LEUNG YEE

vs. FRANK L. STRONG MACHINERY COMPANY & J. G. WILLIAMSON

G.R. No. L-11658
February 15, 1918

FACTS:
Compania Agricola Filipina bought rice-cleaning machines from Strong Machinery Co. and
installed it in one of its buildings
Agricola executed a chattel on the machines and the building where it was installed as a
security for the purchase price
Unable to pay, mortgage was foreclosed and building was purchased by Strong Machinery
Co. the sale was annotated in the Chattel Mortgage Registry
Later, Agricola sold the lot where the building was constructed to Strong Machinery Co.
sale was not registered in Registry of Property but the latter took possession
Previously, Leung Yee (a creditor of Agricola) bought the building at a sheriffs sale, and this
was recorded in the Registry
Before purchasing the property, Yee knew about the prior sale to Strong Machinery Co. he
now sues to recover the property from Strong Machinery Co.

LAW/S:
ACT NO. 1508 (Chattel Mortgage Law)
Chattel mortgage is a conditional sale of personal property as security
Should be recorded with the Chattel Mortgage Registry to be legally binding
ART. 415, NEW CIVIL CODE
PAR.1: Land, buildings, roads, and constructions of all kinds adhered to the soil
Buildings and land are immovable property
ART. 1473, NEW CIVIL CODE
Rules on determining ownership if property is sold to different vendees:
Personal Property - grant ownership to person who 1st possessed it in good faith
Real Property grant ownership to person who 1st recorded it in the Registry
No Entry grant to person who 1st possessed in good faith
No Proof of Possession grant to person who presents oldest title

ISSUE/S:
Whether or not the property's nature changed by its registration in the Chattel Mortgage
Registry
Whether or not Leung Yee has a better right to the property since the sale to him was duly
registered with the Land Registry

RULING:
NO, THE NATURE OF THE PROPERTY HAS NOT CHANGED
By inclusion, buildings and land are REAL PROPERTY
The mere fact that the parties decided to deal with the building as personal property
does not change its character as real property

STRONG MACHINERY CO. HAS BETTER RIGHT

Leung Yee was not a buyer in good faith (had previous knowledge of an earlier sale)
Though the sale to Strong Machinery Co. was not recorded in the proper registry, it
was the first the possess the property in good faith
NOTE:
Building is REAL PROPERTY, its sale as annotated in the Chattel Mortgage Registry cannot be
given the legal effect of registration in the Registry of Real Property
Neither the original registry in the chattel mortgage registry, nor the annotation in said
registry of the sale of the mortgaged property had any effect on the building