LEUNG YEE

vs. FRANK L. STRONG MACHINERY COMPANY & J. G. WILLIAMSON

G.R. No. L-11658
February 15, 1918

FACTS:
 Compania Agricola Filipina bought rice-cleaning machines from Strong Machinery Co. and
installed it in one of its buildings
 Agricola executed a chattel on the machines and the building where it was installed as a
security for the purchase price
 Unable to pay, mortgage was foreclosed and building was purchased by Strong Machinery
Co. – the sale was annotated in the Chattel Mortgage Registry
 Later, Agricola sold the lot where the building was constructed to Strong Machinery Co. –
sale was not registered in Registry of Property but the latter took possession
 Previously, Leung Yee (a creditor of Agricola) bought the building at a sheriff’s sale, and this
was recorded in the Registry
 Before purchasing the property, Yee knew about the prior sale to Strong Machinery Co. – he
now sues to recover the property from Strong Machinery Co.

LAW/S:
 ACT NO. 1508 (Chattel Mortgage Law)
 Chattel mortgage is a conditional sale of personal property as security
 Should be recorded with the Chattel Mortgage Registry to be legally binding
 ART. 415, NEW CIVIL CODE
 PAR.1: “Land, buildings, roads, and constructions of all kinds adhered to the soil”
 Buildings and land are immovable property
 ART. 1473, NEW CIVIL CODE
 Rules on determining ownership if property is sold to different vendees:
 Personal Property - grant ownership to person who 1st possessed it in good faith
 Real Property – grant ownership to person who 1st recorded it in the Registry
 No Entry – grant to person who 1st possessed in good faith
 No Proof of Possession – grant to person who presents oldest title

ISSUE/S:
 Whether or not the property's nature changed by its registration in the Chattel Mortgage
Registry
 Whether or not Leung Yee has a better right to the property since the sale to him was duly
registered with the Land Registry

RULING:
 NO, THE NATURE OF THE PROPERTY HAS NOT CHANGED
 By inclusion, buildings and land are REAL PROPERTY
 The mere fact that the parties decided to deal with the building as personal property
does not change its character as real property

 STRONG MACHINERY CO. HAS BETTER RIGHT

 Leung Yee was not a buyer in good faith (had previous knowledge of an earlier sale)
 Though the sale to Strong Machinery Co. was not recorded in the proper registry, it
was the first the possess the property in good faith
NOTE:
 Building is REAL PROPERTY, its sale as annotated in the Chattel Mortgage Registry cannot be
given the legal effect of registration in the Registry of Real Property
 Neither the original registry in the chattel mortgage registry, nor the annotation in said
registry of the sale of the mortgaged property had any effect on the building