GR L 58469; (May, 1983) (Digest)
G.R. No. L-58469. May 16, 1983
MAKATI LEASING AND FINANCE CORPORATION, petitioner, vs. WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
FACTS
Makati Leasing extended financial accommodations to Wearever Textile Mills. To secure the assigned receivables, Wearever executed a chattel mortgage covering raw materials and an Artos Aero Dryer Stentering Range machinery. Upon Wearever’s default, Makati Leasing filed for extrajudicial foreclosure. The sheriff failed to seize the machinery, prompting Makati Leasing to file a complaint for judicial foreclosure. The lower court issued a writ of seizure for the machinery, which was enforced by the sheriff removing the machine’s main drive motor.
Wearever filed a petition for certiorari and prohibition with the Court of Appeals, arguing the machinery was real property under Article 415 of the Civil Code, as it was attached to the ground by bolts, and its removal would require destroying the concrete floor. The appellate court annulled the lower court’s orders, directing the motor’s return, ruling the machinery was immovable and thus could not be subject to replevin or a valid chattel mortgage. It rejected Makati Leasing’s estoppel argument.
ISSUE
Whether the machinery, though physically attached to the ground, can be legally treated as personal property for purposes of the chattel mortgage contract between the parties.
RULING
The Supreme Court reversed the Court of Appeals, ruling the machinery could be considered personal property based on the parties’ agreement, applying the principle of estoppel. The Court cited Tumalad v. Vicencio, which held that parties may by agreement treat as personal property that which is ordinarily real property, provided no third-party rights are prejudiced. Here, Wearever, by voluntarily executing a chattel mortgage over the machinery, manifested its intention to treat it as chattel. It is now estopped from asserting a contrary claim to nullify the security and evade its obligation, especially after having benefited from the loan secured by the mortgage.
The Court distinguished the inapplicable case of Machinery and Engineering Supplies, Inc. v. CA, as the nature of the property there was not disputed nor covered by a chattel mortgage. The physical attachment of the machinery does not per se negate its characterization as personal property when the parties’ contract clearly indicates such intent. Wearever’s claim of being forced to sign a blank form does not render the contract void but merely voidable, and no action for annulment was taken. Therefore, the chattel mortgage is valid, and the orders for the writ of seizure are reinstated.