G.R. No. L-40411 August 7, 1935 5.

Machinery, liquid containers, instruments or implements intended by the owner of any building or
DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. land for use in connection with any industry or trade being carried on therein and which are expressly
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees. adapted to meet the requirements of such trade of industry.

.The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that
counsel for the parties on appeal, involves the determination of the nature of the properties described in the the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.In the first
complaint. The trial judge found that those properties were personal in nature, and as a consequence absolved the place, it must again be pointed out that the appellant should have registered its protest before or at the time of the
defendants from the complaint, with costs against the plaintiff. sale of this property. It must further be pointed out that while not conclusive, the characterization of the property
as chattels by the appellant is indicative of intention and impresses upon the property the character determined by
the parties. In this connection the decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation.
Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao.
However, the land upon which the business was conducted belonged to another person. On the land the sawmill
company erected a building which housed the machinery used by it. Some of the implements thus used were It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is
clearly personal property, the conflict concerning machines which were placed and mounted on foundations of machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in
cement. In the contract of lease between the sawmill company and the owner of the land there appeared the connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned
following provision: to the lessee on the expiration or abandonment of the lease.

That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was
the party of the second part shall pass to the exclusive ownership of the party of the first part without any held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the
obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a
second part should leave or abandon the land leased before the time herein stipulated, the improvements and temporary right, unless such person acted as the agent of the owner. In the opinion written by Chief Justice
buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had White, whose knowledge of the Civil Law is well known, it was in part said:
expired: Provided, however, That the machineries and accessories are not included in the improvements which
will pass to the party of the first part on the expiration or abandonment of the land leased. To determine this question involves fixing the nature and character of the property from the point of
view of the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., as a judgment creditor of the Altagracia Company and the rights derived by them from the execution
Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in levied on the machinery placed by the corporation in the plant. Following the Code Napoleon, the
that action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes
by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by immovability in some cases to property of a movable nature, that is, personal property, because of the
the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the destination to which it is applied. "Things," says section 334 of the Porto Rican Code, "may be
defendant herein having consummated the sale, proceeded to take possession of the machinery and other immovable either by their own nature or by their destination or the object to which they are
properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao. applicable." Numerous illustrations 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 industrial or works that they may carry on in any building or upon any land and which tend directly
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a to meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq. to and
number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third inclusive of article 534, recapitulating the things which, though in themselves movable, may be
persons. One of such persons is the appellee by assignment from the original mortgages. 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 and of the Code Napoleon, that
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of — machinery which is movable in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant. Such result would not be accomplished, therefore, by the placing of
machinery in a plant by a tenant or a usufructuary or any person having only a temporary right.
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and
decisions quoted in Fuzier-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 the possession defendants again failed to pay and, for the second time, asked for another extension, which was given, up to
or enjoyment of property is not presumed by the law to have applied movable property belonging to July 30, 1960. In the second extension, defendant Pineda in a document entitled "Promise", categorically stated
him so as to deprive him of it by causing it by an act of immobilization to become the property of that in the remote event he should fail to make good the obligation on such date (July 30, 1960), the defendant
another. It follows that abstractly speaking the machinery put by the Altagracia Company in the plant
would no longer ask for further extension and there would be no need for any formal demand, and plaintiff
belonging to Sanchez did not lose its character of movable property and become immovable by
destination. But in the concrete immobilization took place because of the express provisions of the could proceed to take whatever action he might desire to enforce his rights, under the said mortgage contract.
lease under which the Altagracia held, since the lease in substance required the putting in of improved In spite of said promise, defendants, failed and refused to pay the obligation.
machinery, deprived the tenant of any right to charge against the lessor the cost such machinery, and it
was expressly stipulated that the machinery so put in should become a part of the plant belonging to the On August 10, 1960, plaintiff filed a complaint for foreclosure of the mortgage and for damages, which
owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective
was acting but as the agent of the owner in compliance with the obligations resting upon him, and the on the date of maturity, until fully paid.
immobilization of the machinery which resulted arose in legal effect from the act of the owner in
giving by contract a permanent destination to the machinery. Defendants, answering the complaint, among others, stated —

Defendants admit that the loan is overdue but deny that portion of paragraph 4 of the First Cause of Action
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the
Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had which states that the defendants unreasonably failed and refuse to pay their obligation to the plaintiff the truth
the right to levy on it under the execution upon the judgment in their favor, and the exercise of that being the defendants are hard up these days and pleaded to the plaintiff to grant them more time within which
right did not in a legal sense conflict with the claim of Valdes, since as to him the property was a part to pay their obligation and the plaintiff refused;
of the realty which, as the result of his obligations under the lease, he could not, for the purpose of
collecting his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.) WHEREFORE, in view of the foregoing it is most respectfully prayed that this Honorable Court render judgment
granting the defendants until January 31, 1961, within which to pay their obligation to the plaintiff.
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance
On September 30, 1960, plaintiff presented a Motion for summary Judgment, claiming that the Answer failed to
to be paid by the appellant.
tender any genuine and material issue. The motion was set for hearing, but the record is not clear what ruling
the lower court made on the said motion. On November 11, 1960, however, the parties submitted a Stipulation
of Facts, wherein the defendants admitted the indebtedness, the authenticity and due execution of the Real
G.R. No. L-18456 November 30, 1963
CONRADO P. NAVARRO, plaintiff-appellee, vs.RUFINO G. PINEDA, RAMONA REYES, ET AL., defendants- Estate and Chattel Mortgages; that the indebtedness has been due and unpaid since June 14, 1960; that a
appellants. liability of 12% per annum as interest was agreed, upon failure to pay the principal when due and P500.00 as
PAREDES, J.: liquidated damages; that the instrument had been registered in the Registry of Property and Motor Vehicles
Office, both of the province of Tarlac; that the only issue in the case is whether or not the residential house,
On December 14, 1959, defendants Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio subject of the mortgage therein, can be considered a Chattel and the propriety of the attorney's fees.
Pineda), borrowed from plaintiff Conrado P. Navarro, the sum of P2,500.00, payable 6 months after said date or on June
14, 1959. To secure the indebtedness, Rufino executed a document captioned "DEED OF REAL ESTATE and CHATTEL On February 24, 1961, the lower court held —
MORTGAGES", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her,
egistered with the Register of Deeds of Tarlac, under Transfer Certificate of Title No. 25776, and Rufino G. Pineda, by ... WHEREFORE, this Court renders decision in this Case:
way of Chattel Mortgage, mortgaged his two-story residential house, having a floor area of 912 square meters, erected (a) Dismissing the complaint with regard to defendant Gregorio Pineda;
on a lot belonging to Atty. Vicente Castro, located at Bo. San Roque, Tarlac, Tarlac; and one motor truck, registered in his
name, under Motor Vehicle Registration Certificate No. A-171806. Both mortgages were contained in one instrument, (b) Ordering defendants Juana Gonzales and the spouses Rufino Pineda and Ramon Reyes, to pay jointly and
which was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. severally and within ninety (90) days from the receipt of the copy of this decision to the plaintiff Conrado P.
Navarro the principal sum of P2,550.00 with 12% compounded interest per annum from June 14, 1960, until
When the mortgage debt became due and payable, the defendants, after demands made on them, failed to said principal sum and interests are fully paid, plus P500.00 as liquidated damages and the costs of this suit,
pay. They, however, asked and were granted extension up to June 30, 1960, within which to pay. Came June 30, with the warning that in default of said payment of the properties mentioned in the deed of real estate
mortgage and chattel mortgage (Annex "A" to the complaint) be sold to realize said mortgage debt, interests, said contract, "is good only insofar as the contracting parties are concerned. It is based partly, upon the
liquidated damages and costs, in accordance with the pertinent provisions of Act 3135, as amended by Act principles of estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In a case, a mortgage house
4118, and Art. 14 of the Chattel Mortgage Law, Act 1508; and built on a rented land, was held to be a personal property, not only because the deed of mortgage considered it
as such, but also because it did not form part of the land (Evangelista v. Abad [CA];36 O.G. 2913), for it is now
(c) Ordering the defendants Rufino Pineda and Ramona Reyes, to deliver immediately to the Provincial Sheriff well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee
of Tarlac the personal properties mentioned in said Annex "A", immediately after the lapse of the ninety (90) or usufructuary, does not become immobilized by attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in
days above-mentioned, in default of such payment. Davao Sawmill Co., Inc. v. Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person stands on a
The above judgment was directly appealed to this Court, the defendants therein assigning only a single error, rented land belonging to another person, it may be mortgaged as a personal property is so stipulated in the
allegedly committed by the lower court, to wit — document of mortgage. (Evangelista v. Abad, supra.) It should be noted, however, that the principle is
predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably
In holding that the deed of real estate and chattel mortgages appended to the complaint is valid, estop him from subsequently claiming otherwise (Ladera, et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The
notwithstanding the fact that the house of the defendant Rufino G. Pineda was made the subject of the chattel doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed materials
mortgage, for the reason that it is erected on a land that belongs to a third person. has been considered as a chattel between them, has been recognized, it has been a constant criterion
nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution
Appellants contend that article 415 of the New Civil Code, in classifying a house as immovable property, makes proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code).
no distinction whether the owner of the land is or not the owner of the building; the fact that the land belongs
to another is immaterial, it is enough that the house adheres to the land; that in case of immovables by In the case at bar, the house in question was treated as personal or movable property, by the parties to the
incorporation, such as houses, trees, plants, etc; the Code does not require that the attachment or contract themselves. In the deed of chattel mortgage, appellant Rufino G. Pineda conveyed by way of "Chattel
incorporation be made by the owner of the land, the only criterion being the union or incorporation with the Mortgage" "my personal properties", a residential house and a truck. The mortgagor himself grouped the house
soil. In other words, it is claimed that "a building is an immovable property, irrespective of whether or not said with the truck, which is, inherently a movable property. The house which was not even declared for taxation
structure and the land on which it is adhered to, belong to the same owner" (Lopez v. Orosa, G.R. Nos. L-10817- purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and
8, Feb. 28, 1958). (See also the case of Leung Yee v. Strong Machinery Co., 37 Phil. 644). Appellants argue that wooden posts; built on land belonging to another.
since only movables can be the subject of a chattel mortgage (sec. 1, Act No. 3952) then the mortgage in
question which is the basis of the present action, cannot give rise to an action for foreclosure, because it is The cases cited by appellants are not applicable to the present case. The Iya cases (L-10837-38, supra), refer to
nullity. (Citing Associated Ins. Co., et al. v. Isabel Iya v. Adriano Valino, et al., L-10838, May 30, 1958.) a building or a house of strong materials, permanently adhered to the land, belonging to the owner of the
house himself. In the case of Lopez v. Orosa, (L-10817-18), the subject building was a theatre, built of materials
The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground worth more than P62,000, attached permanently to the soil. In these cases and in the Leung Yee case, supra,
that the house mortgaged was erected on the land which belonged to a third person, but also and principally on third persons assailed the validity of the deed of chattel mortgages; in the present case, it was one of the
the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house parties to the contract of mortgages who assailed its validity.
as chattel "for its smallness and mixed materials of sawali and wood". In construing arts. 334 and 335 of the
Spanish Civil Code (corresponding to arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel CONFORMABLY WITH ALL THE FOREGOING, the decision appealed from, should be, as it is hereby affirmed,
Mortgage Law, it was held that under certain conditions, "a property may have a character different from that with costs against appellants.
imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Barrera, Dizon, Regala, and Makalintal, JJ., concur.
property that which by nature would be real property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632-
633)."There can not be any question that a building of mixed materials may be the subject of a chattel
mortgage, in which case, it is considered as between the parties as personal property. ... The matter depends
on the circumstances and the intention of the parties". "Personal property may retain its character as such
where it is so agreed by the parties interested even though annexed to the realty ...". (42 Am. Jur. 209-210,
cited in Manarang, et al. v. Ofilada, et al., G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p. 3954.) The view that
parties to a deed of chattel mortgagee may agree to consider a house as personal property for the purposes of