G.R. No.

L -11658 (February 15, 1918)

LEUNG YEE vs. FRANK L. STRONG MACHINERY COMPANY and J.G. WILLIAMSON
Facts:
The Coma!"a #$r"co%a F"%""!a (C#F) bou$ht r"ce-c%ea!"!$ mach"!es &rom 'tro!$
(ach"!eryComa!y ('(C). These mach"!es )ere "!sta%%e* "! o!e o& the C#F+s bu"%*"!$s, )h"ch
)as ma*eout o& stro!$ mater"a%s. # c h a t t e % mo r t $ a $ e )a s e , e c u t e * t o s e c u r e
a y me ! t o & t h e u r c h a s e r " c e . T h e c h a t t e % mort$a$e "!c%u*e* the bu"%*"!$ a!*
the mach"!es- the %a!* o! )h"ch "t stoo* )as !ot "!c%u*e*..he! C#F &a"%e* to ay the"r *ebt, the
roerty )as so%* by the sher"/ a!* the same )as bou$htby '(C. The mor t $a$e )as
re$" st ere* " ! t he chat t e% mor t $a$e re$" st r y a!* t he sa% e o& t he roerty to '(C
)as a!!otate* o! the same re$"stry o! 0ecember 19, 1912. 3! 4a!uary 15, 1912, C#F e,ecute* a
*ee* o& sa%e o& the %a!*, )here the bu"%*"!$ stoo*, to '(C. The sa%e )as "! the &orm o& a ub%"c
"!strume!t, but the same )as !ot re$"stere*. '(C )e!t "!toossess"o! o& the bu"%*"!$ at or about
the same t"me )he! the sa%e too6 %ace.#t or about t he same t " me )he! t he chat t e%
mor t $a$e )as e,ecut e* " ! & a7or o& '(C, C#F e,ecute* a!other mort$a$e to here"!
%a"!t"/ (Leu!$ 8ee) uo! the bu"%*"!$ to secure ayme!to& the ba%a!ce o& "ts "!*ebte*!ess. 9o!
C#F+s &a"%ure to ay, Leu!$ 8ee secure* :u*$me!t &orthe amou!t a!* %e7"e* e,ecut"o! uo!
the bu"%*"!$, bou$ht "t at the sher"/+s sa%e o! or about 0ec 18, 1915 a!* ha* t he
sher " / + s cer t " ; cat e o& sa% e *u% y re$" st ere* " ! t he % a!* re$" st r y o& Ca7"te. #t
t h e t " me o & t h e e ,e c u t " o ! , ' (C , )h o )a s " ! o s s e s s " o ! , ; % e * )" t h
t h e s h e r " / a s )o r ! stateme!t sett"!$ u "ts c%a"m o& t"t%e a!* *ema!*"!$ the re%ease o& the
roerty &rom the %e7y.#ccor*"!$%y, a! act"o! to reco7er ossess"o! o& the bu"%*"!$ )as ;%e* by
Leu!$ 8ee. RTC ru%e* "!&a7or o& '(C o! the $rou!* that the coma!y ha* "ts t"t%e to the bu"%*"!$
re$"stere* r"or to the*ate o& the re$"stry o& Leu!$ 8ee+s cert";cate. Thus, th"s aea%.
<ssue: .ho has a better r"$ht to the roerty=
Ru%"!$: RTC ru%"!$ "! &a7or o& '(C "s a>rme*- $rou!* mo*";e*.
Rat"o 0ec"*e!*": The bu"%*"!$ ma*e out o& stro!$ mater"a%s "s rea% roerty. The mere &act that the
art"es *ea%t )" t h " t as sear at e a!* aar t & rom t he % a!* ( or as er so!a%
roer t y) *oes !ot cha!$e " t s character as rea% roerty. <! th"s case, "t &o%%o)s that
!e"ther the or"$"!a% re$"stry "! the chatte% mort$a$e o& the bu"%*"!$ a!* the mach"!ery "!sta%%e*
there"!, !or the a!!otat"o! "! the re$"stry o& the sa%e o& the mort$a$e* roerty ha* a!y %e$a%
e/ect. ?o)e7er, s"!ce the &acts *"sc%ose that the urchase by Leu!$ 8ee a!* the
"!scr"t"o! o! the sher"/+s cert";cate o& sa%e )ere !ot ma*e "! $oo* &a"th, "t must be he%* that
'(C "s the o)!er o& the roerty ursua!t to the th"r* (2r*) ara$rah o& #rt"c%e 15@2 o& the NCC,
ABshou%* there be !o e!try, the roerty sha%% be%o!$ to the erso! )ho ;rst too6 ossess"o! o& "t
"! $oo* &a"th, a!*"! the abse!ce thereo&, to the erso! )ho rese!ts the o%*est t"t%e, ro7"*e*
there "s $oo* &a"th.C