Davao Sawmill Co. vs Castillo

Davao Sawmill Co. vs Castillo
61 PHIL 709
GR No. L-40411
August 7, 1935

A tenant placed machines for use in a sawmill on the landlord's land.

FACTS
Davao Sawmill Co., operated a sawmill. The land upon which the business was conducted was leased from another person. On the land, Davao Sawmill erected a building which housed the machinery it used. Some of the machines were mounted and placed on foundations of cement. In the contract of lease, Davo Sawmill agreed to turn over free of charge all improvements and buildings erected by it on the premises with the exception of machineries, which shall remain with the Davao Sawmill. In an action brought by the Davao Light and Power Co., judgment was rendered against Davao Sawmill. A writ of execution was issued and the machineries placed on the sawmill were levied upon as personalty by the sheriff. Davao Light and Power Co., proceeded to purchase the machinery and other properties auctioned by the sheriff.

ISSUE
Are the machineries real or personal property?

HELD
Art.415 of the New Civil Code provides that Real Property consists of:

    (1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

    xxx

    (5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

Appellant should have registered its protest before or at the time of the sale of the property. While not conclusive, the appellant's characterization of the property as chattels is indicative of intention and impresses upon the property the character determined by the parties.

Machinery is naturally movable. However, machinery may be immobilized by destination or purpose under the following conditions:

General Rule: The machinery only becomes immobilized if placed in a plant by the owner of the property or plant.

    Immobilization cannot be made by a tenant, a usufructuary, or any person having only a temporary right.

Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of the premises; or he intended to permanently give away the property in favor of the owner.

As a rule, therefore, the machinery should be considered as Personal Property, since it was not placed on the land by the owner of the said land.

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