G.R. No. L-11940 - Dagdag, Jr. vs. Public Service Commission

B. H. Berkenkotter (plaintiff-appellant) filed a complaint against Cu Unjieng e Hijos, Yek Tong Lin Fire and Marine Insurance Company, Mabalacat Sugar Company, and the Provincial Sheriff of Pampanga (defendants-appellees) in the Court of First Instance of Manila.
The trial court dismissed Berkenkotter’s complaint with costs. He appealed to the Supreme Court (G.R. No. 41643, July 31, 1935).

On April 26, 1926, Mabalacat Sugar Co., Inc. obtained from Cu Unjieng e Hijos a loan secured by a first mortgage on its sugar central in Pampanga, covering “all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is a necessary complement,” existing or future.
On October 5, 1926, the corporation decided to expand capacity from 150 to 250 tons daily by purchasing additional machinery and equipment (estimated cost ~₱100,000). President B. A. Green proposed that Berkenkotter advance the funds, promising reimbursement upon securing an additional mortgage loan from Cu Unjieng e Hijos.
Berkenkotter had an existing ₱22,000 salary credit against the corporation and, on October 9, 1926, advanced a total of ₱25,750 to Green, who used these funds plus the salary credit to acquire the new machinery and equipment.
On June 10, 1927, Green applied for an additional ₱75,000 loan from Cu Unjieng e Hijos, offering the newly installed machinery and future equipment as security, but the loan was denied.
Berkenkotter then sued to assert ownership over the machinery and equipment and to exclude them from the original mortgage.

Whether the additional machinery and equipment, installed after the original mortgage, became subject to that mortgage under Civil Code Article 1877.
Whether the agreement by B. A. Green to hold the machinery as security for Berkenkotter’s loan and not to encumber them until reimbursement excluded them from the original mortgage.
Whether the purported sale of the machinery and equipment to Berkenkotter after their incorporation with the sugar central vested ownership in him or only conferred a right of redemption.