Serg's Products v.

PCI Leasing, 338 SCRA 499

After agreeing to a contract stipulating that a real or immovable property be considered as personal or
movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper
subject of a writ of replevin obtained by the other contracting party.
FACTS:
PCI Leasing and Finance, Inc. (PCI) filed with the RTC-QC a complaint for [a] sum of money with an
application for a writ of replevin. Respondent judge issued a writ of replevin directing its sheriff to seize
and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses. The sheriff proceeded to petitioners factory, seized one machinery with [the] word
that he [would] return for the other machineries. Petitioners filed a motion for special protective order,
praying for a directive for the sheriff to defer enforcement of the writ of replevin. This motion was
opposed by PCI Leasing, on the ground that the properties [were] still personal and therefore still subject
to seizure and a writ of replevin. Petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the contrary
notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third
parties. They further stated that PCI Leasing [was] estopped from treating these machineries as personal
because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical.
ISSUE:
Whether the said machines are personal, not immovable, property which may be a proper subject of a writ
of replevin.
RULING:
Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ
issued by the RTC, because they were in fact real property. Serious policy considerations, they argue,
militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal
property only.
On the other hand, Article 415 of the Civil Code enumerates immovable or real property.
In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners
in the factory built on their own land. Indisputably, they were essential and principal elements of their
chocolate-making industry. Hence, although each of them was movable or personal property on its own,
all of them have become immobilized by destination because they are essential and principal elements in
the industry. In that sense, petitioners are correct in arguing that the said machines are real, not personal,
property pursuant to Article 415 (5) of the Civil Code.
Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper
subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered as
personal. After agreeing to such stipulation, they are consequently estopped from claiming otherwise.
Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any
material fact found therein.
In the present case, the Lease Agreement clearly provides that the machines in question are to be
considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:
12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building thereon, or attached in any
manner to what is permanent.
Clearly then, petitioners are estopped from denying the characterization of the subject machines as
personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed personal property
pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned. Hence,
while the parties are bound by the Agreement, third persons acting in good faith are not affected by its
stipulation characterizing the subject machinery as personal. In any event, there is no showing that any
specific third party would be adversely affected.

Tumalad v. Vicencio, 41 SCRA 143

FACTS:
Vicencio and Simeon executed a chattel mortgage in favor of plaintiffs Tumalad over their house,
which was being rented by Madrigal and company. This was executed to guarantee a loan,
payable in one year with an interest of 12% per annum.
When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed. The house
was sold at a public auction and the plaintiffs were the highest bidder. Thereafter, the plaintiffs filed an
action for ejectment against the defendants, praying that the latter vacate the house as they were the
proper owners.
Defendants-appellants, questioned the legality of the chattel mortgage. They maintained the nullity of the
chattel mortgage based on two grounds:
(a) that, their signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and
(b) that the subject matter of the mortgage is a house of strong materials, and, being an immovable, it can
only be the subject of a real estate mortgage and not a chattel mortgage.
ISSUE:
Whether or not the property in question can be the subject matter of a chattel mortgage.
RULING:
Yes.
Certain deviations have been allowed from the general doctrine that buildings are immovable
property such as when through stipulation, parties may agree to treat as personal property those by
their nature would be real property. This is partly based on the principle of estoppel wherein the
principle is predicated on statements by the owner declaring his house as chattel, a conduct that may
conceivably estopped him from subsequently claiming otherwise.
In the case at bar, though there be no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property through chattel mortgage could only have
meant that defendant conveys or intends to treat the house as chattel, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a
rented lot to which defendants-appellants merely had a temporary right as lessee, and although this cannot
in itself a lone determine the status of the property, it does so when combined with other factors to sustain
the interpretation that the parties, particularly the mortgagors, intended to treat the house as personality.
Furthermore, unlike the cases of Lopez vs. Orosa and Leung Yee vs. F. L. Strong Machinery, wherein
third persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as
debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of
estoppel therefore applies to the herein defendants-appellants, having treated the subject house as
personality.

Philippine Refining Co. v. Jarque, 61 Phil 229

Facts:
The Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on the motor vessels
Pandan and Zaragoza denominated as “chattel mortgage”. A fourth mortgage was executed by Francisco
Jarque and Ramon Aboitiz on the motorship Zaragoza.
Thereafter, a petition was filed with the CFI of Cebu praying that Francisco Jarque be declared an
insolvent debtor, said petition was granted and an assignment of all the properties of the insolvent was
executed in favor of Jose Corominas.
Neither of the first two mortgages had appended an affidavit of good faith. The third mortgage contained
such an affidavit, but this mortgage was not registered until within thirty days prior to the
commencement of insolvency proceedings against Jarque while the fourth mortgage was entered in the
chattel mortgage registry within the thirty-day period before the institution of insolvency proceedings.
Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages and sustained the special
defenses of fatal defectiveness of the mortgages.
ISSUE:
Whether or not vessels are personal properties
RULING:
Yes, vessels are considered personal property under the civil law. Similarly under the common law,
vessels are personal property although occasionally referred to as a peculiar kind of personal property.
Since the term "personal property" includes vessels, they are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law. Indeed, it has heretofore been accepted without discussion that a
mortgage on a vessel is in nature a chattel mortgage. The only difference between a chattel mortgage of a
vessel and a chattel mortgage of other personal property is that it is not now necessary for a chattel
mortgage of a vessel to be noted in the registry of the register of deeds, but it is essential that a record of
documents affecting the title to a vessel be entered in the record of the Collector of Customs at the port of
entry. Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites and
validity.