MAKATI LEASING AND FINANCIAL CORPORATION v.

WEAREVER TEXTILE MILLS, INC

DOCTRINE: Where a chattel mortgage is constituted on a machinery permanently attached to the ground, the machinery is to be considered as
personal property.
FACTS: Wearever Textile Mills, Inc. discounted and assigned several receivables with Makati Leasing and Financial Corp. under a Receivable
Purchase Agreement so that the latter would lend money to the former. In order to secure the collection of the receivables assigned, Wearever
executed a Chattel Mortgage over certain raw materials inventory as well as a machinery (Artos Aero Dryer Stentering Range). Upon default of
Wearever in paying what is due, Makati Leasing filed a petition for extrajudicial foreclosure of the properties mortgaged to it. The Sheriff assigned to
execute such foreclosure, however, failed to enter the premises of Wearever to effect the seizure of the machinery. Afterwhich, petitioner filed a
complaint for a judicial foreclosure with the RTC of Rizal which was granted even after the motion for reconsideration filed by the private respondent.
Enforcing then the writ of seizure issued by the lower court, the Sheriff removed the main drive motor of the machinery. Upon appeal, CA reversed
the ruling of the RTC and ordered the return of the motor to Wearever since the said machinery cannot be the subject of a replevin and chattel
mortgage for it is a real property pursuant to Art. 415 (3) of the NCC. CA argued that the machinery is attached to the ground by means of bolts and
the only way to remove it from the respondents plant would be to drill out or destroy the concrete floor which is why all that the sheriff could do to
enforce the writ was to take the main drive motor of the machinery. Hence, this petition for certiorari.
ISSUE: Whether the machinery is a personal property.
HELD: YES. By destination, it is a real property but by virtue of the intention of the parties stipulated in their chattel mortgage contract, the machinery
was intended to be a personal property. The Court made reference to its ruling in Tumalad v. Vicencio and Standard Oil Co. of New York v. Jaramillo
where it held that a real property may be considered as a personal property for purposes of executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third party will be prejudiced thereby, and once the parties so agreed, they are already stopped from
claiming otherwise.