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Contractual Property Classification

The parties entered into a receivable purchase agreement where Wearever Textile discounted and assigned receivables to Makati Leasing in exchange for financial accommodations. To secure the collection of receivables, Wearever executed a chattel mortgage over raw materials and a dryer. When Wearever defaulted, the properties were extrajudicially foreclosed. The Court of Appeals ordered the return of the dryer's drive motor, ruling it was an immovable property. However, the Supreme Court held that the dryer could be considered a movable property since the parties agreed to treat it as such in the chattel mortgage, and no third party was prejudiced.

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Valentine Morales
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183 views1 page

Contractual Property Classification

The parties entered into a receivable purchase agreement where Wearever Textile discounted and assigned receivables to Makati Leasing in exchange for financial accommodations. To secure the collection of receivables, Wearever executed a chattel mortgage over raw materials and a dryer. When Wearever defaulted, the properties were extrajudicially foreclosed. The Court of Appeals ordered the return of the dryer's drive motor, ruling it was an immovable property. However, the Supreme Court held that the dryer could be considered a movable property since the parties agreed to treat it as such in the chattel mortgage, and no third party was prejudiced.

Uploaded by

Valentine Morales
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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MAKATI LEASING AND FINANCE CORP. V.

WEAREVER
TEXTILE MILLS, INC.

Parties to a contract may by agreement treat as personal property that which by nature is a real property, as
long as no interest of 3rd party would be prejudiced.

FACTS:

To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and assigned several
receivables under a Receivable Purchase Agreement with Makati Leasing. To secure the collection of
receivables, it executed a chattel mortgage over several raw materials and a machinery – Artos Aero Dryer
Stentering Range (Dryer).

Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed. The sheriff, after the
restraining order was lifted, was able to enter the premises of Wearever and removed the drive motor of the
Dryer. The CA reversed the order of the CFI, ordering the return of the drive motor since it cannot be the
subject of a replevin suit being an immovable bolted to the ground. Thus the case at bar.

ISSUE:

Whether the dryer is an immovable property

HELD: NO

The SC relied on its ruling in Tumalad v. Vicencio, that if a house of strong materials can be the subject of a
Chattel Mortgage as long as the parties to the contract agree and no innocent 3rd party will be prejudiced
then moreso that a machinery may treated as a movable since it is movable by nature and becomes
immobilized only by destination. And treating it as a chattel by way of a Chattel Mortgage, Wearever is
estopped from claiming otherwise.

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