Leung Yee vs FL Strong Machinery

Facts:
Compania Agricola Filipina bought rice cleaning machinery from FL Strong Machinery secured by a chattel
mortgage on the machinery and on the building to which it was installed. They failed to pay, thus the
chattel mortgage was foreclosed. Almost at the same time as when the chattel mortgage was constituted,
the Compania executed a real estate mortgage, separate and distinct from the chattel mortgage, over the
lot on which the building was erected in favor of Leung Yee to secure a loan. Compania also failed to pay,
and thus, the real estate mortgage was foreclosed; Leung Yee securing in his favor a judgment levying
execution upon the building. FL Strong Machinery then filed a case for it to be declared the rightful owner
of the building which was granted by the trial court on the ground that it had a title prior to the date of
registry of Leung Yees certificate.
Issue:
WON the registration of the building in the Registry of Chattel Mortgages affected the character of the
building and the machineries installed thereon.
Held:
No.
The Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the
sole purpose and object of the chattel mortgage registry is to provide for the registry of Chattel
mortgages, mortgages of personal property executed in the manner and form prescribed in the statute.
The building of strong materials in which the machinery was installed was real property, and the mere fact
that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise
changed its character as real property. It follows that neither the original registry in the chattel mortgage
registry of the instrument purporting to be a chattel mortgage of the building and the machinery installed
therein, nor the annotation in that registry of the sale of the mortgaged property, had any effect whatever
so far as the building was concerned.
Multiple Sale to Different Vendees Real vs Personal Property
In 1913, Compania Agricola Filipina was indebted to two personalities: Leung Yee and Strong
Machinery Co. CAF purchased some rice cleaning machines from SMCo. CAF installed the machines
in a building. As security for the purchase price, CAF executed a chattel mortgage on the rice cleaning
machines including the building where the machines were installed. CAF failed to pay SMCo, hence
the latter foreclosed the mortgage the same was registered in the chattel mortgage registry.
CAF also sold the land (where the building was standing) to SMCo. SMCo took possession of the
building and the land.

On the other hand, Yee, another creditor of CAF who engaged in the construction of the building,
being the highest bidder in an auction conducted by the sheriff, purchased the same building where the
machines were installed. Apparently CAF was also executed a chattel mortgage in favor Yee. Yee
registered the sale in the registry of land. Yee was however aware that prior to his buying, the property
has been sold in favor of SMCo evidence is the chattel mortgage already registered by SMCo.

ISSUE: Who is the owner of the building?

HELD: The SC ruled that SMCo has a better right to the contested property. Yee cannot be regarded
as a buyer in good faith as he was already aware of the fact that there was a prior sale of the same
property to SMCo.
The SC also noted that the Chattel Mortgage Law expressly contemplates provisions for chattel
mortgages which only deal with personal properties. The fact that the parties dealt the building as if its
a personal property does not change the nature of the thing. It is still a real property. Its inscription in
the Chattel Mortgage registry does not modify its inscription the registry of real property.


BICERRA v TENEZA G.R. No. L-16218 November 29, 1962

Facts: appellants were the owners of the house, worth P200.00, built on and
owned by them and situated in the said municipality Lagangilang; that sometime
in January 1957 appealed forcibly demolished the house, claiming to be the
owners thereof; that the materials of the house, after it was dismantled, were
placed in the custody of the barrio lieutenant of the place; and that as a result of
appellate's refusal to restore the house or to deliver the material appellants the
latter have suffered damages.

Issue: whether the action involves title to real property.

Ruling/ Rationale: A house is classified as immovable property by reason of its
adherence to the soil on which it is built (Art. 415, par. 1, Civil Code). This
classification holds true regardless of the fact that the house may be situated on
land belonging to a different owner. But once the house is demolished, as in this
case, it ceases to exist as such and hence its character as an immovable likewise
ceases.

The Bicerras are supposedly the owners of the house (PhP 20,000) built on a lot
owned by them in Lagangilang, Abra; which the Tenezas forcibly demolished in
January 1957, claiming to be the owners thereof. The materials of the house
were placed in the custody of the barrio lieutenant. The Bicerras filed a
complaint claiming actual damages of P200, moral and consequential damages
amounting to P600, and the costs. The CFI Abra dismissed the complaint
claiming that the action was within the exclusive (original) jurisdiction of the
Justice of the Peace Court of Lagangilang, Abra.

The Supreme Court affirmed the order appealed. Having been admitted in forma
pauperis, no costs were adjudged.

ISSUE:
Whether or not the house is immovable property even if it is on the land of
another

RULING:
Yes.

House is immovable property even if situated on land belonging to a different
owner; Exception, when demolished.

A house is classified as immovable property by reason of its adherence to the soil
on which it is built (Article 415, paragraph 1, Civil Code). This classification holds
true regardless of the fact that the house may be situated on land belonging to a
different owner. But once the house is demolished, as in this case, it ceases to
exist as such and hence its character as an immovable likewise ceases.





NAVARRO V. PINEDA
9 SCRA 631


FACTS:
Pineda and his mother executed real estate and chattel mortgages in favor of
Navarro, to secure a loan they got from the latter. The REM covered a parcel of
land owned by the mother while the chattel mortgage covered a
residential house. Due to the failure to pay the loan, they asked for
extensions to pay for the loan. On the second extension, Pineda executed a
PROMISE wherein in case of default in payment, he wouldnt ask for any
additional extension and there would be no need for any formal demand. In
spite of this, they still failed to pay.
Navarro then filed for the foreclosure of the mortgages. The court decided in his
favor.

HELD:
Where a house stands on a rented land belonging to another person, it may
be the subject matter of a chattel mortgage as personal property if so stipulated
in the document of mortgage, and in an action by the mortgagee for the
foreclosure, the validity of the chattel mortgage cannot be assailed
by one of the parties to the contract of mortgage.

Furthermore, although in some instances, a house of mixed materials has been
considered as a chattel between the parties and that the validity of
the contract between them, has been recognized, it has been a constant
criterion that with respect to third persons, who are not parties to the
contract, and specially in execution proceedings, the house is considered as
immovable property.


DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER
CO., INC. G.R. No. L-40411 August 7, 1935

Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. 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 clearly personal property, the conflict concerning
machines which were placed and mounted on foundations of cement. In the
contract of lease between 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 buildings introduced and erected by the party of
the second part shall pass to the exclusive ownership of the lessor without any
obligation on its part to pay any amount for said improvements and buildings;
which do not include the machineries and accessories in the improvements.

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; a writ of execution
issued thereon, and the properties now in question were levied upon as
personalty by the sheriff. No third party claim was filed for such properties at the
time of the sales thereof as is borne out by the record made by the plaintiff
herein

It must be noted also that on number of occasion, Davao Sawmill treated the
machinery as personal property by executing chattel mortgages in favor of third
persons. One of such is the appellee by assignment from the original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this
instant appeal.

Issue:
whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.

Machinery which is movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant, but not when so placed
by a tenant, a usufructuary, or any person having only a temporary right, unless
such person acted as the agent of the owner.

FACTS:
Petitioner is the holder of a lumber concession. It operated a sawmill on a land,
which it doesnt own. Part of the lease agreement was a stipulation in which
after the lease agreement, all buildings and improvements would pass to the
ownership of the lessor, which would not include machineries
and accessories. In connection to this, petitioner had in its sawmill
machineries and other equipment wherein some were bolted in foundations of
cement.


HELD:
The machinery must be classified as personal property.

The lessee placed the machinery in the building erected on land belonging to
another, with the understanding that the machinery was not included in the
improvements which would pass to the lessor on the expiration of the
lease agreement. The lessee also treated the machinery as personal
property in executing chattel mortgages in favor of third persons. The
machinery was levied upon by the sheriff as personalty pursuant to a writ of
execution obtained without any protest being registered.

Furthermore, machinery only becomes immobilized when placed in a plant by
the owner of the property or plant, but not when so placed by a tenant,
usufructuary, or any person having temporary right, unless such person
acted as the agent of the owner