Davao Sawmill v. Castillo (1935) – J.

Malcolm

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs .
APRONIANO G.
CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants appellees.

Facts
1. Appeal – Trial court found properties were personal, ruled in favor of Davao Light – current
appeal.
2. Peitioner, Davao Saw Mill Co., Inc., - holder of a lumber concession grant. Operates sawmill in
sitio Maa, barrio Tigatu, Davao.
a. Land of the sawmill was owned by another person(unspecified who), but the petitioner
erected a building with machinery; some of which were mounted on foundations of
cement.
3. Contract of lease between Saw Mill and owner of land had a provision 1 that said upon the expiry
of the lease, all of the improvements and buildings erected upon the land by Saw Mill shall pass
to the exclusive ownership of the owner without any obligation to pay. Does not include
machineries and accessories that are included in the improvements.
4. Previous action by Davao Light against Saw Mill – led to writ of execution in favor of Davao
Light, properties were levied by the sheriff.
5. SC notes that Davao Saw mill executed previous chattel mortgages over the subject machinery
with third persons, one of these persons being the assignor of the current appellee, Davao Light.
(Original mortgagee assigned right to pursue debt of Saw Mill to Davao Light)
a. Basically, Davao Saw Mill wants to dispute ruling that classified the machineries as
personal property because if personal property then the writ of execution and subsequent
sale of the machineries made in favor of Davao Light would be valid. If, instead
properties were classified as immovables then sale would be invalid and as per the terms
of the lease, machineries would go back to Davao Saw Mill.
Issues
1. W/N subject properties were personal properties and thus included in the provisions of the
contract of lease? – YES
a. Machinery in question was not intended by the owner of the land, but was introduced by
the lessee of the building, the building of which was to be returned to the lessor upon
expiration of the lease.
i. Similar case in Puerto Rico where the US SC held that machinery, which is
movable by nature, only becomes immovable when placed on land by the owner
or agent of the same. Does not cover placement by a tenant/usufructuary or any
other person that only has a temporary right to the property.
1. Ratio being that a person, only having a temporary right to
possession/enjoyment of the property is not presumed by law to have
applied movable property belonging to them to the property of another
 (because if it becomes an immovable, the immobilized property becomes
the property of the owner of the immovable to which the property was
attached to)
b. Under the PH Civil code2 similar provisions and rules are applicable. Therefore, the
subject machinery is considered as personal property thus the subsequent execution and
sale in favor of Davao Light was valid.

Finding no reversible error in the record, the judgment appealed from will be
affirmed, the costs of this instance to be paid by the appellant.

Notes

1. “That on the expiration of the period agreed upon, all the improvements and buildings
introduced and erected by the party of the second part shall pass to the exclusive ownership of
the party of the First part without any obligation on its part to pay any amount for said
improvements and buildings; also, in the event the party of the second part should leave or
abandon the land leased before the time herein stipulated, the improvements and buildings shall
likewise pass to the ownership of the party of the First part as though the time agreed upon had
expired: Provided, however, That the machineries and accessories are not included in the
improvements which will pass to the party of the First part on the expiration or abandonment of
the land leased."

2. Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real
property consists of —

"1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
"5. Machinery, liquid containers, instruments or implements intended by the owner of any
building or land for use in connection with any industry or trade being carried on therein and
which are expressly adapted to meet the requirements of such trade or industry."