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  • Davao Saw Mill vs. Castillo - GR No. 40411 - Case Digest

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    Davao Saw Mill leased land from Castillo to conduct its sawmill business. The lease agreement stated that buildings erected on the land would pass to Castillo upon expiration of the lease. Davao Saw Mill installed machinery in one of the buildings. Later, the machinery was seized by the sheriff to satisfy a judgment against Davao Saw Mill. The Supreme Court affirmed the lower court's finding that the machinery installed by the lessee was considered personal property, not improvements to the real property, because machinery placed by a tenant remains personal unless intended to be a permanent part of the property.

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    Davao Saw Mill leased land from Castillo to conduct its sawmill business. The lease agreement stated that buildings erected on the land would pass to Castillo upon expiration of the lease. Davao Saw Mill installed machinery in one of the buildings. Later, the machinery was seized by the sheriff to satisfy a judgment against Davao Saw Mill. The Supreme Court affirmed the lower court's finding that the machinery installed by the lessee was considered personal property, not improvements to the real property, because machinery placed by a tenant remains personal unless intended to be a permanent part of the property.

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    2K views1 page

    Davao Saw Mill vs. Castillo - GR No. 40411 - Case Digest

    Uploaded by

    C S
    Davao Saw Mill leased land from Castillo to conduct its sawmill business. The lease agreement stated that buildings erected on the land would pass to Castillo upon expiration of the lease. Davao Saw Mill installed machinery in one of the buildings. Later, the machinery was seized by the sheriff to satisfy a judgment against Davao Saw Mill. The Supreme Court affirmed the lower court's finding that the machinery installed by the lessee was considered personal property, not improvements to the real property, because machinery placed by a tenant remains personal unless intended to be a permanent part of the property.

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    © All Rights Reserved
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    of 1

    DAVAO SAW MILL VS.

    CASTILLO
    DAVAO SAW MILL Co., INC., plaintiff and appellant, vs.
    APRONIANO G. CASTILLO and DAVAO LIGHT & POWER Co.,
    INC., def endants and appellees.
    G.R. No. 40411, August 7, 1935

    Recit-Ready Case Summary: Lessee Davao Sawmill placed machinery in a building erected on land belonging to another with the
    understanding that the machinery was not included in the improvements which would pass to the lessor on the expiration (or
    abandonment) of the lease contract. Davao Sawmill even treated the machinery as personal property by executing chattel mortgages in
    favor of third persons. Later, the machinery was levied upon by the sheriff as personalty pursuant to a writ of execution obtained without
    any protest being registered.

    General Rule of Law/Doctrine: Machinery which is movable in its nature only becomes immobilized when placed in a plant by the
    owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless
    such person acted as the agent of the owner.

    FACTS: Davao Saw Mill conducted its business on a parcel of land belonging to appellee, Castillo, via lease. The contract of lease
    provided that “upon expiration of the period agreed upon, all the improvements and buildings introduced and erected by the [lessee]
    shall pass to the exclusive ownership of the [lessor] without any obligation on tis part to pay any amount for said improvements and
    buildings.” Appellant Davao Saw Mill installed machinery within the period of lease. Later, this machinery was levied upon by the sheriff
    of Davao as personalty pursuant to a writ of execution rendered by a judgement in favor of Davao Light & Power, in another action.

    ISSUE: WON the machinery installed by the lessee, Davao Saw Mill, on the leased property is classified as personal property?

    HELD: YES. Machinery is classified as personal property. Art. 335 of the NCC provides that “real property consists of… 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.” Machinery which is
    movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed
    by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. The
    machinery in controversy installed by appellant Davao Saw Mill falls within the ambit of personal property as defined under Art. 355 of
    the NCC.

    The trial judge found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint,
    with costs against the plaintiff. Supreme Court affirms the judgement of the lower court.

    1
    Property - SUNG

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