Star Two (Spv-Amc) v. Paper City Corporation of the Philippines

Summary

Star Two (successor of RCBC) and other creditor banks provided loans to Paper City Corporation secured by mortgage trust indentures that specifically included land, buildings, and machineries/equipment listed in detailed annexes. When Paper City defaulted, RCBC foreclosed on the real estate mortgage. Paper City later sought to remove the machineries, claiming they remained personal property under earlier chattel mortgages. The Supreme Court ruled that the subsequent mortgage trust indentures clearly and intentionally included the machineries as part of the mortgaged properties, superseding the earlier chattel mortgages. The Court applied contract interpretation principles and Civil Code provisions on immovable property and mortgage coverage, finding that the machineries were properly included in the foreclosure sale. This case establishes important precedent on the classification of industrial equipment in mortgage contexts and the hierarchy of security instruments.