Leung Yee vs Strong Machinery Co.

Multiple Sale to Different Vendees Real vs Personal Property In 1913, Compania Agricola Filipina was indebted to two personalities: Leung Yee and Strong Machinery Co. CAF purchased some rice cleaning machines from SMCo. CAF installed the machines in a building. As security for the purchase price, CAF executed a chattel mortgage on the rice cleaning machines including the building where the machines were installed. CAF failed to pay SMCo, hence the latter foreclosed the mortgage the same was registered in the chattel mortgage registry. CAF also sold the land (where the building was standing) to SMCo. SMCo took possession of the building and the land. On the other hand, Yee, another creditor of CAF who engaged in the construction of the building, being the highest bidder in an auction conducted by the sheriff, purchased the same building where the machines were installed. Apparently CAF was also executed a chattel mortgage in favor Yee. Yee registered the sale in the registry of land. Yee was however aware that prior to his buying, the property has been sold in favor of SMCo evidence is the chattel mortgage already registered by SMCo. ISSUE: Who is the owner of the building? HELD: The SC ruled that SMCo has a better right to the contested property. Yee cannot be regarded as a buyer in good faith as he was already aware of the fact that there was a prior sale of the same property to SMCo. The SC also noted that the Chattel Mortgage Law expressly contemplates provisions for chattel mortgages which only deal with personal properties. The fact that the parties dealt the building as if its a personal property does not change the nature of the thing. It is still a real property. Its inscription in the Chattel Mortgage registry does not modify its inscription the registry of real property. ==== Davao Sawmill v. Castillo DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R. No. L-40411 August 7, 1935 Facts: Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. 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 lessor without any obligation on its part to pay any amount for said improvements and buildings; which do not include the machineries and accessories in the improvements. In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein

It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such is the appellee by assignment from the original mortgages. The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal. Issue: whether or not the machineries and equipments were personal in nature. Ruling/ Rationale: Yes. The Supreme Court affirmed the decision of the lower court. 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. ====