Serg’s Products, Inc. Vs. PCI Leasing and Finance, Inc. GR No. 137705. August 22, 2000

Facts:

Respondent PCI Leasing and Finance, Inc, filed with the RTC-QC a complaint for a sum of money with an application for a writ of replevin.

Respondent Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI after 5 days and upon the payment of the necessary expenses.

In the implementation of the said writ, the sheriff proceeded to petitioner’s factory, seized one machinery with word that he would return for the other.

Petitioners filed a motion for special protective order, invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin.

The motion was opposed by PCI Leasing, on the ground that the properties were still personal and therefore still subject to seizure and a writ of replevin.

The sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest.

Issue:

1.        Whether or not the machineries purchased and imported by Serg’s became real property by virtue of immobilization.

2.        Whether or not the contract between the parties is valid.

Ruling:

The petition is not meritorious.

1.        No.

The machines that were subjects of the Writ of seizure were placed by petitioners in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the industry. In that sense petitioners are correct in arguing that the said machines are real property pursuant to Article 415 (5) of the Civil Code.

But the Court disagrees with the submission of the petitioners that the said machines are not proper subject of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are consequently stopped from claiming otherwise. Under the principle of estoppels, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein.

Clearly then, petitioners are stopped from denying the characterization of the subject machines as personal property. Under circumstances, they are proper subjects of the Writ of Seizure.

It should be stressed, however, that the Court’s holding-that the machines should be deemed personal property pursuant to the Lease Agreement-is good only insofar as the contracting parties are concerned. Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal. In any event, there is no showing that any specific third party would be adversely affected.

2.        Yes.

It should be pointed out that the Court may rely on the Lease Agreement, for nothing on the record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. Accordingly, it must be presumed valid and binding as the law between the parties.

Petition denied. Judgment affirmed.

Note:

Article 415. The following are immovable property:

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works.