Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-40411 August 7, 1935
DAVAO SA M!LL CO., !NC., plaintiff-appellant,
vs.
APRON!ANO G. CAST!LLO "#$ DAVAO L!G%T & POER CO., !NC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set
forth b counsel for the parties on appeal, involves the deter!ination of the nature of the properties
described in the co!plaint. The trial "udge found that those properties #ere personal in nature, and as a
conse$uence absolved the defendants fro! the co!plaint, #ith costs against the plaintiff.
The %avao &a# Mill Co., 'nc., is the holder of a lu!ber concession fro! the (overn!ent of the Philippine
'slands. 't has operated a sa#!ill in the sitio of Maa, barrio of Tigatu, !unicipalit of %avao, Province of
%avao. )o#ever, the land upon #hich the business #as conducted belonged to another person. *n the
land the sa#!ill co!pan erected a building #hich housed the !achiner used b it. &o!e of the
i!ple!ents thus used #ere clearl personal propert, the conflict concerning !achines #hich #ere placed
and !ounted on foundations of ce!ent. 'n the contract of lease bet#een the sa#!ill co!pan and the
o#ner of the land there appeared the follo#ing provision+
That on the e,piration of the period agreed upon, all the i!prove!ents and buildings introduced
and erected b the part of the second part shall pass to the e,clusive o#nership of the part of the
first part #ithout an obligation on its part to pa an a!ount for said i!prove!ents and buildings-
also, in the event the part of the second part should leave or abandon the land leased before the
ti!e herein stipulated, the i!prove!ents and buildings shall li.e#ise pass to the o#nership of the
part of the first part as though the ti!e agreed upon had e,pired+ Provided, ho#ever, That the
!achineries and accessories are not included in the i!prove!ents #hich #ill pass to the part of
the first part on the e,piration or abandon!ent of the land leased.
'n another action, #herein the %avao /ight 0 Po#er Co., 'nc., #as the plaintiff and the %avao, &a#, Mill
Co., 'nc., #as the defendant, a "udg!ent #as rendered in favor of the plaintiff in that action against the
defendant in that action- a #rit of e,ecution issued thereon, and the properties no# in $uestion #ere levied
upon as personalt b the sheriff. No third part clai! #as filed for such properties at the ti!e of the sales
thereof as is borne out b the record !ade b the plaintiff herein. 'ndeed the bidder, #hich #as the plaintiff
in that action, and the defendant herein having consu!!ated the sale, proceeded to ta.e possession of
the !achiner and other properties described in the corresponding certificates of sale e,ecuted in its favor
b the sheriff of %avao.
As connecting up #ith the facts, it should further be e,plained that the %avao &a# Mill Co., 'nc., has on a
nu!ber of occasions treated the !achiner as personal propert b e,ecuting chattel !ortgages in favor
of third persons. *ne of such persons is the appellee b assign!ent fro! the original !ortgages.
Article 112, paragraphs 3 and 4, of the Civil Code, is in point. According to the Code, real propert
consists of 5
3. /and, buildings, roads and constructions of all .inds adhering to the soil-
, , , , , , , , ,
4. Machiner, li$uid containers, instru!ents or i!ple!ents intended b the o#ner of an building or
land for use in connection #ith an industr or trade being carried on therein and #hich are
e,pressl adapted to !eet the re$uire!ents of such trade of industr.
Appellant e!phasi6es the first paragraph, and appellees the last !entioned paragraph. 7e entertain no
doubt that the trial "udge and appellees are right in their appreciation of the legal doctrines flo#ing fro! the
facts.
'n the first place, it !ust again be pointed out that the appellant should have registered its protest before
or at the ti!e of the sale of this propert. 't !ust further be pointed out that #hile not conclusive, the
characteri6ation of the propert as chattels b the appellant is indicative of intention and i!presses upon
the propert the character deter!ined b the parties. 'n this connection the decision of this court in the
case of &tandard *il Co. of Ne# 8or.vs. 9ara!illo : ;3<=1>, 22 Phil., ?1@A, #hether obiter dicta or not,
furnishes the .e to such a situation.
't is, ho#ever not necessar to spend overl !ust ti!e in the resolution of this appeal on side issues. 't is
!achiner #hich is involved- !oreover, !achiner not intended b the o#ner of an building or land for
use in connection there#ith, but intended b a lessee for use in a building erected on the land b the latter
to be returned to the lessee on the e,piration or abandon!ent of the lease.
A si!ilar $uestion arose in Puerto Rico, and on appeal being ta.en to the Bnited &tates &upre!e Court, it
#as held that !achiner #hich is !ovable in its nature onl beco!es i!!obili6ed #hen placed in a plant
b the o#ner of the propert or plant, but not #hen so placed b a tenant, a usufructuar, or an person
having onl a te!porar right, unless such person acted as the agent of the o#ner. 'n the opinion #ritten
b Chief 9ustice 7hite, #hose .no#ledge of the Civil /a# is #ell .no#n, it #as in part said+
To deter!ine this $uestion involves fi,ing the nature and character of the propert fro! the point of
vie# of the rights of Caldes and its nature and character fro! the point of vie# of Nevers 0
Callaghan as a "udg!ent creditor of the Altagracia Co!pan and the rights derived b the! fro!
the e,ecution levied on the !achiner placed b the corporation in the plant. Dollo#ing the Code
Napoleon, the Porto Rican Code treats as i!!ovable :realA propert, not onl land and buildings,
but also attributes i!!ovabilit in so!e cases to propert of a !ovable nature, that is, personal
propert, because of the destination to #hich it is applied. EThings,E sas section 112 of the Porto
Rican Code, E!a be i!!ovable either b their o#n nature or b their destination or the ob"ect to
#hich the are applicable.E Nu!erous illustrations are given in the fifth subdivision of section 114,
#hich is as follo#s+ EMachiner, vessels, instru!ents or i!ple!ents intended b the o#ner of the
tene!ents for the industrial or #or.s that the !a carr on in an building or upon an land and
#hich tend directl to !eet the needs of the said industr or #or.s.E :See also Code Nap., articles
43?, 43F et seq. to and inclusive of article 412, recapitulating the things #hich, though in
the!selves !ovable, !a be i!!obili6ed.A &o far as the sub"ect-!atter #ith #hich #e are dealing
5 !achiner placed in the plant 5 it is plain, both under the provisions of the Porto Rican /a# and
of the Code Napoleon, that !achiner #hich is !ovable in its nature onl beco!es i!!obili6ed
#hen placed in a plant b the o#ner of the propert or plant. &uch result #ould not be
acco!plished, therefore, b the placing of !achiner in a plant b a tenant or a usufructuar or an
person having onl a te!porar right. :%e!olo!be, Tit. <, No. =@1- Aubr et Rau, Tit. =, p. 3=,
&ection 3?2- /aurent, Tit. 4, No. 22G- and decisions $uoted in Du6ier-)er!an ed. Code Napoleon
under articles 4== et seq.A The distinction rests, as pointed out b %e!olo!be, upon the fact that
one onl having a te!porar right to the possession or en"o!ent of propert is not presu!ed b
the la# to have applied !ovable propert belonging to hi! so as to deprive hi! of it b causing it
b an act of i!!obili6ation to beco!e the propert of another. 't follo#s that abstractl spea.ing
the !achiner put b the Altagracia Co!pan in the plant belonging to &anche6 did not lose its
character of !ovable propert and beco!e i!!ovable b destination. But in the concrete
i!!obili6ation too. place because of the e,press provisions of the lease under #hich the
Altagracia held, since the lease in substance re$uired the putting in of i!proved !achiner,
deprived the tenant of an right to charge against the lessor the cost such !achiner, and it #as
e,pressl stipulated that the !achiner so put in should beco!e a part of the plant belonging to the
o#ner #ithout co!pensation to the lessee. Bnder such conditions the tenant in putting in the
!achiner #as acting but as the agent of the o#ner in co!pliance #ith the obligations resting upon
hi!, and the i!!obili6ation of the !achiner #hich resulted arose in legal effect fro! the act of the
o#ner in giving b contract a per!anent destination to the !achiner.
, , , , , , , , ,
The !achiner levied upon b Nevers 0 Callaghan, that is, that #hich #as placed in the plant b
the Altagracia Co!pan, being, as regards Nevers 0 Callaghan, !ovable propert, it follo#s that
the had the right to lev on it under the e,ecution upon the "udg!ent in their favor, and the
e,ercise of that right did not in a legal sense conflict #ith the clai! of Caldes, since as to hi! the
propert #as a part of the realt #hich, as the result of his obligations under the lease, he could
not, for the purpose of collecting his debt, proceed separatel against. :Caldes vs. Central
Altagracia ;3<=>, ==4 B.&., 4F.A
Dinding no reversible error in the record, the "udg!ent appealed fro! #ill be affir!ed, the costs of this
instance to be paid b the appellant.
Villa!eal" #mperial" $utte" and Goddard" JJ." concur.
%"'st"()* D"+"o S",-.// +. C"st.//o 0GR 40411, 7 August 19351
D"+"o S",-.// +. C"st.//o
;(.R. No. 2@233. August G, 3<14.>
En Banc, Malcol! :9A+ 2 concur
Facts: The %avao &a# Mill is the holder of a lu!ber concession fro! the (overn!ent. 't has operated a
sa#!ill in the sitio of Maa, barrio of Tigatu, !unicipalit of %avao, Province of %avao. )o#ever, the land
upon #hich the business #as conducted belonged to another person. *n the land the sa#!ill co!pan
erected a building #hich housed the !achiner used b it. &o!e of the i!ple!ents thus used #ere clearl
personal propert, the conflict concerning !achines #hich #ere placed and !ounted on foundations of
ce!ent. 'n the contract of lease stipulated that on the e,piration of the period agreed upon, or if the
/essee should leave or abandon the land leased, all the i!prove!ents and buildings introduced and
erected b the /essee shall pass to the e,clusive o#nership of the /essor #ithout an obligation on its
part to pa an a!ount for said i!prove!ents and buildings- #hich do not include the !achineries and
accessories in the i!prove!ents.
'n another action :%avao /ight 0 Po#er vs. %avao &a# MillA, a "udg!ent #as rendered in favor of %avao
/ight 0 Po#er- a #rit of e,ecution issued thereon, and the properties in $uestion #ere levied upon as
personalt b the sheriff. No third part clai! #as filed for such properties at the ti!e of the sales thereof
as is borne out b the record !ade b the plaintiff herein. 'ndeed the bidder, #hich #as %avao /ight 0
Po#er, and the defendant herein having consu!!ated the sale, proceeded to ta.e possession of the
!achiner and other properties described in the corresponding certificates of sale e,ecuted in its favor b
the sheriff of %avao.
't !ust be noted that on a nu!ber of occasions, %avao &a#!ill treated the !achiner as personal
propert b e,ecuting chattel !ortgages in favor of third persons. *ne of such persons is the appellee b
assign!ent fro! the original !ortgagees.
#nstance on %o& controvers' arose can(t be found in t%e case facts. #mpliedl'" t%e issue on t%e c%aracter
of t%e properties arose from t%e consummation of a sale follo&in) t%e e*ecution of t%e +ud)ment in t%e
ot%er action" Davao Li)%t , Po&er v. Davao Sa&mill
The trial "udge found that the properties #ere personal in nature, and as a conse$uence absolved the
defendants fro! the co!plaint. The issue #as raised in the &upre!e Court involving the deter!ination of
the nature of said properties.
The &upre!e Court affir!ed the "udg!ent appealed fro!, #ith costs against the appellant.
1. St"#$"2$ O./ 2u/.#g )3' to .ssu3 o# t43 (4"2"(t32 o5 t43 62o632t'
't !ust be pointed out that %avao &a#!ill should have registered its protest before or at the ti!e of the
sale of this propert. 't !ust further be pointed out that #hile not conclusive, the characteri6ation of the
propert as chattels b %avao &a#!ill is indicative of intention and i!presses upon the propert the
character deter!ined b the parties. 'n this connection the decision of the court in the case of &tandard *il
Co. of Ne# 8or. vs. 9ara!illo :;3<=1>, 22 Phil., ?1@A, #hether obiter dicta or not, furnishes the .e to such
a situation.
7. !--o8./.9"t.o# o5 -"(4.#32': ,43# 6/"(3$ .# 6/"#t 8' o,#32
Machiner #hich is !ovable in its nature onl beco!es i!!obili6ed #hen placed in a plant b the o#ner
of the propert or plant, but not #hen so placed b a tenant, a usufructuar, or an person having onl a
te!porar right, unless such person acted as the agent of the o#ner. The distinction rests upon the fact
that one onl having a te!porar right to the possession or en"o!ent of propert is not presu!ed b the
la# to have applied !ovable propert belonging to hi! so as to deprive hi! of it b causing it b an act of
i!!obili6ation to beco!e the propert of another.
3. Co#(23t3 .--o8./.9"t.o# o5 /3ss33;s -"(4.#32' o#/' .5 /3"s3 st.6u/"t3s t2"#s532 o5 o,#32s4.6 o#
.ts t32-.#"t.o#
Concrete i!!obili6ation ta.es place because of the e,press provisions of the lease #hich re$uires the
putting in of i!proved !achiner, deprived the tenant of an right to charge against the lessor the cost of
such !achiner, and it #as e,pressl stipulated that the !achiner so put in should beco!e a part of the
plant belonging to the o#ner #ithout co!pensation to the lessee. Bnder such conditions the tenant in
putting in the !achiner #as acting but as the agent of the o#ner in co!pliance #ith the obligations
resting upon hi!, and the i!!obili6ation of the !achiner #hich resulted arose in legal effect fro! the act
of the o#ner in giving b contract a per!anent destination to the !achiner. :Caldes v. AltagraciaA