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MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, would be to drill out or destroy the concrete fl oor.

troy the concrete fl oor. When the motion for


INC. reconsideration of Makati Leasing was denied by the Court of Appeals,
Makati Leasing elevated the matter to the Supreme Court.
Parties to a contract may by agreement treat as personal property that which
by nature is a real property, as long as no interest of 3rd party would be ISSUE Whether the machinery in suit is real or personal property from the
prejudiced. point of view of the parties.

FACTS: HELD There is no logical justification to exclude the rule out the present case
from the application of the pronouncement in Tumalad v Vicencio, 41 SCRA
To obtain financial accommodations from Makati Leasing, Wearever Textile 143. If a house of strong materials, like what was involved in the Tumalad
discounted and assigned several receivables under a Receivable Purchase case, may be considered as personal property for purposes of executing a
Agreement with Makati Leasing. To secure the collection of receivables, it chattel mortgage thereon as long as the parties to the contract so agree and
executed a chattel mortgage over several raw materials and a machinery no innocent third party will be prejudiced thereby, there is absolutely no
Artos Aero Dryer Stentering Range (Dryer). reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as
Wearever defaulted thus the properties mortgaged were extrajudicially such. This is really because one who has so agreed is estopped from the
foreclosed. The sheriff, after the restraining order was lifted, was able to denying the existence of the chattel mortgage.
enter the premises of Wearever and removed the drive motor of the Dryer.
The CA reversed the order of the CFI, ordering the return of the drive motor In rejecting petitioners assertion on the applicability of the Tumalad doctrine,
since it cannot be the subject of a replevin suit being an immovable bolted to the CA lays stress on the fact that the house involved therein was built on a
the ground. Thus the case at bar. land that did not belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which the house is
ISSUE: Whether the dryer is an immovable property built and We should not lay down distinctions not contemplated by law.

HELD: NO. The SC relied on its ruling in Tumalad v. Vicencio, that if a house It must be pointed out that the characterization by the private respondent is
of strong materials can be the subject of a Chattel Mortgage as long as the indicative of the intention and impresses upon the property the character
parties to the contract agree and no innocent 3rd party will be prejudiced determined by the parties. As stated in Standard Oil Co. of New York v.
then moreso that a machinery may treated as a movable since it is movable Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may, by
by nature and becomes immobilized only by destination. And treating it as a agreement, treat as personal property that which by nature would be a real
chattel by way of a Chattel Mortgage, Wearever is estopped from claiming property as long as no interest of third parties would be prejudiced thereby.
otherwise.
The status of the subject matter as movable or immovable property was not
MAKATI LEASING AND FINANCE CORPORATION V. WEAREVER raised as an issue before the lower court and the CA, except in a
TEXTILE MILLS 122 SCRA 296 supplemental memorandum in support of the petition filed in the appellate
court. There is no record showing that the mortgage has been annulled, or
FACTS: To be able to secure financial accommodations from the
that steps were taken to nullify the same. On the other hand, respondent has
petitioner, the private respondent discounted and assigned several
benefited from the said contract.
receivables under a Receivable Purchase Agreement. To secure
the collection of the receivables, a chattel mortgage was executed over Equity dictates that one should not benefit at the expense of another.
machinery found in the factory of the private respondent.
As such, private respondent could no longer be allowed to impugn the
As the private respondent failed to pay, the mortgage was extrajudicially efficacy of the chattel mortgage after it has benefited therefrom.
foreclosed. Nonetheless, the sheriff was unable to seize the
machinery. This prompted petitioner to file an action for replevin. Therefore, the questioned machinery should be considered as personal
property.
The CA reversed the decision of the trial court and ordered the return of
the drive motor, after ruling that the machinery may not be the subject of a
chattel mortgage, given that it was an immovable under the provisions of
Article 415. The same was attached to the ground by means of bolts and the
only way to remove it from the plant would be to drill the ground.
Examining the records of the instant case, We fi nd no
HELD:
logical justi fi cation to exclude the rule out, as the
appellate court
There is no logical justification to exclude the rule out that the machinery did, the present case from the application of the above-
may be considered as personal property, and subject to a chattel quoted
mortgage. If a house may be considered as personal property for purposes pronouncement. If a house of strong materials, like what
of executing a chattel mortgage, what more a machinery, which is movable was
involved in the above Tumalad case, may be
by nature and becomes immobilized only by destination or purpose, considered as personal
may not be likewise treated as such. property for purposes of executing a chattel mortgage
thereon as
Makati Leasing and Finance Corp., vs Wearever Textile Mills, Inc., 122
SCRA 296 GR No. L-58469 May 16, 1983
long as the parties to the contract so agree and no
innocent third
FACTS Wearever Textile Mills, Inc. executed a chattel mortgage contract in party will be prejudiced thereby, there is absolutely no
favor of Makati Leasing and Finance Corporation covering certain raw reason
materials and machinery. Upon default, Makati Leasing fi led a petition for why a machinery, which is movable in its nature and
judicial foreclosure of the properties mortgaged. Acting on Makati Leasings becomes
application for replevin, the lower court issued a writ of seizure. Pursuant immobilized only by destination or purpose, may not be
thereto, the sheriff enforcing the seizure order seized the machinery subject likewise
matter of the mortgage. In a petition for certiorari and prohibition, the Court of treated as such. This is really because one who has so
Appeals ordered the return of the machinery on the ground that the same agreed is
can-not be the subject of replevin because it is a real property pursuant to estopped from the denying the existence of the chattel
Article415 of the new Civil Code, the same being attached to the ground by mortgage.
means of bolts and the only way to remove it from Wearever textiles plant
In rejecting petitioners assertion on the applicability of
the
Tumalad doctrine, the Court lays stress on the fact that
the house
involved therein was built on a land that did not belong
to the owner
41
of such house. But the law makes no distinction with
respect to the
ownership of the land on which the house is built and
We should
not lay down distinctions not contemplated by law.
It must be pointed out that the characterization by the
private
respondent is indicative of the intention and impresses
upon the
property the character determined by the parties. As
stated in
Standard Oil Co. of New York v. Jaramillo, 44
Phil. 630, it is
undeniable that the parties to a contract may by
agreement treat as
personal property that which by nature would be a real
property, as
long as no interest of third parties would be prejudiced
thereb

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