Star-two v. Paper PARTY INVOLVED YES.

MACHINERIES AND EQUIPMENT ARE INCLUDED IN THE

City RCBC (Star-two) as the creditor and the trustee MORTGAGE AND FORECLOSURE
Unionbank and Metrobank as creditor banks The parties stipulated that the properties mortgaged by Paper
Equipment and Star-two, a domestic corporation engaged in the City to RCBC are various parcels of land including the buildings
improvement inside a manufacture of paper products particularly cartons, and existing improvements thereon as well as the machineries
foreclosed real estate newsprint and clay-coated paper, as the debtor and equipment, which as stated in the granting clause of the
was foreclosed with original mortgage
it HOW THE CASE STARTED The plain language and literal interpretation of the MTIs must be
Paper City contracted a loan with RCBC worth applied. The petitioner and Paper City intended from the very first
P110,000,000 as secured by 4 Deeds of Continuing Chattel execution of the indentures that the machineries and equipment
Mortgages on its machineries and equipment found inside enumerated in Annexes "A" and "B" are included.
its paper plants Law and jurisprudence provide and guide that even if not
Creditor banks entered into a Mortgage Trust Indenture expressly so stated, the mortgage extends to the improvements.
(MTI) with Paper City where Paper City acquired an
additional loan P170,000,000 from the creditor banks in
addition to the previous loan from RCBC thereby
increasing the entire loan to a total of P280,000,000. The
old loan was partly secured by various parcels of land
pursuant to 5 Deeds of Real Estate Mortgage. The new
loan obligation would be secured by the same five (5)
Deeds and additional real and personal properties
described in an annex to MTI, Annex "B." Annex "B" of the
said MTI covered the machineries and equipments of
Paper City.
There were 3 supplemental indentures made to the MTI
increasing the amount of loan and the properties
mortgaged.
After July 1997, Paper City failed to comply with its
obligation and trustee bank foreclosed the said properties
Paper City and Unionbank entered into a compromise
agreement where the latter condoned the remaining debt
of the former
Paper City filed with a Motion to Remove and/or Dispose
Machinery reasoning that the machineries located inside
the foreclosed land and building were deteriorating.
It posited that since the machineries were not included in
the foreclosure of the real estate mortgage, it is
appropriate that it be removed from the building and sold
to a third party

RULING OF RTC
The RTC initially denied the petition but eventually
granted if after an MR.
The court justified the reversal on the finding that the
disputed machineries and equipment are chattels by
 agreement of the parties through in the 4 Deeds of Chattel
Mortgage

RULING OF THE CA
The CA sustained the findings of the RTC and denied the
petition.
It stated that nowhere from any of the MTIs executed can
it find the alleged "express" agreement adverted to by
petitioner. There is no provision in any of the parties MTI,
which expressly states to the effect that the parties shall
treat the equipment and machineries as real property. On
the contrary, the plain and unambiguous language of the
aforecited MTIs, which described the same as personal
properties, contradicts petitioners claims
It was also ruled that the subject machineries and
equipments were not included in the extrajudicial
foreclosure sale.

ISSUE: WON the equipment and machineries inside the real estate
foreclosed shall be foreclosed with it