Davao Sawmill V. Castillo

Davao Sawmill v. Castillo

Facts: The Davao Saw Mill is the holder of a lumber concession from the Government. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. In the contract of lease stipulated that on the expiration of the period agreed upon, or if the Lessee should leave or abandon the land leased, all the improvements and buildings introduced and erected by the Lessee shall pass to the exclusive ownership of the Lessor without any obligation on its part to pay any amount for said improvements and buildings; which do not include the machineries and accessories in the improvements. In another action, Davao Light & Power Co., Inc., vs. Davao Saw Mill Co., Inc., a judgment was rendered in favor of the Davao Light and a writ of execution issued for the properties now in question to be levied upon as personalty by the sheriff. Davao Light, the winning bidder, proceeded to take, possession of the machinery and other properties described in the certificates of sale executed in its favor by the, sheriff of Davao. As connecting up with the facts, Davao Saw Mill Co. has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is Castillo, an appellee by assignment from the original mortgagees. Issue: Whether or not the machinery real or personal? Held: As a rule, the machinery should be considered as personal, since it wan not placed on the land by the owner of the said land. Immobilization by destination or purpose cannot generally be made by a person, whose possession of the property is only temporary, other wise we will be forced to presume that he intended to give the property permanently away in favor of the owner of the premises. In the case at bar, when Davao Saw placed the machinery in a building erected on land belonging to another, with the understanding that the machinery was not included in the improvements which would pass to the lessor on the expiration or abandonment of the land leased, it in effect shows that the lessee also treated the machinery as personal property by executing chattel mortgages in favor of third persons. The machinery was levied upon by the sheriff as personalty pursuant to a writ of execution obtained without any protest being registered, therefore the machinery must be classified as personal property. Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.