G.R. No.

L-40411 August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. APRONIANO G. CASTILLO !" DAVAO LIG#T $ POW%R CO.,
INC., defendants-appellees.
&ACTS
Davao Sawmill Co., operated a sawmill. The land upon which the business was conducted was leased from another
person. On the land, Davao Sawmill erected a building which housed the machinery it used. Some of the machines were
mounted and placed on foundations of cement. In the contract of lease, Davao Sawmill agreed to turn over free of charge
all improvements and buildings erected by it on the premises with the eception of machineries, which shall remain with
the Davao Sawmill. In an action brought by the Davao !ight and "ower Co., #udgment was rendered against Davao
Sawmill. $ writ of eecution was issued and the machineries placed on the sawmill were levied upon as personalty by the
sheriff. Davao !ight and "ower Co. proceeded to purchase the machinery and other properties auctioned by the sheriff.
ISS'%
$re the machineries real or personal property%
R'LING
$rt.&'( of the )ew Civil Code provides that *eal "roperty consists of+
,'- !ands, buildings, roads and constructions of all .inds adhered to the soil/

,(- 0achinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot wor.s
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 wor.s/
$ppellant should have registered its protest before or at the time of the sale of the property. 1hile not conclusive, the
appellant2s characteri3ation of the property as chattels is indicative of intention and impresses upon the property the
character determined by the parties.
0achinery is naturally movable. 4owever, machinery may be immobili3ed by destination or purpose under the following
conditions+ The machinery only becomes immobili3ed if placed in a plant by the owner of the property or plant.
Immobili3ation cannot be made by a tenant, a usufructuary, or any person having only a temporary right unless such
person acted as the agent of the owner of the premises/ or he intended to permanently give away the property in favor of
the owner.
$s a rule, therefore, the machinery should be considered as "ersonal "roperty, since it was not placed on the land by the
owner of the said land.
G.R. No. L-4150( M)*+ ,5, 1935
P#ILIPPIN% R%&INING CO., INC., plaintiff-appellant, vs. &RANCISCO -AR.'%, -OS% COROMINAS, !" A/OITI0 $
CO., defendants.
-OS% COROMINAS, 1! +1s *2*1t3 s ss1g!44 o5 t+4 4stt4 o5 t+4 1!so674!t &)!*1s*o -)8u4,appellee.
&ACTS
"laintiff "hilippine *efining Co. and defendant 5ar6ue eecuted three mortgages on the motor vessels "andan and
7arga3o. The documents were recorded as transfer and encumbrances of the vessels for the port of Cebu and each was
denominated a chattel mortgage.
The first two mortgages did not have an affidavit of good faith. $ fourth mortgage was eecuted by 5ar6ue and *amon
$boiti3 over motorship 7arago3a and was entered in the Chattel 0ortgage *egistry on 0ay '8, '9:8, within the period of
:; days prior to the foreclosure<institution of the insolvency proceedings.
5ose Curaminas filed with the C=I of Cebu a petition praying that =rancisco 5ar6ue be declared an insolvent debtor. This
was granted and 5ar6ue>s properties were then assigned to Curaminas.
$ problem arose when 5udge 5ose 4ontiveros declined to order the foreclosure of the mortgages, and instead, ruled that
they were defective because they did not have affidavits of good faith.
ISS'%
1hether or not the mortgages of the vessels are governed by the Chattel 0ortgage !aw.
R'LING
?es. @"ersonal propertyA includes vessels. They are sub#ect to the provisions of the Chattel 0ortgage !aw. The Chattel
0ortgage !aw says that a good chattel mortgage includes an affidavit of good faith. The absence of such affidavit ma.es
mortgage unenforceable against creditors and subse6uent encumbrances. $ mortgage on a vessel is generally li.e other
chattel mortgages. The only difference between a chattel mortgage of a vessel and a chattel mortgage of other personalty
is that it is not now necessary for a chattel mortgage of a vessel to be noted n the registry of the register of deeds, but it is
essential that a record of documents affecting the title to a vessel be entered in the record of the Collector of Customs at
the port of entry.
G.R. No. 1(9557 &4:)u)3 1(, ,007
&%LS %N%RG;, INC., "etitioner, vs. T#% PROVINC% O& /ATANGAS !" T#% O&&IC% O& T#% PROVINCIAL
ASS%SSOR O& /ATANGAS, *espondents.
----------------------------------------------------
G.R. No. 170(,9 &4:)u)3 1(, ,007
NATIONAL POW%R CORPORATION, "etitioner, vs. LOCAL /OARD O& ASS%SSM%NT APP%ALS O& /ATANGAS,
LA'RO C. ANDA;A, 1! +1s *2*1t3 s t+4 Ass4sso) o5 t+4 P)o71!*4 o5 /t!gs, !" t+4 PROVINC% O&
/ATANGAS )42)4s4!t4" :3 1ts P)o71!*16 Ass4sso), *espondents.
&ACTS
On 5anuary 'B, '99:, )"C entered into a lease contract with "olar Cnergy, Inc. over :D:; 01 diesel engine power
barges moored at Ealayan Eay in Calaca, Eatangas. The contract, denominated as an Cnergy Conversion $greement,
was for a period of five years. $rticle '; states that )"C shall be responsible for the payment of taes. ,other than ,i-
taes imposed or calculated on the basis of the net income of "O!$* and "ersonal Income Taes of its employees and
,ii- construction permit fees, environmental permit fees and other similar fees and charges. "olar Cnergy then assigned its
rights under the $greement to =els despite )"C>s initial opposition.
=C!S received an assessment of real property taes on the power barges from "rovincial $ssessor !auro C. $ndaya of
Eatangas City. =C!S referred the matter to )"C, reminding it of its obligation under the $greement to pay all real estate
taes. It then gave )"C the full power and authority to represent it in any conference regarding the real property
assessment of the "rovincial $ssessor. )"C filed a petition with the !E$$. The !E$$ ordered =els to pay the real estate
taes. The !E$$ ruled that the power plant facilities, while they may be classified as movable or personal property, are
nevertheless considered real property for taation purposes because they are installed at a specific location with a
character of permanency. The !E$$ also pointed out that the owner of the bargesF=C!S, a private corporationFis the one
being taed, not )"C. $ mere agreement ma.ing )"C responsible for the payment of all real estate taes and
assessments will not #ustify the eemption of =C!S/ such a privilege can only be granted to )"C and cannot be etended
to =C!S. =inally, the !E$$ also ruled that the petition was filed out of time.
=C!S appealed to the CE$$. The CE$$ reversed and ruled that the power barges belong to )"C/ since they are
actually, directly and eclusively used by it, the power barges are covered by the eemptions under Section 8:&,c- of *.$.
)o. G'H;. $s to the other #urisdictional issue, the CE$$ ruled that prescription did not preclude the )"C from pursuing its
claim for ta eemption in accordance with Section 8;H of *.$. )o. G'H;. Ipon 0*, the CE$$ reversed itself.
ISS'%
1hether or not the petitioner may be assessed of real property taes.
R'LING
?es. The CE$$ and !E$$ power barges are real property and are thus sub#ect to real property ta. $rticle &'( ,9- of the
)ew Civil Code provides that @doc.s and structures which, though floating, are intended by their nature and ob#ect to
remain at a fied place on a river, la.e, or coastA are considered immovable property. Thus, power barges are categori3ed
as immovable property by destination, being in the nature of machinery and other implements intended by the owner for
an industry or wor. which may be carried on in a building or on a piece of land and which tend directly to meet the needs
of said industry or wor..
"etitioners maintain nevertheless that the power barges are eempt from real estate ta under Section 8:& ,c- of *.$. )o.
G'H; because they are actually, directly and eclusively used by petitioner )"C, a government- owned and controlled
corporation engaged in the supply, generation, and transmission of electric power.
1e affirm the findings of the !E$$ and CE$$ that the owner of the taable properties is petitioner =C!S, which in fine, is
the entity being taed by the local government. $s stipulated under Section 8.'', $rticle 8 of the $greement+
@O1)C*S4I" O= "O1C* E$*JCS. "O!$* shall own the "ower Earges and all the fitures, fittings, machinery and
e6uipment on the Site used in connection with the "ower Earges which have been supplied by it at its own cost. "O!$*
shall operate, manage and maintain the "ower Earges for the purpose of converting =uel of )$"OCO* into electricity.A
It follows then that =C!S cannot escape liability from the payment of realty taes by invo.ing its eemption in Section 8:&
,c- of *.$. )o. G'H;. Indeed, the law states that the machinery must be actually, directly and eclusively used by the
government owned or controlled corporation/ nevertheless, petitioner =C!S still cannot find solace in this provision
because Section (.(, $rticle ( of the $greement provides+
@O"C*$TIO). "O!$* underta.es that until the end of the !ease "eriod, sub#ect to the supply of the necessary =uel
pursuant to $rticle H and to the other provisions hereof, it will operate the "ower Earges to convert such =uel into
electricity in accordance with "art $ of $rticle G.
It is a basic rule that obligations arising from a contract have the force of law between the parties. )ot being contrary to
law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and conditions.