Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines G.R. No. 169211

Are machineries and equipment were considered real properties and should therefore be included in the extra-judicial foreclosure which in turn were sold to the banks?

HELD:

YES. According to Article 415 of Civil Code.

Petition was granted.

Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage includes the machineries and equipments of respondent. Considering that the Indenture which is the instrument of the mortgage that was foreclosed exactly states through the Deed of Amendment that the machineries and equipments listed in Annexes "A" and "B" form part of the improvements listed and located on the parcels of land subject of the mortgage, such machineries and equipments are surely part of the foreclosure of the "real estate properties, including all improvements thereon" as prayed for in the petition. The real estate mortgages which specifically included the machineries and equipments were subsequent to the chattel mortgages. Without doubt, the real estate mortgages superseded the earlier chattel mortgages.

The real estate mortgage over the machineries and equipments is even in full accord with the classification of such properties by the Civil Code of the Philippines as immovable property. Thus:

Article 415. The following are immovable property:(1) Land, buildings, roads and constructions of all kinds adhered to the soil;xxxx(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;

Davao Sawmill Co. v. Castillo61 Phil 709 G.R. No. L-40411

Are the machineries real or personal property?

HELD:

YES. According to Article 415 of Civil Code.

Art.415 of the New Civil Code provides that Real Property consists of:

(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot 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;

Appellant should have registered its protest before or at the time of the sale of the property. While not conclusive, the appellant's characterization of the property as chattels is indicative of intention and impresses upon the property the character determined by the parties.

Machinery is naturally movable. However, machinery may be immobilized by destination or purpose under the following conditions:

General Rule: The machinery only becomes immobilized if placed in a plant by the owner of the property or plant.

Immobilization cannot be made by a tenant, a usufructuary, or any person having only a temporary right.

Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of the premises; or he intended to permanently give away the property in favor of the owner.

As a rule, therefore, the machinery should be considered as Personal Property, since it was not placed on the land by the owner of the said land.

Yap vs. Taada Julian S. Yap vs. Hon. Santiago O. Taada and Goulds Pumps International (Phil), Inc.,G.R. No. L-32917

Whether or not the pump and its accessories are immovable property

HELD: NO. Article 415, par. 3 of the Civil Code considers and immovable property as everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object. The pump does not fit this description. It could be, and was, in fact, separated from Yaps premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners.

No. The water pump and its accessories are NOT immovable properties. The argument of Yap that the water pump had become immovable property by its being installed in his residence is untenable. Article 415, par. 3 of the Civil Code considers and immovable property as everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object. The pump does not fit this description. It could be, and was, in fact,separated from Yaps premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners.

Machinery and Engineering vs. Court of Appeals96 Phil 70 G.R. No. L-7057

Whether the contract for the fabrication and installation of a central air-conditioning system in a building, one of sale or for a piece of work?

HELD:

CONTRACT FOR PIECE OF WORK.

1) A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale.A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work .

The contract in question is one for a piece of work. It is not petitioners line of business to manufacture air-conditioning systems to be sold off-the-shelf. Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers.

Board of Assessment Appeals, Q.C. vs Meralco119 Phil 328 G.R. No. L-15334

Are the steel towers or poles of the MERALCO considered real or personal properties?

HELD:

MERALCO's steel towers should be considered personal property

Pole long, comparatively slender, usually cylindrical piece of wood, timber, object of metal or the like; an upright standard to the top of which something is affixed or by which something is supported.

MERALCO's steel supports consists of a framework of 4 steel bars/strips which are bound by steel cross-arms atop of which are cross-arms supporting 5 high-voltage transmission wires, and their sole function is to support/carry such wires. The exemption granted to poles as quoted from Part II, Par.9 of respondent's franchise is determined by the use to which such poles are dedicated.

It is evident that the word poles, as used in Act No. 484 and incorporated in the petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles should be taken and understood as part of MERALCO's electric power system for the conveyance of electric current to its consumers.

Art. 415 of the NCC classifies the following as immovable property:

(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

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;

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot 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;

Following these classifications, MERALCO's steel towers should be considered personal property. It should be noted that the steel towers:

(a) are neither buildings or constructions adhered to the soil;

(b) are not attached to an immovable in a fixed manner they can be separated without breaking the material or deterioration of the object;are not machineries, receptacles or instruments, and even if they are, they are not intended for an industry to be carried on in the premises.

Meralco v. CBAA114 SCRA 273 G.R. No. L-47943

Are the 2 oil tanks installed by Meralco in Batangas is a subject to a realty tax?

HELD:

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

The SC ruled 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. Thus, the two tanks should be held subject to realty tax because they were considered real property. Henceforth, the petition is dismissed. The Board's questioned decision and resolution are affirmed.

FELS Energy, Inc. vs. Province of BatangasG.R. No. 168557

Can the CBAA and LBAA power barges be assessed of real property taxes?

HELD:

YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax.

YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from this rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation, and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:

OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides:

OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7.

It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and conditions.

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Thus, applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is considered a taxable entity.

The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas.

It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals.

In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.

Presbitero v. FernandezG.R. No. L-19527

Are the sugar quotas are real (immovable) or personal properties.

HELD:YES. They are real Properties

They are real properties.Legal bases:a) The Sugar Limitation Law xxx attaching to the land xxx (p 631)b) RA 1825xxx to be an improvement attaching to the land xxx (p 631)c) EO # 873"plantation" xxx to which is attached an allotment of centrifugal sugar.

Under the express provisions of law, the sugar quota allocations are accessories to the land, and cannot have independent existence away from a plantation.4) Since the levy is invalid for non-compliance with law, xxx the levy amount to no levy at all

Sibal v. Valdez60 Phil 521 G.R. No. L-26278

Is sugar cane personal o real property?

HELD:

For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property.

It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received 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.

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 Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop."

For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. SC lowered the award for damages to the defendant to 8,900.80 by acknowledging the fact that some of the sugar canes were owned by the petitioner and by reducing the calculated expected yield or profit that defendant would have made if petitioner did not judicially prevent him from planting and harvesting his lands.