FACTS:

1.    First  mortgage:  Compania  Agricola  Filipina  bought  rice-cleaning machinery from the machinery company and this was secured by a chattel mortgage on the machinery and the building to which it
was  installed.    Upon  failure  to  pay,  the  chattel  mortgage  was foreclosed, the building and machinery sold in public auction and bought by the machinery company.

2.    Days after, the Compania Agricola Filipina executed a deed of sale over the land to which the building stood in favor of the machinery company.  This was done to cure any defects that may arise in the
machinery company’s ownership of the building.

3.    Second  mortgage:  on  or  about  the  date  to  which  the  chattel mortgage  was  excecuted,  Compania  executed  a  real  estate mortgage  over  the  building  in  favor  of  Leung  Yee,  distinct  and
separate  from  the  land.    This  is  to  secure  payment  for  its indebtedness for the construction of the building.  Upon failure to pay, the mortgage was foreclosed.

4.    The  machinery  company  then  filed  a  case,  demanding  that  it  be declared  the  rightful  owner  of  the  building.    The  trial  court  held that it was the machinery company which was the rightful owner
as  it  had  its  title  before  the  building  was  registered  prior  to  the date of registry of Leung Yee’s certificate.
 

HELD:

The building in which the  machinery was installed was  real property, and the  mere  fact  that  the  parties  seem  to  have  dealt  with  it  separate  and apart from the land on which it stood in no wise changed the character as real property.
 
It follows that neither the original registry in the chattel mortgage registry of the instrument purporting to be a chattel mortgage of the building and the  machinery  installed  therein,  nor  the  annotation  in  the  registry  of  the sale  of  the  mortgaged  property,  had  any  effect  whatever  so  far  as  the building is concerned. *LANDMARK CASE