Bischoff v. Pomar
REITERATIONFacts
The Antecedents: Samuel Bischoff claimed ownership of a steam sugar mill, an 8-horsepower boiler with attachments, a complete tramway with rails and fittings, and fifteen small cars located at Hacienda San Jose. He alleged that Juan Pomar, appointed as receiver for the property of Romana Ganzon by the Compañia General de Tabacos de Filipinas (Compañia Tabacalera), unlawfully took possession of these items, refusing to return them despite demands, and causing Bischoff damages at a rate of P30 per day. Procedural History: Bischoff filed a complaint seeking a declaration of ownership over the described property and damages. The Compañia Tabacalera, in its defense, asserted that the property was included in a mortgage executed by Romana Ganzon in favor of Lazaro Mota, which was subsequently transferred to the Compañia Tabacalera. Juan Pomar, the receiver, claimed he took possession of the property by virtue of a court order appointing him as receiver. The Court of First Instance ruled that the steam sugar mill, boiler, tramway, and cars were included in the mortgage executed by Ganzon in favor of Mota, which was later transferred to Compañia Tabacalera. The defendants were absolved, and Bischoff's right to recover from Ganzon was reserved. Bischoff appealed this decision. The Appeal: Bischoff appealed the judgment of the Court of First Instance, arguing that the steam sugar mill, boiler, tramway, and cars were not included in the mortgage of Hacienda San Jose. He contended that these items were separate from the hacienda itself and that their inclusion in the mortgage was not explicitly stated in the instruments. The core of his appeal was to have these items declared his property, free from the mortgage encumbrance.
Issue(s)
Whether the steam sugar mill, portable boiler, tramway, and cars located at Hacienda San Jose are included in the mortgage executed by Romana Ganzon in favor of Lazaro Mota, subsequently transferred to Compañia General de Tabacos de Filipinas. Whether Bischoff, as a purchaser under pacto de retro of these items, can claim them free from the mortgage encumbrance, given that they were already part of the mortgaged property.
Ruling
The Supreme Court affirmed the judgment of the lower court, holding that the steam sugar mill, portable 8-horsepower boiler with attachments, the complete tramway with rails and other fittings, and the fifteen small cars located at Hacienda San Jose are considered included in the mortgage executed by Romana Ganzon in favor of Lazaro Mota, which mortgage was later transferred and conveyed to the Compañia General de Tabacos de Filipinas. The defendants were absolved without special ruling as to costs, and the plaintiff, Samuel Bischoff, was reserved the right of action to recover from Romana Ganzon the sum he paid for the property.
Ratio Decidendi
On Issue 1: The Court held that the steam sugar mill, boiler, tramway, and cars are considered improvements and fixtures on Hacienda San Jose. Citing Articles 110 and 111 of the Mortgage Law and Article 1877 of the Civil Code, the Court established that a mortgage extends to natural accessions, improvements, and even chattels permanently located on the mortgaged property, provided they belong to the owner of the estate and are necessary for its exploitation. The Court found that these items were essential for the working of the hacienda and were already mounted and in use when the mortgages were executed. Furthermore, the mortgage instruments, including those executed in favor of Lazaro Mota and later transferred to Compañia General de Tabacos, repeatedly referred to the mortgaged hacienda with its improvements, buildings, and machinery, without any express stipulation excluding the machinery and tramway. Therefore, by operation of law and the clear intent of the contracting parties as evidenced by the instruments and their registration, these items were included in the mortgage. On Issue 2: The Court ruled that even if Bischoff acquired the machinery and tramway under pacto de retro, his alienation did not release them from the encumbrance to which they were subjected. Since these items were already affected by and included in the mortgage of Hacienda San Jose at the time Bischoff acquired them, his purchase was necessarily subject to the existing mortgage. The Court noted that Bischoff purchased goods that were already liable to the credit of Compañia General de Tabacos. Therefore, he could not acquire possession of the same free from the encumbrance, and consequently, he could not claim any right to indemnity for loss and damages, as he purchased property already burdened by a prior mortgage.
Main Doctrine
The Supreme Court affirmed the principle that a mortgage extends to natural accessions, improvements, and even chattels permanently located on the mortgaged property, provided they belong to the owner of the estate and are necessary for its exploitation, unless there is an express stipulation to the contrary. This doctrine is rooted in Articles 110 and 111 of the Mortgage Law and Article 1877 of the Civil Code, which presume the inclusion of such improvements in the mortgage to secure the debt.