Author Topic: Real estate mortgage in favor of the defendant  (Read 1213 times)

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Real estate mortgage in favor of the defendant
« on: November 14, 2019, 07:51:46 PM »

BH Berkenkotter vs. Cu Unjieng (61 P 663)
□ : Mabaclat Sugar has an existing mortgage over its building and improvements in favor of Cu Unjieng. Mabaclat bought new machineries. Mabaclat failed to pay, so Cu Unjieng lays claim on the mortgage – including the new machineries
□ : new machineries are considered permanent improvements thus part of the mortgage
Machinery intended by the owner of any building or land for the use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade, are considered as real property.
If the installation of the machinery and equipment in question in the central converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. The new machinery must, therefore, be considered as subject to the real estate mortgage in favor of the defendant.

Note: Would it have made a difference if there was no stipulation that the real estate mortgage would cover future improvements?  No, the improvements would be covered automatically by law as the same are immobilized.  Of course, the parties are free to stipulate what may be excluded from the mortgage.

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