CREDIT TRANSACTIONS CASE DIGEST/ MAKATI LEASING VS. WEAREVER TEXTILE, 122 SCRA 296 (1983)

MAKATI LEASING VS. WEAREVER TEXTILE,

122 SCRA 296 (1983)

TOPIC/DOCTRINE

Where a chattel mortgage is constituted on machinery permanently attached to the ground the machinery is to be considered as personal property and the chattel mortgage constituted thereon is not null and void, regardless of who owns the land.

FACTS

To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and assigned several receivables under a Receivable Purchase Agreement with Makati Leasing. To secure the collection of receivables, it executed a chattel mortgage over several raw materials and a machinery – Artos Aero Dryer Stentering Range (Dryer).


Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed. The sheriff, after the restraining order was lifted, was able to enter the premises of Wearever and removed the drive motor of the Dryer. The CA reversed the order of the CFI, ordering the return of the drive motor since it cannot be the subject of a replevin suit being an immovable bolted to the ground.

ISSUE

Whether the seized drive motor cannot be a subject of chattel mortgage, because it is a real property pursuant to Article 4151 of the new Civil Code.

RULING

No.

The court held that where a chattel mortgage is constituted on machinery permanently attached to the ground the machinery is to be considered as personal property and the chattel mortgage constituted thereon is not null and void, regardless of who owns the land. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as 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, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.

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