G.R. No. L-4373
SAMUEL BISCHOFF, plaintiff-appellant, vs. JUAN D. POMAR and THE COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, defendants-appellees.
February 2, 1909 (Decision), February 6, 1909 (Basis of Decision)

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FACTS:

Samuel Bischoff, the plaintiff, filed a complaint claiming ownership of a steam sugar mill with a portable 8-horsepower boiler, a complete tramway, and fifteen small cars located at Hacienda San Jose. He alleged that the defendant Compañia General de Tabacos (CGT) obtained the appointment of Juan Pomar as receiver for the properties of Romana Ganzon, and Pomar unlawfully took possession of Bischoff’s described property. Bischoff demanded the return of the property and P30 daily damages.

The Compañia General de Tabacos, in defense, asserted that Romana Ganzon had mortgaged the Hacienda San Jose to Lazaro Mota in July 1900. This mortgage was subsequently increased and transferred to CGT, eventually securing a total debt of P53,042.53. The agreement for one of the increases stipulated that if Ganzon failed to pay, the hacienda, “together with its buildings, machinery and agricultural implements,” would be auctioned. CGT contended that the disputed steam sugar mill, boiler, tramway, and cars were fixtures and necessary for the hacienda’s operation, forming an integral part of it when the mortgages were executed. The Compañia also claimed that Bischoff knew of these mortgages prior to his alleged purchase of the items. Crucially, the machinery and tramway were exclusively owned by Romana Ganzon and were already mounted and in use on the hacienda when the initial mortgage was created. Bischoff’s acquisition of the property, under a pacto de retro sale, occurred on November 8, 1904, after the hacienda and its integral machinery had already been mortgaged.

Juan Pomar, the receiver, merely stated he was acting under court order.

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ISSUE:

Whether the steam sugar mill, boiler, tramway, and cars, although not explicitly mentioned, were included in the mortgage of Hacienda San Jose, and whether a subsequent sale of these items to a third party (Samuel Bischoff) released them from the mortgage encumbrance.

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RULING:

The Supreme Court affirmed the judgment of the lower court, holding that the steam sugar mill, boiler, tramway, and cars are considered included in the mortgage executed by Romana Ganzon and subsequently transferred to the Compañia General de Tabacos. The defendants were absolved, and Samuel Bischoff’s right to recover the sum paid for the property from Romana Ganzon was reserved.

The Court reasoned that under Article 110 of the Mortgage Law and Article 1877 of the Civil Code, a mortgage extends to natural accessions, improvements, and other items. Specifically, Article 111 of the Mortgage Law provides that “chattels permanently located in a building, either useful or ornamental, or for the service of some industry even though they were placed there after the creation of the mortgage,” are considered mortgaged with the estate, provided they belong to the owner of said estate.

In this case, the machinery and tramway were already mounted and in use on the Hacienda San Jose and exclusively owned by Romana Ganzon when the mortgage was created. Bischoff acquired them via pacto de retro sale on November 8, 1904, long after the property was mortgaged. While Ganzon had the right to dispose of her property, the alienation did not release them from the encumbrance. The purchaser (Bischoff) was necessarily bound to acknowledge and respect the mortgage that burdened the acquired property. Since the property was already subject to the mortgage when Bischoff purchased it, the placing of the hacienda and its contents under receivership by the mortgagee (CGT) caused no damage to Bischoff. He acquired no right to indemnity for losses and damages because he purchased goods that were already liable to the credit of the company.