BERKENKOTTER v.

CU UNJIENG e HIJOS
Villareal, J.
Appeal from CFI of Manila
1935
FACTS:
*
Mabalacat Sugar Co., owner of sugar centrsl in Mabalacat, Pampanga, obtained loan from Cu
Unjieng secured by mortgage on 2 parcels of lands with all bldgs., improvements, sugar-cane mill,
steel railway, telephone line, apparatus, utensils, and whateer forms part of is a necessary
complement of mill
*
MSC decided to buy addl machinery and equipment (P100K). President B.A. Green proposed to B.H.
Berkenkotter to advance amount for purchase, with promise to reimburse as soon as he can obtain
addl loan from Cu Unjieng (total loan: P25,750; total credit: P22K) purchased M&E now subject of
litigation
*
BA Green applied for addl loan to Cu Unjieng for 75K offered M&E stated above as security. Green
failed to obtain loan
*
A1877 CC. mortgage includes all natural accessions, imp, growing fruits, and rents not collected
when obligation falls due
*
Doctrine of Bischoff v. Pomar and COmpana General de Tabacos:
o
REM includes improvements and fixtures even if placed AFTER mortgage was constituted;
exclusion of machinery must be stipulated
*
Berkenkotter contends that M&E not permanent in character ( that upon failure to obtain addl loans,
they will become security, that BA Green will not mortgage or encumber them to anybody until
Berkenkotter is fully paid)
ISSUE: WON machinery and equipment as improvements incorporated with the sugar central are subject to
REM deed in favor of Cu Unjieng e Hijos. YES
HELD: Upon acquiring M&E with money obtained as loan from Berkenkotter, BA Green became owner of said
M&E; therefore, he could not have offered them to plaintiff as security
- A334, par 5 CC: machinery intended by the owner of any bldg. or land for use in connection with any
industry or trade being carried on therein and which are expressly adapted to meet the requirements of such
trade or industry is real property
- incorporation of M&E PERMANENT in character as essential and principal elements of a sugar central, w/o
them the sugar central would be unable to function or carry on the industrial purpose for which it was
established
- THEREFORE:
1. installation of M&E in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of
carrying out the industrial functions of the central and increasing production = PERMANT IMPROVEMENT =
subject to MORTGAGE
2. fact that Green bound himself to Berkenkotter to hold M&E as security for payment of credit and to refrain
from mortgaging the same DOES NOT ALTER permanent character. Nothing prevents him from giving them
as security for 2nd mortgage
3. Sale of ME by Green to Berkenkotter after incorporation with sugar central while mortgage to Cu Unjieng
was in force does not vest B with owenership of said ME but simply right of redemption (of Green), subj to
right of Cu Unjieng under 1st mortgage