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Makati Leasing vs. Wearever Textile

Makati Leasing and Financial Corporation vs. Wearever Textile Mills, Inc.  

G.R. No. L-58469. May 16, 1983. 

 De Castro, J. 

Doctrine: Where a chattel mortgage is constituted on a machinery permanently attached to the ground, the machinery is to be

considered as personal property.

Facts: Wearever Textile Mills, Inc. discounted and assigned several receivables with Makati Leasing and Financial Corp. under

a Receivable Purchase Agreement so that the latter would lend money to the former. In order to secure the collection of the

receivables assigned, Wearever executed a Chattel Mortgage over certain raw materials inventory as well as a machinery (Artos

Aero Dryer Stentering Range). Upon default of Wearever in paying what is due, Makati Leasing filed a petition for extrajudicia

foreclosure of the properties mortgaged to it. The Sheriff assigned to execute such foreclosure, however, failed to enter the

 premises of Wearever to effect the seizure of the machinery. Afterwhich, petitioner filed a complaint for a judicial foreclosure

with the RTC of Rizal which was granted even after the motion for reconsideration filed by the private respondent. Enforcing

then the writ of seizure issued by the lower court, the Sheriff removed the main drive motor of the machinery. Upon appeal, CA

reversed the ruling of the RTC and ordered the return of the motor to Wearever since the said machinery cannot be the subject

of a replevin and chattel mortgage for it is a real property pursuant to Art. 415 (3) of the NCC. CA argued that the machinery is

attached to the ground by means of bolts and the only way to remove it from the respondent’s plant would be to drill out or 

destroy the concrete floor  – which is why all that the sheriff could do to enforce the writ was to take the main drive motor of the

machinery. Hence, this petition for certiorari.

Issue: Whether the machinery is a personal property.

Held: Yes. By destination, it is a real property but by virtue of the intention of the parties stipulated in their chattel mortgage

contract, the machinery was intended to be a personal property. The Court made reference to its ruling inTumalad v.

Vicencio and Standard Oil Co. of New York v. Jaramillo where it held that a real property may be considered as a personal

 property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent

third party will be prejudiced thereby, and once the parties so agreed, they are already stopped from claiming otherwise. Private

respondent contended that its characterization of the subject machinery as chattel in their agreement should not be appreciated

against it because it had never represented nor agreed in such as it was merely required and dictated on by the petitioner to sign

a chattel mortgage in blank form. The Court was not persuaded by its contention as the said issue was not duly raised in the

lower and appellate courts nor will the said signing in blank by the respondent make the contract void but merely voidable by a

 proper action in court. Furthermore as it was undeniable that it benefited from the chattel mortgage, it cannot be allowed to

impugn its efficacy for equity reasons.

Caveat: Anyone who claims this digest as his own without proper authority shall be held liable under the law of Karma.