Makati Leasing and Finance Corporation v. Wearever Textile Mills, Inc.

FACTS:
-Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under
a Receivable Pur c has e Agr e e me nt i n f a vor of Makat i Lea s i ng a nd Fi na nc e
Cor por at ion i n or der t o obt a i n f i na nc i a l accommodations.

- To secure the collection of the receivables assigned, Wearever executed a Chattel Mortgage
over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.

-Upon Wearevers default, Makati Leasing filed a petition for extrajudicial foreclosure of the properties mortgage
to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into premises of
Wearever and was not able to effect the seizure of the aforedescribed machinery. Makati Leasing thereafter filed a
complaint for judicial foreclosure.

-Acting on Makati Leasing's application for replevin, the lower court issued a writ of seizure, the
enforcement of which was however subsequently 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 Wearevers to
enforce said writ. The lower court reaffirmed its stand upon Wearevers filing of a further motion for
reconsideration.

-The sheriff enforcing the seizure order, repaired to the premises Wearevers and removed the main drive motor
of the subject machinery.

CA:
-Set aside orders of the Lower Court and ordered the return of the main drive motor of the
machinery. It held that the subject machinery cannot be subject of replevin because it is a real property
pursuant to Article 415 of the Civil Code. Therefore Chattel Mortgage constituted upon it is null and void.

ISSUE:
-Whether or not the subject machinery is a real property or a personal property to subject it to chattel mortgage.

HELD:
-Where a chattel mortgage is constituted on machinery attached to the ground the machinery is to be considered as
a personal property and the chattel mortgage constituted thereon is not null and void regardless
of who owns the land.

- A property attached to the ground like a house of strong materials, may be considered as
personal property for purposes of executing a chattel mortgage thereon as long as the parties to
the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason
why a machinery, which is movable in its nature and becomes immobilized only by dest inat ion
or purpose, may not be likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel mortgage.