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Makati Leasing and Finance Corp v. Wearever Textile Mills (1983) De Castro, J. Wearever Textile assigned several receivables in favor of Makati leasing in order to secure a loan. And to secure collection of the receivables, Wearever (debtor) executed a Chattel Mortgage over a machinery it owned. This machinery was bolted to the concrete in Wearevers premises. Wearever defaulted and after a case by Makati Leasing (creditor), the sheriff was ordered to enforce a writ. However, since the machine was bolted to the concrete, he was only able to get the main drive motor of the machine. CA says this machine was immovable and held that the Chattel mortgage was null and void. To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and assigned several receivables under a Receivable Purchase Agreement. To secure the collection of the receivables, Wearever executed a Chattel Mortgage over raw materials and machinery (Artos Aero Dryer Stentering Range). Wearever defaulted so Makati Leasing filed a petition for extrajudicial foreclosure of the mortaged properties. However, the Deputy Sheriff failed to enter Wearevers premises and wasnt able to seize the machinery. Makati Leasing then filed a complaint for judicial foreclosure with the CFI. CFI issued a writ of seizure but its enforcement was restrained by Wearevers MR. After several incidents, lower court finally issued an order lifting the restraining order for the enforcement of the writ and an order to break open the premises of Wearever. Sheriff removed the main drive motor of the machinery, not the whole machinery itself. Wearever filed certiorari and prohibition proceedings in the CA. CA ordered the return of the drive to Wearever. o The machinery cannot be the subject of replevin, much less a chattel mortgage because it is real property pursuant to NCC 415 as it was bolted to the ground and the only way to remove it would be to drill out the concrete. (thats why the sheriff could only take the drive to enforce the writ) o Chattel mortgage is null and void. o Also ruled that Wearever is not estopped from claiming that the machine is real property just because it constituted a chattel mortgage

Issue/Held: Was the machinery a real or personal property? ---PERSONAL Claims: Makati Leasing says it is personal property. Weaever says it is real property. Ratio:

Tumalad v. Vicencio: o Although there is no specific statement referring to the house as personal property, by ceding, a property by way of chattel mortgage, defendants could only have meant to convey the house as chattel, or at least, INTENDED to treat it as such, so they should not now be allowed to make an inconsistent stand by claiming otherwise. o Moreover, the house stood on a rented lot to which defendants merely had a temporary right as lessee, and although this can not in itself alone determine the status of the house, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors (defendants), intended to treat the house as personalty. o It is the defendants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage. The doctrine of estoppel therefore applies to them, having treated the subject house as personalty. If a house of strong materials, like what was involved in the Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage as long as the parties so agree and no innocent third party will be prejudiced, there is no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be treated as such. This is really because one who has agreed is estopped from denying the existence of the chattel mortgage.

CA: the house involved in the Tumalad case was built on a land that did not belong to the owner of such house. Law makes no distinction wrt ownership of the land on which the house is built. Ans SC should not lay down distinctions not contemplated by law. The characterization of the machinery as chattel by Wearever is indicative of INTENTION and impresses upon the property the character determined by the parties. As stated in Standard Oil v. Jaramillo: the parties to a contract may treat as personal property that which by nature would be real property, as long as no interest of third parties would be prejudiced Wearever argues that estoppel cannot apply because it had never agreed that the machinery be considered as personal but was merely required by Makati Leasing to sign a printed form of chattel mortgage which was in a blank form at the time of signing. As aptly pointed out by Makati Leasing and not denied by Weaever, the status of the machinery as movable or immovable was never placed in issue before the LC and CA except in a supplemental memo in support of the petition filed in the appellate court. And even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering the contract voidable, or annullable pursuant to NCC 1390, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify it.

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Wearever has benefited from the contract. Equity dictates that one should not benefit at the expense of another. Weaever could not now, be allowed to impugn the efficacy of the chattel mortgage after it has benefited. Petition granted.