, astypically the stem of a small tree stripped of its branches; also by extension, a similar typicallycylindrical piece or object of metal or the like". The term also refers to "an upright standard to the topof which something is affixed or by which something is supported; as a dovecote set on a pole;telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New InternationalDictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen cylindrical metalpoles, cubical concrete poles, and poles of the PLDT Co. which are made of two steel bars joined

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together by an interlacing metal rod. They are called "poles" notwithstanding the fact that they are nomade of wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" forwhich exemption is granted, is not determined by their place or location, nor by the character of theelectric current it carries, nor the material or form of which it is made, but the use to which they arededicated. In accordance with the definitions, pole is not restricted to a long cylindrical piece of woodor metal, but includes "upright standards to the top of which something is affixed or by which

something is supported. As heretofore described, respondent's steel supports consists of aframework of four steel bars or strips which are bound by steel cross-arms atop of which are cross-arms supporting five high voltage transmission wires (See Annex A) and their sole function is tosupport or carry such wires.

The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is nota novelty. Several courts of last resort in the United States have called these steel supports "steeltowers", and they denominated these supports or towers, as electric poles. In their decisions thewords "towers" and "poles" were used interchangeably, and it is well understood in that jurisdictionthat a transmission tower or pole means the same thing.

In a proceeding to condemn land for the use of electric power wires, in which the law provided thatwires shall be constructed upon suitablepoles, this term was construed to mean either wood ormetal poles and in view of the land being subject to overflow, and the necessary carrying ofnumerous wires and the distance between poles, the statute was interpreted toinclude towersorpoles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words andPhrases, p. 365.)

The term "poles" was also used to denominate the steel supports or towers used by an associationused to convey its electric power furnished to subscribers and members, constructed for the purposeof fastening high voltage and dangerous electric wires alongside public highways. The steel supportsor towers were made of iron or other metals consisting of two pieces running from the ground upsome thirty feet high, being wider at the bottom than at the top, the said two metal pieces beingconnected with criss-cross iron running from the bottom to the top, constructed like ladders andloaded with high voltage electricity. In form and structure, they are like the steel towers in question.

(Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)

The term "poles" was used to denote the steel towers of an electric company engaged in thegeneration of hydro-electric power generated from its plant to the Tower of Oxford and City ofWaterbury. These steel towers are about 15 feet square at the base and extended to a height ofabout 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top ofwhich extends above the surface of the soil in the tower of Oxford, and to the towers are attachedinsulators, arms, and other equipment capable of carrying wires for the transmission of electricpower (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).

In a case, the defendant admitted that the structure on which a certain person met his death wasbuilt for the purpose of supporting a transmission wire used for carrying high-tension electric power,

but claimed that the steel towers on which it is carried were so large that their wire took theirstructure out of the definition of a pole line. It was held that in defining the word pole, one should notbe governed by the wire or material of the support used, but was considering the danger from anyelevated wire carrying electric current, and that regardless of the size or material wire of its individualmembers, any continuous series of structures intended and used solely or primarily for the purposeof supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper Co. v.Bryan 252 P. 1016).

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It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in thepetitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat thevery object for which the franchise was granted. The poles as contemplated thereon, should beunderstood and taken as a part of the electric power system of the respondent Meralco, for theconveyance of electric current from the source thereof to its consumers. If the respondent would berequired to employ "wooden poles", or "rounded poles" as it used to do fifty years back, then one

should admit that the Philippines is one century behind the age of space. It should also be concededby now that steel towers, like the ones in question, for obvious reasons, can better effectuate thepurpose for which the respondent's franchise was granted.

Granting for the purpose of argument that the steel supports or towers in question are not embracedwithin the termpoles, the logical question posited is whether they constitute real properties, so thatthey can be subject to a real property tax. The tax law does not provide for a definition of realproperty; but Article 415 of the Civil Code does, by stating the following are immovable property:

(1) Land, buildings, roads, and constructions of all kinds adheredto the soil;x x x x x x x x x

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot beseparated therefrom without breaking the material or deterioration of the object;

x x x x x x x x x(5) Machinery, receptacles, instruments or implements intended by the owner of thetenement for an industry or works which may be carried in a building or on a piece of land,and which tends directly to meet the needs of the said industry or works;

x x x x x x x x x

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1,because they do not constitute buildings or constructions adhered to the soil. They are notconstruction analogous to buildings nor adhering to the soil. As per description, given by the lowercourt, they are removable and merely attached to a square metal frame by means of bolts, whichwhen unscrewed could easily be dismantled and moved from place to place. They can not beincluded under paragraph 3, as they are not attached to an immovable in a fixed manner, and they

can be separated without breaking the material or causing deterioration upon the object to whichthey are attached. Each of these steel towers or supports consists of steel bars or metal strips,

joined together by means of bolts, which can be disassembled by unscrewing the bolts andreassembled by screwing the same. These steel towers or supports do not also fall under paragraph5, for they are not machineries, receptacles, instruments or implements, and even if they were, theyare not intended for industry or works on the land. Petitioner is not engaged in an industry or worksin the land in which the steel supports or towers are constructed.

It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund thesum of P11,651.86, despite the fact that Quezon City is not a party to the case. It is argued that asthe City Treasurer is not the real party in interest, but Quezon City, which was not a party to the suit,notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. Thisquestion has not been raised in the court below, and, therefore, it cannot be properly raised for thefirst time on appeal. The herein petitioner is indulging in legal technicalities and niceties which do nothelp him any; for factually, it was he (City Treasurer) whom had insisted that respondent herein paythe real estate taxes, which respondent paid under protest. Having acted in his official capacity asCity Treasurer of Quezon City, he would surely know what to do, under the circumstances.

IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-47943 May 31, 1982

MANILA ELECTRIC COMPANY, petitioner,vs.CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OFBATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:

This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila

Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc.The tanks are within the Caltex refinery compound. They have a total capacity of 566,000 barrels.They are used for storing fuel oil for Meralco's power plants.

According to Meralco, the storage tanks are made of steel plates welded and assembled on thespot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer, asand 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,

The steel sides of the tank are directly supported underneath by a circular wall made of concrete,eighteen inches thick, to prevent the tank from sliding. Hence, according to Meralco, the tank is notattached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate

is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sitson its foundation. Each empty tank can be floated by flooding its dike-inclosed location with waterfour feet deep. (pp. 29-30, Rollo.)

On the other hand, according to the hearing commissioners of the Central Board of AssessmentAppeals, the area where the two tanks are located is enclosed with earthen dikes with electric steelpoles on top thereof and is divided into two parts as the site of each tank. The foundation of thetanks is elevated from the remaining area. On both sides of the earthen dikes are two separateconcrete steps leading to the foundation of each tank.

Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick.Pipelines were installed on the sides of each tank and are connected to the pipelines of the ManilaEnterprises Industrial Corporation whose buildings and pumping station are near Tank No. 2.

The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and thewalls, dikes and steps, which are integral parts of the tanks, are affixed to the land while thepipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the municipal treasurer of Bauan,Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to payrealty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and penaltiesamounted to P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as

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a condition for entertaining its appeal from the adverse decision of the Batangas board ofassessment appeals.

The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M.Almanzor as chairman and Secretary of Justice Vicente Abad Santos and Secretary of LocalGovernment and Community Development Jose Roo as members) in its decision dated November

5, 1976 ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and otherappurtenances constitute taxable improvements.

Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motionfor reconsideration which the Board denied in its resolution of November 25, 1977, a copy of whichwas received by Meralco on February 28, 1978.

On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decisionand resolution. It contends that the Board acted without jurisdiction and committed a grave error oflaw in holding that its storage tanks are taxable real property.

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 bynature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks arenot attached to the land and that they were placed on leased land, not on the land owned byMeralco.

This is one of those highly controversial, borderline or penumbral cases on the classification ofproperty where strong divergent opinions are inevitable. The issue raised by Meralco has to beresolved in the light of the provisions of the Assessment Law, Commonwealth Act No. 470, and theReal 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. Thisprovision 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 andcollected in all provinces, cities and municipalities an annual ad valorem tax on realproperty, such as land, buildings, machinery and other improvementsaffixed orattached to real property not hereinafter specifically exempted.

The Code contains the following definition in its section 3:

k) Improvementsis a valuable addition made to property or an amelioration in itscondition, amounting to more than mere repairs or replacement of waste, costinglabor or capital and intended to enhance its value, beauty or utility or to adapt it fornew or further purposes.

We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, beconsidered as improvements on the land, enhancing its utility and rendering it useful to the oilindustry. It is undeniable that the two tanks have been installed with some degree of permanence asreceptacles 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.

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For purposes of taxation, the term "real property" may include things which should generally beregarded as personal property(84 C.J.S. 171, Note 8). It is a familiar phenomenon to see thingsclassed as real property for purposes of taxation which on general principle might be consideredpersonal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein

Meralco's steel towers were held not to be subject to realty tax, is not in point because in that casethe steel towers were regarded as poles and under its franchise Meralco's poles are exempt fromtaxation. Moreover, the steel towers were not attached to any land or building. They were removablefrom their metal frames.

Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil.501, where the tools and equipment in the repair, carpentry and blacksmith shops of a transportationcompany were held not subject to realty tax because they were personal property.

WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution areaffirmed. No costs.

SO ORDERED.

Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.

Concepcion, Jr., J., is on leave.

Justice Abad Santos, J., took no part.

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-40411 August 7, 1935

DAVAO SAW MILL CO., INC.,plaintiff-appellant,vs.APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC.,defendants-appellees.

Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.J.W. Ferrier for appellees.

MALCOLM, J.:

The issue in this case, as announced in the opening sentence of the decision in the trial court and as

set forth by counsel for the parties on appeal, involves the determination of the nature of theproperties described in the complaint. The trial judge found that those properties were personal innature, and as a consequence absolved the defendants from the complaint, with costs against theplaintiff.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of thePhilippine Islands. It has operated a sawmill in the sitioof Maa, barrio of Tigatu, municipality ofDavao, Province of Davao. However, the land upon which the business was conducted belonged toanother person. On the land the sawmill company erected a building which housed the machineryused by it. Some of the implements thus used were clearly personal property, the conflict concerningmachines which were placed and mounted on foundations of cement. In the contract of leasebetween the sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildingsintroduced and erected by the party of the second part shall pass to the exclusive ownershipof the party of the first part without any obligation on its part to pay any amount for saidimprovements and buildings; also, in the event the party of the second part should leave orabandon the land leased before the time herein stipulated, the improvements and buildingsshall likewise pass to the ownership of the party of the first part as though the time agreedupon had expired: Provided, however, That the machineries and accessories are notincluded in the improvements which will pass to the party of the first part on the expiration orabandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw,Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action

against the defendant in that action; a writ of execution issued thereon, and the properties now inquestion were levied upon as personalty by the sheriff. No third party claim was filed for suchproperties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.Indeed the bidder, which was the plaintiff in that action, and the defendant herein havingconsummated the sale, proceeded to take possession of the machinery and other propertiesdescribed in the corresponding certificates of sale executed in its favor by the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., hason a number of occasions treated the machinery as personal property by executing chattel

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mortgages in favor of third persons. One of such persons is the appellee by assignment from theoriginal mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real propertyconsists of

1. Land, buildings, roads and constructions of all kinds adhering to the soil;x x x x x x x x x

5. Machinery, liquid containers, instruments or implements intended by the owner of anybuilding or land for use in connection with any industry or trade being carried on therein andwhich are expressly adapted to meet the requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertainno doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowingfrom the facts.

In the first place, it must again be pointed out that the appellant should have registered its protest

before or at the time of the sale of this property. It must further be pointed out that while notconclusive, the characterization of the property as chattels by the appellant is indicative of intentionand impresses upon the property the character determined by the parties. In this connection thedecision of this court in the case of Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil.,630), whether obiter dictaor not, furnishes the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues.It is machinery which is involved; moreover, machinery not intended by the owner of any building orland for use in connection therewith, but intended by a lessee for use in a building erected on theland by the latter to be returned to the lessee on the expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme

Court, it was held that machinery which is movable in its nature only becomes immobilized whenplaced in a plant by the owner of the property or plant, but not when so placed by a tenant, ausufructuary, or any person having only a temporary right, unless such person acted as the agent ofthe owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is wellknown, it was in part said:

To determine this question involves fixing the nature and character of the property from thepoint of view of the rights of Valdes and its nature and character from the point of view ofNevers & Callaghan as a judgment creditor of the Altagracia Company and the rights derivedby them from the execution levied on the machinery placed by the corporation in the plant.Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, notonly land and buildings, but also attributes immovability in some cases to property of amovable nature, that is, personal property, because of the destination to which it is applied.

"Things," says section 334 of the Porto Rican Code, "may be immovable either by their ownnature or by their destination or the object to which they are applicable." Numerousillustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery,vessels, instruments or implements intended by the owner of the tenements for the industrialor works that they may carry on in any building or upon any land and which tend directly tomeet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq.to and inclusive of article 534, recapitulating the things which, though in themselvesmovable, may be immobilized.) So far as the subject-matter with which we are dealing machinery placed in the plant it is plain, both under the provisions of the Porto Rican Law

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and of the Code Napoleon, that machinery which is movable in its nature only becomesimmobilized when placed in a plant by the owner of the property or plant. Such result wouldnot be accomplished, therefore, by the placing of machinery in a plant by a tenant or ausufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203;

Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted inFuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as

pointed out by Demolombe, upon the fact that one only having a temporary right to thepossession or enjoyment of property is not presumed by the law to have applied movableproperty belonging to him so as to deprive him of it by causing it by an act of immobilizationto become the property of another. It follows that abstractly speaking the machinery put bythe Altagracia Company in the plant belonging to Sanchez did not lose its character ofmovable property and become immovable by destination. But in the concrete immobilizationtook place because of the express provisions of the lease under which the Altagracia held,since the lease in substance required the putting in of improved machinery, deprived thetenant of any right to charge against the lessor the cost such machinery, and it wasexpressly stipulated that the machinery so put in should become a part of the plant belongingto the owner without compensation to the lessee. Under such conditions the tenant in puttingin the machinery was acting but as the agent of the owner in compliance with the obligationsresting upon him, and the immobilization of the machinery which resulted arose in legal

effect from the act of the owner in giving by contract a permanent destination to themachinery.

x x x x x x x x x

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in theplant by the Altagracia Company, being, as regards Nevers & Callaghan, movable property,it follows that they had the right to levy on it under the execution upon the judgment in theirfavor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes,since as to him the property was a part of the realty which, as the result of his obligationsunder the lease, he could not, for the purpose of collecting his debt, proceed separatelyagainst. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)

Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs ofthis instance to be paid by the appellant.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-17898 October 31, 1962

PASTOR D. AGO,petitioner,vs.THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the Court of FirstInstance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO and GRACE PARKENGINEERING, INC.,respondents.

Jose M. Luison for petitioner.Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.

LABRABOR, J.:

Appeal by certiorarito review the decision of respondent Court of Appeals in CA-G.R. No. 26723-Rentitled "Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al." which in part reads:

In this case for certiorariand prohibition with preliminary injunction, it appears from therecords that the respondent Judge of the Court of First Instance of Agusan rendered

judgment (Annex "A") in open court on January 28, 1959, basing said judgment on acompromise agreement between the parties.

On August 15, 1959, upon petition, the Court of First Instance issued a writ of execution.

Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or hiscounsel, did not receive a formal and valid notice of said decision, which motion forreconsideration was denied by the court below in the order of November 14, 1959.

Petitioner now contends that the respondent Judge exceeded in his jurisdiction in renderingthe execution without valid and formal notice of the decision.

A compromise agreement is binding between the parties and becomes the law betweenthem. (Gonzales vs. Gonzales G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin,G.R. No. L-12439, May 22, 1959) .

It is a general rule in this jurisdiction that a judgment based on a compromise agreement is

not appealable and is immediately executory, unless a motion is filed on the ground fraud,mistake or duress. (De los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No. L-10089, July 31, 1957)

Petitioner's claim that he was not notified or served notice of the decision is untenable. Thejudgment on the compromise agreement rendered by the court below dated January 28,1959, was given in open court. This alone is a substantial compliance as to notice. (De losReyes vs. Ugarte, supra)

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IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its jurisdictionin ordering the execution of the judgment. The petition for certiorariis hereby dismissed andthe writ of preliminary injunction heretofore dissolved, with costs against the petitioner.

IT IS SO ORDERED.

The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago boughtsawmill machineries and equipments from respondent Grace Park Engineer domineering, Inc.,executing a chattel mortgage over said machineries and equipments to secure the payment ofbalance of the price remaining unpaid of P32,000.00, which petitioner agreed to pay on installmentbasis.

Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park Engineering, Inc.instituted extra-judicial foreclosure proceedings of the mortgage. To enjoin said foreclosure,petitioner herein instituted Special Civil Case No. 53 in the Court of First Instance of Agusan. Theparties to the case arrived at a compromise agreement and submitted the same in court in writing,signed by Pastor D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz, Judge ofthe Court of First Instance of Agusan, then presiding, dictated a decision in open court on January

28, 1959.

Petitioner continued to default in his payments as provided in the judgment by compromise, soGrace Park Engineering, Inc. filed with the lower court a motion for execution, which was granted bythe court on August 15, 1959. A writ of execution, dated September 23, 1959, later followed.

The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution issued by thelower court, levied upon and ordered the sale of the sawmill machineries and equipments inquestion. These machineries and equipments had been taken to and installed in a sawmill buildinglocated in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill, Inc., to whom,petitioner alleges, he had sold them on February 16, 1959 (a date after the decision of the lowercourt but before levy by the Sheriff).

Having been advised by the sheriff that the public auction sale was set for December 4, 1959,petitioner, on December 1, 1959, filed the petition for certiorariand prohibition with preliminaryinjunction with respondent Court of Appeals, alleging that a copy of the aforementioned judgmentgiven in open court on January 28, 1959 was served upon counsel for petitioner only on September25, 1959 (writ of execution is dated September 23, 1959); that the order and writ of execution havingbeen issued by the lower court before counsel for petitioner received a copy of the judgment, itsresultant last order that the "sheriff may now proceed with the sale of the properties leviedconstituted a grave abuse of discretion and was in excess of its jurisdiction; and that the respondentProvincial Sheriff of Surigao was acting illegally upon the allegedly void writ of execution by levyingthe same upon the sawmill machineries and equipments which have become real properties of theGolden Pacific sawmill, Inc., and is about to proceed in selling the same without prior publication ofthe notice of sale thereof in some newspaper of general circulation as required by the Rules of

Court.

The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction against thesheriff but it turned out that the latter had already sold at public auction the machineries in question,on December 4, 1959, as scheduled. The respondent Grace Park Engineering, Inc. was the onlybidder for P15,000.00, although the certificate sale was not yet executed. The Court of Appealsconstructed the sheriff to suspend the issuance of a certificate of sale of the said sawmillmachineries and equipment sold by him on December 4, 1959 until the final decision of the case. OnNovember 9, 1960 the Court of Appeals rendered the aforequoted decision.

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Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the rendition ofjudgment on compromise in open court on January 1959 was a sufficient notice; and (2) in notresolving the other issues raised before it, namely, (a) the legality of the public auction sale made bythe sheriff, and (b) the nature of the machineries in question, whether they are movables orimmovables.

The Court of Appeals held that as a judgment was entered by the court below in open court upon thesubmission of the compromise agreement, the parties may be considered as having been notified ofsaid judgment and this fact constitutes due notice of said judgment. This raises the following legalquestion: Is the order dictated in open court of the judgment of the court, and is the fact the petitionerherein was present in open court was the judgment was dictated, sufficient notice thereof? Theprovisions of the Rules of Court decree otherwise. Section 1 of Rule 35 describes the manner inwhich judgment shall be rendered, thus:

SECTION 1. How judgment rendered. All judgments determining the merits of cases shallbe in writing personally and directly prepared by the judge, and signed by him, stating clearlyand distinctly the facts and the law on which it is based, filed with the clerk of the court.

The court of first instance being a court of record, in order that a judgment may be considered asrendered, must not only be in writing, signed by the judge, but it must also be filed with the clerk ofcourt. The mere pronouncement of the judgment in open court with the stenographer taking notethereof does not, therefore, constitute a rendition of the judgment. It is the filing of the signeddecision with the clerk of court that constitutes rendition. While it is to be presumed that the

judgment that was dictated in open court will be the judgment of the court, the court may still modifysaid order as the same is being put into writing. And even if the order or judgment has already beenput into writing and signed, while it has not yet been delivered to the clerk for filing it is still subject toamendment or change by the judge. It is only when the judgment signed by the judge is actually filedwith the clerk of court that it becomes a valid and binding judgment. Prior thereto, it could still besubject to amendment and change and may not, therefore, constitute the real judgment of the court.

Regarding the notice of judgment, the mere fact that a party heard the judge dictating the judgment

in open court, is not a valid notice of said judgment. If rendition thereof is constituted by the filingwith the clerk of court of a signed copy (of the judgment), it is evident that the fact that a party or anattorney heard the order or judgment being dictated in court cannot be considered as notice of thereal judgment. No judgment can be notified to the parties unless it has previously been rendered.The notice, therefore, that a party has of a judgment that was being dictated is of no effect becauseat the time no judgment has as yet been signed by the judge and filed with the clerk.

Besides, the Rules expressly require that final orders or judgments be served personally or byregistered mail. Section 7 of Rule 27 provides as follows:

SEC. 7. Service of final orders or judgments. Final orders or judgments shall be servedeither personally or by registered mail.

In accordance with this provision, a party is not considered as having been served with the judgmentmerely because he heard the judgment dictating the said judgment in open court; it is necessary thathe be served with a copy of the signed judgment that has been filed with the clerk in order that hemay legally be considered as having been served with the judgment.

For all the foregoing, the fact that the petitioner herein heard the trial judge dictating the judgment inopen court, is not sufficient to constitute the service of judgement as required by the above-quotedsection 7 of Rule 2 the signed judgment not having been served upon the petitioner, said judgment

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could not be effective upon him (petitioner) who had not received it. It follows as a consequence thatthe issuance of the writ of execution null and void, having been issued before petitioner her wasserved, personally or by registered mail, a copy of the decision.

The second question raised in this appeal, which has been passed upon by the Court of Appeals,concerns the validity of the proceedings of the sheriff in selling the sawmill machineries and

equipments at public auction with a notice of the sale having been previously published.

The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill machineriesand equipments he assigned the same to the Golden Pacific Sawmill, Inc. in payment of hissubscription to the shares of stock of said corporation. Thereafter the sawmill machinery andequipments were installed in a building and permanently attached to the ground. By reason of suchinstallment in a building, the said sawmill machineries and equipment became real estate propertiesin 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 tenementfor an industry or works which may be carried on in a building or on a piece of land, andwhich 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. CuUnjieng e Hijos, 61 Phil. 683, held that the installation of the machine and equipment in the central ofthe 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.Paraphrasing language of said decision we hold that by the installment of the sawmill machineries inthe building of the Gold Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building,the same became a necessary and permanent part of the building or real estate on which the samewas constructed, converting the said machineries and equipments into real estate within themeaning of Article 415(5) above-quoted of the Civil Code of the Philippines.

Considering that the machineries and equipments in question valued at more than P15,000.00appear to have been sold without the necessary advertisement of sale by publication in anewspaper, as required in Sec. 16 of Rule 39 of the Rules of Court, which is as follows:

SEC. 16. Notice of sale of property on execution. Before the sale of property onexecution, notice thereof must be given as follows:

xxx xxx xxx

(c) In case of real property, by posting a similar notice particularly describing the property fortwenty days in three public places in the municipality or city where the property is situated,and also where the property is to be sold, and, if the assessed value of the property exceedsfour hundred pesos, by publishing a copy of the notice once a week, for the same period, insome newspaper published or having general circulation in the province, if there be one. Ifthere are newspapers published in the province in both the English and Spanish languages,then a like publication for a like period shall be made in one newspaper published in theEnglish language, and in one published in the Spanish language.

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the sale made by the sheriff must be declared null and void.

WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside andWe declare that the issuance of the writ of execution in this case against the sawmill machineriesand equipments purchased by petitioner Pastor D. Ago from the Grace Park Engineering, Inc., aswell as the sale of the same by the Sheriff of Surigao, are null and void. Costs shall be against the

respondent Grace Park Engineering, Inc.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala andMakalintal, JJ.,concur.Padilla, J.,took no part.

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-19527 March 30, 1963

RICARDO PRESBITERO, in his capacity as Executor of the Testate Estate of EPERIDIONPRESBITERO,petitioner,vs.THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the PROVINCIAL SHERIFF OFNEGROS OCCIDENTAL,respondents.

San Juan, Africa and Benedicto and Hilado and Hilado for petitioner.Paredes, Poblador, Cruz and Nazareno and Manuel Soriano for respondents.

REYES, J.B.L., J.:

Petition for a writ of certiorariagainst the Court of First Instance of Negros Occidental.

It appears that during the lifetime of Esperidion Presbitero, judgment was rendered against him bythe Court of Appeals on October 14, 1959, in CA-G.R. No. 20879,

... to execute in favor of the plaintiff, within 30 days from the time this judgment becomesfinal, a deed of reconveyance of Lot No. 788 of the cadastral survey of Valladolid, free fromall liens and encumbrances, and another deed of reconveyance of a 7-hectare portion of LotNo. 608 of the same cadastral survey, also free from all liens and encumbrances, or, uponfailure to do so, to pay to the plaintiff the value of each of the said properties, as may bedetermined by the Court a quoupon evidence to be presented by the parties before it. The

defendant is further adjudged to pay to the plaintiff the value of the products received by himfrom the 5-hectare portion equivalent to 20 cavans of palay per hectare every year, or 125cavans yearly, at the rate of P10.00 per ca