Davao Sawmill v.
Castillo usufructuary, or any person having only a temporary right,
DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO
LIGHT & POWER CO., INC. G.R. No. L-40411 August 7, 1935
Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber
concession from the Government of the Philippine Islands.
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 between the sawmill company and the
owner of the land there appeared the following provision:
That on the expiration of the period agreed upon, all the
improvements and buildings introduced and erected by the
party of the second part 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 wherein the Davao Light & Power Co.,
Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was
the defendant, a judgment was rendered in favor of the
plaintiff in that action against the defendant; a writ of
execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No
third party claim was filed for such properties at the time of
the sales thereof as is borne out by the record made by the
plaintiff herein
It must be noted also that on number of occasion, Davao
Sawmill treated the machinery as personal property by
executing chattel mortgages in favor of third persons. One
of such is the appellee by assignment from the original
mortgages.
The lower court rendered decision in favor of the
defendants herein. Hence, this instant appeal.
Issue:
whether or not the machineries and equipments were
personal in nature.
Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower
court.
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
unless such person acted as the agent of the owner.
DAVAO SAW MILL CO. VS. CASTILLO
61 SCRA 709
FACTS:
Petitioner is the holder of a lumber concession. It operated
a sawmill on a land, which it doesn’t own. Part of the lease
agreement was a stipulation in which after the lease
agreement, all buildings and improvements would pass to
the ownership of the lessor, which would not include
machineries
and accessories. In connection to this, petitioner had
in its sawmill machineries and other equipment wherein
some were bolted in foundations of cement.
HELD:
The machinery must be classified as personal property.
The lessee placed the machinery in the 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 of the
lease agreement. The lessee also treated the machine
ry as personal
property in executing chattel mortgages in favor of thi
rd persons. The machinery was levied upon by the sheriff
as personalty pursuant to a writ of execution obtained
without any protest being registered.
Furthermore, machinery only becomes immobilized when
placed in a plant by the owner of the property or plant, but
not when so placed by a tenant,
usufructuary, or any person having temporary right, un
less such person acted as the agent of the owner.
DAVAO SAW MILL vs. APRONIANO G. CASTILLO and
DAVAO LIGHT & POWER CO. INC.. G.R. No. L-40411.
August 7, 1935.
Facts:
Davao Sawmill Co. Inc.'s machineries were built in a land
owned by a lessor. Some machinery was mounted on the
foundations of cement. In their contract of lease, it was
stated that after the expiration of the contract, all the
improvements and building introduced shall pass to the
ownership to the lessor.
On a separate case, Sawmill apparently executed the
machinery in a chattel mortgage in favor of Davao Light. A
writ of execution was issued against Sawmill to take the
possession of the machinery and other properties by Light.

It was noted the Sawmill treated the machinery as personal

property by executing chattel mortgages on it.

ISSUE: Whether the machinery was movables or not.

RULING:

The SC ruled that the machinery were movables. It was

Davao Sawmill's intention of treating it as personal property
as they executed it in chattel mortgages. Sawmill should
have registered its protest before or at the time of the sale
of property. Also, the machinery was not connected to the
industry the land owner intended. In fact, the land was later
to be returned to the lessor.

The SC affirmed the lower court's decision.