8/10/2017 G.R. No.

L-40411

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RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L40411August7,1935

DAVAOSAWMILLCO.,INC.,plaintiffappellant,
vs.
APRONIANOG.CASTILLOandDAVAOLIGHT&POWERCO.,INC.,defendantsappellees.

ArsenioSuazoandJoseL.PalmaGilandPabloLorenzoandDelfinJovenforappellant.
J.W.Ferrierforappellees.

MALCOLM,J.:

Theissueinthiscase,asannouncedintheopeningsentenceofthedecisioninthetrialcourtandassetforthby
counsel for the parties on appeal, involves the determination of the nature of the properties described in the
complaint.Thetrialjudgefoundthatthosepropertieswerepersonalinnature,andasaconsequenceabsolvedthe
defendantsfromthecomplaint,withcostsagainsttheplaintiff.

TheDavaoSawMillCo.,Inc.,istheholderofalumberconcessionfromtheGovernmentofthePhilippineIslands.It
hasoperatedasawmillinthesitioofMaa,barrioofTigatu,municipalityofDavao,ProvinceofDavao.However,the
land upon which the business was conducted belonged to another person. On the land the sawmill company
erectedabuildingwhichhousedthemachineryusedbyit.Someoftheimplementsthususedwereclearlypersonal
property, the conflict concerning machines which were placed and mounted on foundations of cement. In the
contractofleasebetweenthesawmillcompanyandtheownerofthelandthereappearedthefollowingprovision:

Thatontheexpirationoftheperiodagreedupon,alltheimprovementsandbuildingsintroducedanderected
bythepartyofthesecondpartshallpasstotheexclusiveownershipofthepartyofthefirstpartwithoutany
obligationonitsparttopayanyamountforsaidimprovementsandbuildingsalso,intheeventthepartyof
thesecondpartshouldleaveorabandonthelandleasedbeforethetimehereinstipulated,theimprovements
andbuildingsshalllikewisepasstotheownershipofthepartyofthefirstpartasthoughthetimeagreedupon
hadexpired:Provided,however,Thatthemachineriesandaccessoriesarenotincludedintheimprovements
whichwillpasstothepartyofthefirstpartontheexpirationorabandonmentofthelandleased.

Inanotheraction,whereintheDavaoLight&PowerCo.,Inc.,wastheplaintiffandtheDavao,Saw,MillCo.,Inc.,
was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that
actionawritofexecutionissuedthereon,andthepropertiesnowinquestionwerelevieduponaspersonaltybythe
sheriff.Nothirdpartyclaimwasfiledforsuchpropertiesatthetimeofthesalesthereofasisborneoutbytherecord
madebytheplaintiffherein.Indeedthebidder,whichwastheplaintiffinthataction,andthedefendanthereinhaving
consummated the sale, proceeded to take possession of the machinery and other properties described in the
correspondingcertificatesofsaleexecutedinitsfavorbythesheriffofDavao.

Asconnectingupwiththefacts,itshouldfurtherbeexplainedthattheDavaoSawMillCo.,Inc.,hasonanumberof
occasionstreatedthemachineryaspersonalpropertybyexecutingchattelmortgagesinfavorofthirdpersons.One
ofsuchpersonsistheappelleebyassignmentfromtheoriginalmortgages.

Article334,paragraphs1and5,oftheCivilCode,isinpoint.AccordingtotheCode,realpropertyconsistsof

1.Land,buildings,roadsandconstructionsofallkindsadheringtothesoil

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5.Machinery,liquidcontainers,instrumentsorimplementsintendedbytheownerofanybuildingorlandfor
useinconnectionwithanyindustryortradebeingcarriedonthereinandwhichareexpresslyadaptedtomeet
therequirementsofsuchtradeofindustry.

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Appellantemphasizesthefirstparagraph,andappelleesthelastmentionedparagraph.Weentertainnodoubtthat
thetrialjudgeandappelleesarerightintheirappreciationofthelegaldoctrinesflowingfromthefacts.

Inthefirstplace,itmustagainbepointedoutthattheappellantshouldhaveregistereditsprotestbeforeoratthe
timeofthesaleofthisproperty.Itmustfurtherbepointedoutthatwhilenotconclusive,thecharacterizationofthe
property as chattels by the appellant is indicative of intention and impresses upon the property the character
determinedbytheparties.InthisconnectionthedecisionofthiscourtinthecaseofStandardOilCo.ofNewYork
vs.Jaramillo([1923],44Phil.,630),whetherobiterdictaornot,furnishesthekeytosuchasituation.

Itis,howevernotnecessarytospendoverlymusttimeintheresolutionofthisappealonsideissues.Itismachinery
which is involved moreover, machinery not intended by the owner of any building or land for use in connection
therewith,butintendedbyalesseeforuseinabuildingerectedonthelandbythelattertobereturnedtothelessee
ontheexpirationorabandonmentofthelease.

AsimilarquestionaroseinPuertoRico,andonappealbeingtakentotheUnitedStatesSupremeCourt,itwasheld
thatmachinerywhichismovableinitsnatureonlybecomesimmobilizedwhenplacedinaplantbytheownerofthe
propertyorplant,butnotwhensoplacedbyatenant,ausufructuary,oranypersonhavingonlyatemporaryright,
unlesssuchpersonactedastheagentoftheowner.IntheopinionwrittenbyChiefJusticeWhite,whoseknowledge
oftheCivilLawiswellknown,itwasinpartsaid:

Todeterminethisquestioninvolvesfixingthenatureandcharacterofthepropertyfromthepointofviewof
therightsofValdesanditsnatureandcharacterfromthepointofviewofNevers&Callaghanasajudgment
creditoroftheAltagraciaCompanyandtherightsderivedbythemfromtheexecutionleviedonthemachinery
placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican Code treats as
immovable (real) property, not only land and buildings, but also attributes immovability in some cases to
property of a movable nature, that is, personal property, because of the destination to which it is applied.
"Things,"sayssection334ofthePortoRicanCode,"maybeimmovableeitherbytheirownnatureorbytheir
destinationortheobjecttowhichtheyareapplicable."Numerousillustrationsaregiveninthefifthsubdivision
ofsection335,whichisasfollows:"Machinery,vessels,instrumentsorimplementsintendedbytheownerof
thetenementsfortheindustrialorworksthattheymaycarryoninanybuildingoruponanylandandwhich
tenddirectlytomeettheneedsofthesaidindustryorworks."(SeealsoCodeNap.,articles516,518etseq.
to and inclusive of article 534, recapitulating the things which, though in themselves movable, may be
immobilized.)Sofarasthesubjectmatterwithwhichwearedealingmachineryplacedintheplantitis
plain,bothundertheprovisionsofthePortoRicanLawandoftheCodeNapoleon,thatmachinerywhichis
movableinitsnatureonlybecomesimmobilizedwhenplacedinaplantbytheownerofthepropertyorplant.
Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a
usufructuaryoranypersonhavingonlyatemporaryright.(Demolombe,Tit.9,No.203AubryetRau,Tit.2,
p.12,Section164Laurent,Tit.5,No.447anddecisionsquotedinFuzierHermaned.CodeNapoleonunder
articles522etseq.)Thedistinctionrests,aspointedoutbyDemolombe,uponthefactthatoneonlyhavinga
temporary right to the possession or enjoyment of property is not presumed by the law to have applied
movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to
become the property of another. It follows that abstractly speaking the machinery put by the Altagracia
Company in the plant belonging to Sanchez did not lose its character of movable property and become
immovablebydestination.Butintheconcreteimmobilizationtookplacebecauseoftheexpressprovisionsof
theleaseunderwhichtheAltagraciaheld,sincetheleaseinsubstancerequiredtheputtinginofimproved
machinery,deprivedthetenantofanyrighttochargeagainstthelessorthecostsuchmachinery,anditwas
expresslystipulatedthatthemachinerysoputinshouldbecomeapartoftheplantbelongingtotheowner
withoutcompensationtothelessee.Undersuchconditionsthetenantinputtinginthemachinerywasacting
butastheagentoftheownerincompliancewiththeobligationsrestinguponhim,andtheimmobilizationof
themachinerywhichresultedaroseinlegaleffectfromtheactoftheowneringivingbycontractapermanent
destinationtothemachinery.

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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 the
righttolevyonitundertheexecutionuponthejudgmentintheirfavor,andtheexerciseofthatrightdidnotin
alegalsenseconflictwiththeclaimofValdes,sinceastohimthepropertywasapartoftherealtywhich,as
the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed
separatelyagainst.(Valdesvs.CentralAltagracia[192],225U.S.,58.)

Findingnoreversibleerrorintherecord,thejudgmentappealedfromwillbeaffirmed,thecostsofthisinstanceto
bepaidbytheappellant.

VillaReal,Imperial,Butte,andGoddard,JJ.,concur.

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