Case Name: Makati Leasing and Finance Corporation v Wearever Textile Mills, By: Sherwin Bries

Inc. and Court of Appeals Topic:

GR No. L-58469
Date: May 16, 1983
Facts
Wearever Textile Mills, Inc.m discounted and assigned several receivables to obtain financial accommodations from
Makati Leasing and Finance Corporation. To secure collection of the receivables assigned, Wearever executed a
Chattel Mortgage over certain raw materials inventory as well as machinery described as Artos Aero Dryer Stentering
Range.
Upon Wearevers default, petitioner filed a petition for extrajudicial forclosure of the properties mortgage to it. The
Deputy Sheriff failed to effect the seizure since he failed to gain entry into Wearevers property.
Petitioner then filed a complaint for judicial foreclosure with the Court of First Instance. The lower court issed a writ
of seizure, enforcement was restrained upon Wearevers filing of a motion for reconsideration. After several incidents,
the lower court finally issued an order lifting the restraining order for the enforcement of the writ of seizure and an
order to break open the premises of the private respondent.
The sheriff enforced the seizure order and removed the main drive motor of the subject machinery.
CA set aside the order of RTC and ordered the return of the drive motor after ruling that machinery in suit cannot be
subject of replevin, much less a chattel mortgage, because it is a real property pursuant to Article 415 of the NCC, the
same being attached to the ground by means of bolts and the only way to remove it form the respondents plant would
be to drill out or destroy the concret floor that the sheriff could only take the main drive motor. The appelate court
rejected the argument that the private respondent is estopped from claiming that the machine is real property by
constituting a chattel mortgage.

Issue/s
Whether or not the motor is real or personal property. Personal

Ruling
The motor may be considered as personal property for the purpose of executing a chattel mortgage as long as the
parties to the contract so agree and no innocent third party will be prejudiced. There is absolutely no reason why a
machinery, which is movable in its nature and becomes only immobilized only by destination or purpose, may not
likewise be treated as such. This is because one who has so agreed is estopped from denying the existence of the
chattel mortgage.
The characterization of the subject machinery as chattel by private respondent is indicative of intention and impresses
upon the property the character determined by the parties.
Private respondent contends that estoppel cannot apply against it because it has never represented or agrred tht the
machinery in suit be considered as personal property but was merely required and dictated on by petition to sign a
printed form of chattel mortgage which was in a blank form at the time of signing. The contention lacked
persuasiveness to the court.
The status of the subject matter as movable or immovable property was not raised as an issue before the lower court
and the CA, except in a supplemental memorandum in support of the petition filed in the appellate court.
There is no record showing that the mortgage has been annulled, or that steps were taken to nullify the same. On the
other hand, respondent has benefited from the said contract. Equity dictates that one should not benefit at the expense
of another.
As such, private respondent could no longer be allowed to impugn the efficacy of the chattel mortgage after it has
benefited therefrom.

Doctrine Notes