G.R. No. 40411 ; August 7, 1935
DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.

FACTS

Davao Saw Mill Co., Inc. (appellant) operated a sawmill on leased land. It erected a building and installed machinery, some mounted on cement foundations. The lease contract stipulated that upon expiration or abandonment, improvements and buildings would pass to the landowner, but machineries and accessories were expressly excluded. In a prior case, Davao Light & Power Co., Inc. (appellee) obtained a judgment against Davao Saw Mill, and the sheriff levied upon and sold the machinery as personal property. Davao Saw Mill did not file a third-party claim at the sale. Additionally, Davao Saw Mill had previously treated the machinery as personal property by executing chattel mortgages on it.

ISSUE

Whether the machinery installed by the lessee (Davao Saw Mill) on the leased land is immovable property (real property) or movable property (personal property).

RULING

The machinery is personal property. Under Article 334 of the Civil Code, machinery may be considered immovable by destination only if placed by the owner of the land or building for use in its industry or trade. Here, the machinery was installed by a lessee, not the landowner. The lease contract explicitly excluded machinery from passing to the landowner, indicating the parties’ intent to treat it as personal property. Moreover, Davao Saw Mill’s prior acts, such as executing chattel mortgages, consistently characterized the machinery as chattels. The failure to file a third-party claim during the execution sale further weakened its position. The Court affirmed the trial court’s judgment, holding the levy and sale as valid.

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