Case Digest (G.R. No. 41643)
Facts:
The case involves B. H. Berkenkotter as the plaintiff and appellant against Cu Unjieng e Hijos, Yek Tong Lin Fire and Marine Insurance Company, Mabalacat Sugar Company, and the Provincial Sheriff of Pampanga as defendants and appellees. The events leading to this case began on April 26, 1926, when the Mabalacat Sugar Company, Inc., located in Mabalacat, Pampanga, secured a loan from Cu Unjieng e Hijos, which was secured by a first mortgage on two parcels of land, including all buildings, improvements, and necessary equipment related to the sugar mill. Subsequently, on October 5, 1926, the company sought to enhance its production capacity from 150 tons to 250 tons daily by purchasing additional machinery and equipment, estimated to cost around P100,000. B. A. Green, the president of the Mabalacat Sugar Company, approached Berkenkotter to advance the funds for this purchase, promising reimbursement upon securing an additional loan from the mortgagees. Berkenkotter agreed and pr...
Case Digest (G.R. No. 41643)
Facts:
Parties Involved:
- Plaintiff and Appellant: B. H. Berkenkotter
- Defendants and Appellees: Cu Unjieng e Hijos, Yek Tong Lin Fire and Marine Insurance Company, Mabalacat Sugar Company, and the Provincial Sheriff of Pampanga
Background:
- On April 26, 1926, the Mabalacat Sugar Co., Inc. obtained a loan from Cu Unjieng e Hijos, secured by a first mortgage on two parcels of land, including all buildings, improvements, and machinery related to the sugar central.
- The mortgage covered existing and future improvements on the property.
Additional Machinery and Equipment:
- On October 5, 1926, the Mabalacat Sugar Co., Inc. decided to increase its sugar central's capacity by purchasing additional machinery and equipment, increasing daily production from 150 to 250 tons.
- B. A. Green, the company's president, proposed to B. H. Berkenkotter to advance the necessary funds for the purchase, promising reimbursement once an additional loan was secured from Cu Unjieng e Hijos.
- Berkenkotter advanced P25,750 and had a credit of P22,000 for unpaid salary, which was used to purchase the additional machinery and equipment.
Failure to Secure Additional Loan:
- On June 10, 1927, B. A. Green applied for an additional loan of P75,000 from Cu Unjieng e Hijos, offering the newly acquired machinery and equipment as security. The loan was not granted.
Legal Dispute:
- Berkenkotter claimed ownership of the machinery and equipment, arguing that they were not permanently incorporated into the sugar central and were intended as security for his loan.
- Cu Unjieng e Hijos contended that the machinery and equipment were part of the mortgaged property under Article 1877 of the Civil Code.
Issue:
- (Unlock)
Ruling:
- (Unlock)
Ratio:
Mortgage Coverage:
- Under Article 1877 of the Civil Code, a mortgage includes all natural accessions, improvements, and fixtures, whether existing at the time of the mortgage or added afterward.
Permanent Incorporation:
- Machinery and equipment installed in a sugar central for industrial purposes are considered real property under Article 334, paragraph 5, of the Civil Code, and their incorporation is permanent.
Security Interest vs. Mortgage:
- A creditor’s security interest in machinery and equipment does not override the rights of a mortgagee if the machinery is permanently incorporated into the mortgaged property.
Right of Redemption:
- A sale of machinery and equipment after their incorporation into a mortgaged property only transfers the right of redemption, not ownership, which remains subject to the mortgage.