DAVAO SAWMILL vs.

CASTILLO improvements which will pass to the party of the first

The issue in this case, as announced in the opening sentence In another action, wherein the Davao Light & Power Co., Inc.,
of the decision in the trial court and as set forth by counsel was the plaintiff and the Davao, Saw, Mill Co., Inc., was the
for the parties on appeal, involves the determination of the defendant, a judgment was rendered in favor of the plaintiff in
nature of the properties described in the complaint. The trial that action against the defendant in that action; a writ of
judge found that those properties were personal in nature, execution issued thereon, and the properties now in question
and as a consequence absolved the defendants from the were levied upon as personalty by the sheriff. No third party
complaint, with costs against the plaintiff. claim was filed for such properties at the time of the sales
thereof as is borne out by the record made by the plaintiff
The Davao Saw Mill Co., Inc., is the holder of a lumber herein. Indeed the bidder, which was the plaintiff in that
concession from the Government of the Philippine Islands. It action, and the defendant herein having consummated the
has operated a sawmill in the sitio of Maa, barrio of Tigatu, sale, proceeded to take possession of the machinery and other
municipality of Davao, Province of Davao. However, the land properties described in the corresponding certificates of sale
upon which the business was conducted belonged to another executed in its favor by the sheriff of Davao.
person. On the land the sawmill company erected a building
which housed the machinery used by it. Some of the As connecting up with the facts, it should further be
implements thus used were clearly personal property, the explained that the Davao Saw Mill Co., Inc., has on a number
conflict concerning machines which were placed and mounted of occasions treated the machinery as personal property by
on foundations of cement. In the contract of lease between the executing chattel mortgages in favor of third persons. One of
sawmill company and the owner of the land there appeared such persons is the appellee by assignment from the original
the following provision: mortgages.

That on the expiration of the period agreed upon, all the Article 334, paragraphs 1 and 5, of the Civil Code, is in point.
improvements and buildings introduced and erected by According to the Code, real property consists of
the party of the second part shall pass to the exclusive
ownership of the party of the first part without any 1. Land, buildings, roads and constructions of all kinds
obligation on its part to pay any amount for said adhering to the soil;
improvements and buildings; also, in the event the
party of the second part should leave or abandon the xxx xxx xxx
land leased before the time herein stipulated, the
improvements and buildings shall likewise pass to the 5. Machinery, liquid containers, instruments or
ownership of the party of the first part as though the implements intended by the owner of any building or
time agreed upon had expired: Provided, however, That land for use in connection with any industry or trade
the machineries and accessories are not included in the being carried on therein and which are expressly
 adapted to meet the requirements of such trade of To determine this question involves fixing the nature
industry. and character of the property from the point of view of
the rights of Valdes and its nature and character from
Appellant emphasizes the first paragraph, and appellees the the point of view of Nevers & Callaghan as a judgment
last mentioned paragraph. We entertain no doubt that the creditor of the Altagracia Company and the rights
trial judge and appellees are right in their appreciation of the derived by them from the execution levied on the
legal doctrines flowing from the facts. machinery placed by the corporation in the plant.
Following the Code Napoleon, the Porto Rican Code
In the first place, it must again be pointed out that the treats as immovable (real) property, not only land and
appellant should have registered its protest before or at the buildings, but also attributes immovability in some
time of the sale of this property. It must further be pointed cases to property of a movable nature, that is, personal
out that while not conclusive, the characterization of the property, because of the destination to which it is
property as chattels by the appellant is indicative of intention applied. "Things," says section 334 of the Porto Rican
and impresses upon the property the character determined by Code, "may be immovable either by their own nature or
the parties. In this connection the decision of this court in the by their destination or the object to which they are
case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 applicable." Numerous illustrations are given in the fifth
Phil., 630), whether obiter dicta or not, furnishes the key to subdivision of section 335, which is as follows:
such a situation. "Machinery, vessels, instruments or implements
intended by the owner of the tenements for the
It is, however not necessary to spend overly must time in the industrial or works that they may carry on in any
resolution of this appeal on side issues. It is machinery which building or upon any land and which tend directly to
is involved; moreover, machinery not intended by the owner of meet the needs of the said industry or works." (See
any building or land for use in connection therewith, but also Code Nap., articles 516, 518 et seq. to and
intended by a lessee for use in a building erected on the land inclusive of article 534, recapitulating the things which,
by the latter to be returned to the lessee on the expiration or though in themselves movable, may be immobilized.) So
abandonment of the lease. far as the subject-matter with which we are dealing
machinery placed in the plant it is plain, both under
A similar question arose in Puerto Rico, and on appeal being the provisions of the Porto Rican Law and of the Code
taken to the United States Supreme Court, it was held that Napoleon, that machinery which is movable in its
machinery which is movable in its nature only becomes nature only becomes immobilized when placed in a
immobilized when placed in a plant by the owner of the plant by the owner of the property or plant. Such result
property or plant, but not when so placed by a tenant, a would not be accomplished, therefore, by the placing of
usufructuary, or any person having only a temporary right, machinery in a plant by a tenant or a usufructuary or
unless such person acted as the agent of the owner. In the any person having only a temporary right. (Demolombe,
opinion written by Chief Justice White, whose knowledge of Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164;
the Civil Law is well known, it was in part said: Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-
Herman ed. Code Napoleon under articles 522 et seq.)
The distinction rests, as pointed out by Demolombe, for the purpose of collecting his debt, proceed
upon the fact that one only having a temporary right to separately against. (Valdes vs. Central Altagracia [192],
the possession or enjoyment of property is not 225 U.S., 58.)
presumed by the law to have applied movable property
belonging to him so as to deprive him of it by causing it Finding no reversible error in the record, the judgment
by an act of immobilization to become the property of appealed from will be affirmed, the costs of this instance to be
another. It follows that abstractly speaking the paid by the appellant.
machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
movable property and become immovable by
destination. But in the concrete immobilization took
place because of the express provisions of the lease
under which the Altagracia held, since the lease in
substance required the putting in of improved
machinery, deprived the tenant of any right to charge
against the lessor the cost such machinery, and it was
expressly stipulated that the machinery so put in
should become a part of the plant belonging to the
owner without compensation to the lessee. Under such
conditions the tenant in putting in the machinery was
acting but as the agent of the owner in compliance with
the obligations resting upon him, and the
immobilization of the machinery which resulted arose in
legal effect from the act of the owner in giving by
contract a permanent destination to the machinery.

xxx xxx xxx

The machinery levied upon by Nevers & Callaghan, that