Berkenkotter v.

Cu Unjieng (July 31, 1935)

G.R. No. L-41643|Villareal, J.

F: The Mabalacat Sugar Co., owner of the sugar central in Mabalacat, Pampanga, obtained a
loan from Cu Unjieng e Hijos, secured by a 1 st mortgage comstituted on 2 parcels of land “w/
all its buildings, improvements, sugarcane mill, etc, and whatever forms part or is necessary
complement of said sugarcane mill, now existing or that may in the future exist in said lots.”
After the mortgage has been constituted, Mabalacat Sugar decided to increase the capacity of
its sugar central by buying additional machinery and equipment. In order to carry out this
plan, B.A. Green, president of Mabalacat sugar, proposed to B.H. Berkenkotter to advance
the necessary amount for the purchase of machinery and equipment, promising to reimburse
him as soon as he could obtain an additional loan from Cu Unjieng e Hijos. Berkenkotter
agreed, and supplied a total amount of P25k+. Berkenkotter also had a credit of P22k against
Mabalacat Sugar for unpaid salary. Mabalacat was then able to purchase the additional
machinery and equipment.

B.A. Green applied to Cu Unjieng e Hijos for an additional loan, offering as security the
additional machinery and equipment. B.A. Green failed to obtain said loan. Berkenkotter
contends that the installation of the machinery and equipment claimed by him in the sugar
central was not permanent in character, as B.A. Green wrote in a letter that should B.A.
Green fail to obtain an additional loan from Cu Unjieng, said machinery and equipment
would become security for the money advanced. B.A. Green bound himself not to mortgage
them to anybody until Berkenkotter was fully reimbursed for the debt.

I: WON the machinery and equipment were permanent in character.

H: Yes. The installation of the machinery and equipment in question in lieu of the other of
less capacity converted them into real property by reason of their purpose. As essential and
principal elements of a sugar central, w/o them, the sugar central would be unable to
function or carry on the industrial purpose for w/c it was established. Inasmuch as the
central is permanent in character, the necessary machinery and equipment installed for
carrying on the sugar industry for which it has been established must necessarily be
permanent. The fact that B.A. Green bound himself to Berkenkotter to hold said machinery
and equipment as security for the payment of Berkenkotter’s credit and to refrain from
mortgaging until he has been fully reimbursed, is not incompatible with the permanent
character of the incorporation of said machinery and equipment w/ the sugar central.

OLD CIVIL CODE, ART. 344; CHARACTER OF REAL PROPERTY

Machinery, liquid containers, instruments or implements intended by the owner of any
building or land for use in connection with any industry or trade being carried on therein
and w/c are expressly adapted to meet the requirements of such trade or industry.