G.R. No. L-40411 Case Digest

G.R. No. L-40411, August 7, 1935

Davao Saw Mill Co., Inc.

vs Aproniano Castillo and Davao Light and Power Co., Inc.

Ponente: Malcolm

Facts:

Davao Saw Mill is the holder of a lumber concession, it has operated a sawmill in Davao. In the contract of lease between the sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased.

In another action, a judgment was rendered in favor Davao Light. A writ of execution issued thereon that the properties now in question were levied upon as personalty by the sheriff. The bidder, Davao Light proceeded to take possession of the machinery and other properties described in the certificate of sale.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of —

1. Land, buildings, roads and constructions of all kinds adhering to the soil;

x x x x x x x x x

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of industry.

The trial judge found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the plaintiff.

Held:

The characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

Judgment appealed from will be affirmed.