BERKENTOTTER v.

CU UNJIENG E HIJOS
With reference to object: things that may be subject of prop. rights | July 31, 1935 | Villareal
Nature of Case: Appeal from a judgment of CFI
Digest maker: Niq Polido
SUMMARY: The Mabalacat Sugar Co., Inc., owner of the sugar central, obtained from the
defendants Cu Unjieng e Hijos a loan, secured two parcels of land with all its buildings,
improvements, etc. and whatever forms part or is necessary complement said sugar-cane
mill now existing or that may in the future exist in said lots. Shortly after said mortgage
had been constituted the Mabalacat Sugar Co., Inc. bought additional machinery and
equipment. Plaintiff, was asked by the company president, Green, to advance necessary
aount for the purchase of said machinery and equipment. Plaintiff promised to get
reimbursement when an additional loan from from the mortgagees is obtained. Green failed
to obtain said loan. Appellant contended that installation of machinery and equipment
claimed by him in the sugar central was not permanent in character and in case Green
should fail to obtain a loan (as was the case), said machinery would become security for the
companys debt to him. The court ruled that he installation of the machinery and equipment
in question in the central converted them into real property by reason of their purpose. As
essential and principal elementsof a sugar central without them the sugar central would
unable to function.
DOCTRINE: The installation of the machinery and equipment in question in the central
converted them into real property by reason of their purpose. As essential and principal
elements of a sugar central, without them the sugar central would be unable to function or
carry on the industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for carrying on
the sugar industry for which it has been established must necessarily be permanent.

Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as

security the additional machinery and equipment acquired by said Green and
installed in the sugar central after the execution of the original mortgage deed,
together with whatever additional equipment acquired with said loan. Green
failed to obtain said loan.

ISSUE/S & RATIO:

1. WON the additional machinery and equipment is considered an improvement
subject to the mortgage executed in favor of Mabalacat Sugar Co., Inc. YES
a. The installation of a machinery and equipment in amortgaged sugar
central, in lieu of another of less capacity, for the purpose of carrying out
theindustrial functions of the latter and increasing production, constitutes a
permanent improvement onsaid sugar central and subjects said machinery
and equipment to the mortgage constituted thereon
b. As essential and principal elements of a sugar central, without them the
sugar central would be unable to function or carry on the industrial
purpose for which it was established. Inasmuch as the central is permanent
in character, the necessary machinery and equipment installed for carrying
on the sugar industry for which it has been established must necessarily be
permanent.
RULING: Judgment affirmed.

NOTE:
Article 1877, CC
A mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when
the obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the
mortgaged property or by virtue of the exercise of the power of eminent domain, with the declarations,
amplifications, and limitations established by law, whether the estate continues in the possession of the
FACTS:

On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng e person who mortgaged it or whether it passes into the hands of a third person.
Hijos, a loan securedby a first mortgage constituted on 2 parcels of land "with all its
buildings, improvements, sugar-canemill, steel railway, telephone line, apparatus, Article 334, par. 5, CC
utensils and whatever forms part or is a necessarycomplement of said sugar-cane Gives the character of real property to machinery, liquidcontainers, instruments or implements
mill, steel railway, telephone line, now existing or that may in thefuture exist in intended by the owner of any building or land for use inconnection with any industry or trade being
carried on therein and which are expressly adapted tomeet the requirements of such trade or industry.
said lots.

On 5 October 1926, the Mabalacat Sugar Company decided to increase the capacity
of its sugar central by buying additional machinery and equipment, so that instead
of milling 150 tons daily, it could produce 250 tons. Green, the president of the
company, proposed to Berkenkotter, to advance the necessary amount for the
purchase of said machinery and equipment, promising to reimburse him as soon
as he could obtainan additional loan from the mortgagees, Cu Unjieng e Hijos, and
that in case Green should fail to obtain an additional loan from Cu Unjieng e Hijos,
said machinery and equipment would become security therefore, said Green
binding himself not to mortgage nor encumber them to anybody until
Berkenkotter be fully reimbursed for the corporation's indebtedness to him.

Having agreed to said proposition, Berkenkotter, on 9 October 1926, delivered the

sum of P1,710 to Green, the total amount supplied by him to Green having been
P25,750. Furthermore, Berkenkotter had a credit of P22,000 against said corporation
for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat
Sugar Co., Inc., purchased the additional machinery and equipment.