3. G.R. No.

L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner, vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.

FACTS:

WEAREVER TEXTILE MILLS, INC., executed a Chattel Mortgage over certain raw materials as well as a machinery in order to
obtain financial accommodations from Makati Leasing and Finance Corporation.

When Wearever Textile defaulted, Makati Leasing a petition for extrajudicial forclosure of the properties mortgaged to it. Ho wever
the Sheriff assigned failed to implement the foreclosure as it failed to gain entry into the Wearever Textile premises.

Thereafter, Makati leasing files a complaint for judicial foreclosure with the Court of First Instance of Rizal.

The lower court issued a writ of seizure and an order to break open the premises to enforce the writ of seizure.

The Court of Appeals, in certiorari and prohibition proceedings filed by WEAREVER TEXTILE MILLS, INC, set aside the Orders
of the lower court and ordered the return of the drive motor seized by the sheriff.

It ruled that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property
pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it
from respondent's plant would be to drill out or destroy the concrete floor.

The appellate court rejected Makati Leasing’s argument that Wearever Textile is estopped from claiming that the machine is real
property by constituting a chattel mortgage thereon.

Motion for reconsideration had been denied.

Hence this petition for review by writ of certiorari

ISSUE:
Whether the machinery in this case is real or personal property from the point of view of the parties.

RULING:

The machinery in this case case is to be regarded as personal property in view of c

Where a chattel mortagage is constituted on a machinery permanently attached to the ground, the machinery is to be regarded as
personal property as long as the parties to the contract so agrees and no innocent third party will be prejudiced thereby.

This is based on the principle of estoppels.

It is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property,
as long as no interest of third parties would be prejudiced thereby

WEAREVER TEXTILE MILLS, INC could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it
has benefited therefrom,

WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the Orders o f
the lower court are hereby reinstated, with costs against the private respondent.

NOTE:

THE MACHINERY IN THIS CASE ARE CONSIDERED IMMOVABLE , the same being attached to the ground by means of bolts
and the only way to remove it from respondent's plant would be to drill out or destroy the concrete floor.

The special civil action of replevin is applicable only to personal property. It cannot be filed when the subject machinery and
equipment had become an immovable property.