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Davao Sawmill Co. V. Castillo: Digest

Davao Sawmill Co. leased land to operate a sawmill business. It erected buildings and installed machinery, some of which were mounted on cement. The lease stipulated improvements would pass to the landowner but machinery would remain Davao's property. When Davao defaulted on a debt, the machinery was seized and auctioned as personal property. Davao claimed the machinery was immovable property of the landowner. The court ruled that machinery installed by a tenant remains personal property unless installed to permanently improve the landlord's property or the tenant acted as the landlord's agent. As the lease specified machinery was Davao's, it remained personal property.

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116 views1 page

Davao Sawmill Co. V. Castillo: Digest

Davao Sawmill Co. leased land to operate a sawmill business. It erected buildings and installed machinery, some of which were mounted on cement. The lease stipulated improvements would pass to the landowner but machinery would remain Davao's property. When Davao defaulted on a debt, the machinery was seized and auctioned as personal property. Davao claimed the machinery was immovable property of the landowner. The court ruled that machinery installed by a tenant remains personal property unless installed to permanently improve the landlord's property or the tenant acted as the landlord's agent. As the lease specified machinery was Davao's, it remained personal property.

Uploaded by

Fran Sanglay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Digest

DAVAO SAWMILL CO. v. CASTILLO

61 Phil. 709 (1935)

TOPIC. Machinery as Personal Property: 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 Sawmill Co. is the holder of a lumber concession but the
land where business is conducted belonged to another. On the land, Davao
Sawmill erected a building which housed the machinery used by it, with some
implements mounted on cement. It was stipulated in the contract of lease
that all improvements erected by the lessee shall pass to the exclusive
ownership of the landowner, provided that machineries and accessories are
not included in the improvement which will pass to the owner. In a separate
action brought by the Davao Light and Power Co., judgment was rendered
against Davao Sawmill and a writ of execution was issued with the
machineries placed in the sawmill levied upon as personalty by the sheriff.
Davao Light and Power Co. proceeded to purchase the machinery and other
properties auctioned by the sheriff. No third party claim was filed for such
properties at the time of the sale thereof as is borne out by the record made
by the plaintiff therein. It must be noted that Davao Sawmill has on several
occasions treated the machinery as personal property by executing chattel
mortgages in favor of 3rd persons.

ISSUE. Whether the machineries erected by Davao Sawmill Co. are


considered immovable property.

RESOLUTION. Machineries erected by tenant Davao Sawmill Co. are


PERSONAL PROPERTY.

ARGUMENTS & HOLDING

THE COURT held: Following the ruling in a similar case in Puerto Rico
appealed to the US Supreme Court, it was held that 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 temporary right, unless such person
acted as the agent of the owner.

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