People’s Bank v.

Dahican Lumber

Facts:

ATLANTIC sold and assigned all its right in the DALCO for the total sum of P500,000.00 of which only
the amount of $50,000.00 was paid. DALCO obtained various loans from the People's Bank & Trust
Company amounting, as of July 13, 1950, to P200,000.00. DALCO also obtained, through the Bank, a
loan of $250,000.00 from the Export-Import Bank of Washington D.C., evidenced by five promissory
notes of $50,000.00 each, maturing on different dates, payable to the BANK or its order.

As security for the payment of the abovementioned loans, DALCO executed in favor of the BANK a
deed of mortgage covering live parcels of land situated in the province of Camarines Norte, together
with all the buildings and other improvements existing thereon and all the personal properties of the
mortgagor located in its place of business in the municipalities of Mambulao and Capalonga,
Camarines Norte. DALCO executed a second mortgage on the same properties in favor of ATLANTIC
to secure payment of the unpaid balance of the sale price of the lumber concession amounting to the
sum of $450,000.00. Both deeds contained a provision which stated that it included essential after-
acquired properties such as machineries, fixtures, tools and equiptments. Both mortgages were
registered in the Office of the Register of Deeds of Camarines Norte.

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the BANK paid
the same to the Export-Import Bank of Washington D.C. and the latter assigned to the former its credit
and the first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1,
1953 to pay the overdue promissory note. DALCO purchased various machineries, equipment, spare
parts and supplies in addition to, or in replacement of some of those already owned and used by it on
the date aforesaid. Pursuant to the provision of the mortgage deeds quoted heretofore regarding
"after acquired properties", the BANK requested DALCO to submit complete lists of said properties
but the latter failed to do so. On December 16, 1952, the Board of Directors of DALCO in a special
meeting called for the purpose, passed a resolution agreeing to rescind the alleged sales of
equipment, spare parts and supplies by CONNELL and DAMCO to it.

On January 23, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said
agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12,
1953, ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance of
Camarines Norte against DALCO and DAMCO.

Issue:

Should the deed also be registered in the Chattel Mortgage Registry in so far as it covered the after-
acquired machinery, fixtures, tools and equipments?

Held:

No more, since under Articles 415 the new Civil Code, the properties in question being machinery,
receptacles, instruments or replacements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and shall tend directly to meet the
needs of the said industry or works, are classified as immovable properties, therefore not covered by
the Chattel Mortgage Law.