Star Two v. Paper City

 

Star Two v. Paper City Petitioner: Star Two (SPV-AMC), Inc., Respondent: Responden t: Paper City Corporation of te Pi!ippines Ponente: Pere", #. Shortt Fac Shor Facts ts and Doctrin Doctrine/s e/s:: Pape Paperr City obtained obtained loan loans s from RCBC (substituted by Star Two) secured by a chattel mortgage over Paper City’s machineries and euipment! This C" was unilaterally cancelled by RCBC! Subseue Subs euently ntly## Paper Paper City entered into a "ortg "ortgage age Trust Trust $nden $ndenture ture with RCBC and % other ban&s! $n the "T$# Paper City obtained additional loans secured by a deed of real estate mortgage plus real and personal property whi which ch was was ann anne'e e'ed! d! Th This is nec necess essari arily ly inclu included ded the mac machin hineri eries es and euipment of Paper City! efaulted! oreclosed! They were arguing over  whether whet her the mach machiner ineries ies and euipmen euipmentt are to be cons consider idered ed as real property and thus included in the foreclosure! RCBC poses that Paper City gave its consent to consider the disputed machineries and euipment as real properties! Paper City contends that the machineries and euipment are chattels by agreement thru the deeds of C" $e!d: SC said that the parties stipulated in the "T$ that the properties mortgaged are various parcels of  land including buildings and e'isting improvements thereon as well as the machineries and euipment! The real estate mortgage over the machineries and euipment is even in f ull accord with the classification of such properties by the *CC as immovable property (+rt! ,-.! Par .! "achinery# rece receptacles# ptacles# instruments or implements/)!

%acts: •

Paperr City was granted Pape granted loans loans and credit acco accommoda mmodation tions s by RCBC! The loans were secured by eeds of Continuing Chattel "ortgages on Paper City0s machineries and euipment! 1owever# RCBC unilaterally cancelled the deeds!

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RCBC RCBC con conten tends ds tha thatt -!) -!)Th That at Paper Paper Ci City ty gav gave e its con consen sentt to con consid sider er the dis disput puted ed machi machiner neries ies and eu euipm ipment ent as rea reall properties when they signed the "T$! Paper City argued7 -!) The machineries and euipment are chattels by agreement thru the eeds of Continuing Chattel "ortgages and they did not consent to consider the disputed machineries and eu euipm ipment ent as rea reall pro proper perty ty!! %) They They al also so con conten tend d tha thatt the cancellation of the chattel mortgage was invalid because it was done unilaterally hence such chattel mortgage remains subsisting!

Iss&es: '. 8hether the sub5ect m achineries and euipment were considered real properties properties and should should therefore therefore be incl included uded in the e'tra45ud e'tra45udicia iciall foreclosure which in turn were sold to the ban&s! R&!in: -! 9es Ratio: -! 3'pla 3'planat nation ion of of + +nsw nswer er to $ssue $ssue The SC said that repeatedly in the "T$0s# the parties stipulated that the properties properties mortgaged mortgaged by Paper Paper City to RCBC RCBC are various parcels parce ls of land including including buil building dings s and e'is e'isting ting improveme improvements nts thereon as well as the machineries and euipment! The "T$ is clear! The plain language and literal interpretation of the "T$0s must be applied! The petitioner# other creditor ban&s# and Paper Paper Cit City y int intend ended ed fro from m the ver very y fir first st ind indent enture ure that that the machineries and euipment in the anne' in the "T$0s are included! Considering that the "T$ which is the instrument of the mortgage that was foreclosed e'actly states through the eed of +mendment that the machineries and euipments listed in +nne'es :+: and :B: •

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Subseuently Subseuently# RCBC# together with "etroban& and 2nion entered into a# "ortgage Trust $ndenture with Paper City! $n theBan&# said "T$# Paper City acuired additional loans secured by eeds of  Real 3state "ortgage# "ortgage# plus real and perso personal nal properties properties in an anne' to the "T$# which covered the machineries and euipment of  Paper City! Paperr City defaulte Pape defaulted! d! RCB RCBC C filed filed a petit petition ion for e'tra e'tra45ud 45udicia iciall forecl for eclosu osure re aga again inst st the rea reall estate estate e'ecut e'ecuted ed by Paper Paper City City 6 including all the improvements! +s highest bidders# the three ban&s were issued a Certificate of Sale! Paper City filed with the trial court a motion to remove machinery out of the foreclosed land and building# saying that the same were not included in the foreclosure of the real estate mortgage!

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form of the located on theeuipments parcels of  land part sub5ect of improvements the mortgage# listed such and machineries and are surely part of the foreclosure of the :real estate properties# including all improvements thereon: as prayed for in the petition! The rea reall est estate ate mor mortga tgages ges wh which ich spe specif cifica ically lly inc includ luded ed the machineri machi neries es and euipments euipments were subseuent subseuent to the chattel chattel mortgages! 8ithout doubt# the real estate mortgages superseded the earlier chattel mortgages! The real estate mortgage over the machineries and euipment are even in full accord with the classification of such properties by the Civil Code of the Philippines Philippines as immovable property! Thus7  +rticle ,-.! The following are immovable immovable property7

 

(.) "achinery# receptacles# instruments or implements intended by the owner of the tenement for an industry or wor&s 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 wor&s; ispositi isp osition: on: Resolution 813R3