PROPERTY, OWNERSHIP, AND ITS MODIFICATION

1) INTRODUCTORY CONCEPTS
a) Origin of the Word Property
i) the concept of property extends only to those things which are already possessed and found
in the possession of man
ii) It is in this sense that the concept of property is said to be limited compared to the concept
of things, which extends to all objects that exist,3 whether it is already in the possession of
man or not
b) Concept of Things
i) Things, therefore, are objects external to man. But the concept of things under the Civil
Code is not limited to corporeal objects or to objects that can be perceived by the senses
c) Susceptibility to Appropriation
i) Things which cannot, therefore, be subjected to human control by reason of sheer physical
impossibility are not considered as property.
d) Additional Requisites
i) Utility - or that it can serve as a means to satisfy human needs; and
ii) Substantivity - or individuality, or that the thing must have an autonomous and separate
existence.
2) CLASSIFICATION OF PROPERTY
a) Classification under Book II of the Civil Code
i) Immovable or movable (Arts. 415 to 417);
(1) Movables, in turn, are classified into consumable or non consumable (Art. 418);
ii) From the viewpoint of ownership, property is classified either as property of public
dominion or of private ownership (Arts. 419 to 42u5).
b) Importance of Classification
i) For purposes of applying the rules of acquisitive prescription
(1) The ownership of movables prescribes through uninterrupted possession for four years
in good faith or through uninterrupted possession for eight years, without need of any
other condition.9 Ownership and other real rights over immovable property, on the
other hand, are acquired by ordinary prescription through possession of ten years or
thirty years, without need of title or of good faith.
ii) In determining the propriety of the object of the contracts of pledge, chattel mortgage and
real estate mortgage
(1) Only movables can be the object of the contracts of pledge and chattel mortgage.12 On
the other hand, only immovables can be the object of a real estate mortgage
contract.13 As a consequence, should the parties execute a chattel mortgage over a real
property, the same is null and void and registration of the instrument in the Registry of
Property does not validate it insofar as third parties are concerned.
iii) For purposes of determining the formalities of a donation
iv) In extrajudicial deposit
v) In crimes of theft, robbery and usurpation
vi) For purposes of determining the venue in remedial law
3) IMMOVABLE PROPERTY
a) Kinds of Immovable (Real) Property
i) Immovable by nature those which by their essence and nature are immovable or cannot
be moved from one place to another, such as lands and roads in paragraph 1 of Article 415
and mines, quarries and slug dumps in paragraph 8 of Article 415;
ii) Immovable by incorporation those which are treated as immovable by reason of their
attachment or incorporation to an immovable in such manner as to be an integral part
thereof, such as buildings and constructions of all kinds adhered to the soil
iii) Immovable by destination those which are essentially movable, but by the purpose for
which they have been placed in an immovable, partake of the nature of the latter because
of the added utility derived therefrom, such as those mentioned in paragraphs 4, 5, 6, 7 and
9 of Article 415; and
iv) Immovable by analogy or by law those that are mentioned in paragraph 10 of Article 415.
4) Real Property under Article 415(1)
a) Buildings
i) Building is immovable by incorporation
(1) Bicerra v. Teneza, a house (or a building) is classifi ed as immovable property by reason
of its adherence to the soil on which it is built. Thus, a building which is merely
superimposed on the soil is not a real property
(2) the building referred to is that which substantially adheres to the land and not one
which is merely superimposed on the soil
ii) Buildings are always immovable
(1) Rule is not affected by the fact that the building is treated separately from the land
(a) A building treated separately from the land on which it stood is immovable property
and the mere fact that the parties to a contract seem to have dealt with it separate
and apart from the land on which it stood in no wise changed its character as
immovable property
(b) Leung Yee v. Strong Machinery Thus, while it is true that a mortgage of land
necessarily includes, built.33 in the absence of stipulation, the improvements
thereon, still a building by itself may be mortgaged apart from the land on which it
has been built.
(2) Rule is not affected by the fact that the building is erected on a land owned by another
person
(a) The law makes no distinction as to whether or not the owner of the land is or is not
the owner of the building.
(b) A building certainly cannot be divested of its character of a realty by the fact that
the land on which it is constructed belongs to another, otherwise it would create a
situation where a permanent fixture changes its nature or character as the
ownership of the land changes hands.
(3) Instances Where Building Is Treated As Personal Property By the Parties
(a) Although the dicta in some decisions of the Supreme Court to the effect that the
parties to a contract may by agreement treat as personal property that which by
nature would be a real property
(b) Leung Yee v. Strong machinery that a building is by itself an immovable property
the fact remains that the nature of a building does not depend on the way the
parties deal with it.
(c) The classification of property into real or personal is provided for by law and may
not, therefore, be changed by the agreement of the parties.
(d) As such, even if the parties may treat as personal property that which under the law
is a real property, that agreement does not in any way alter the character of the
property as an immovable or real property.
(4) Doctrine of Estoppel
(a) Ladera v. CN Hodges, the parties to a contract may by agreement treat as personal
property that which by nature would be a real property is predicated on
statements by the owner declaring his house to be a chattel, a conduct that may
conceivably estop him from subsequently claiming otherwise.
(b) Tumalad & Navarro cases. In these two cases, a chattel mortgage contract was
executed by the parties involving a house. Thereafter, the mortgagors questioned
the validity of the chattel mortgage so executed on the ground that the subject
matter thereof was not chattel but real property.
(c) the court need not resolve the issue of the validity of the chattel mortgage in the
cases of Navarro and Tumalad. As a consequence, there is no need on the part of
the court to rule on the character of the house (or building) in these cases.
(d) the doctrine of estoppel not only prohibits a party from assuming inconsistent
positions but also precludes him from repudiating an obligation voluntarily assumed
after having accepted benefi ts therefrom
(e) Piansay v. David regardless of the validity of a contract constituting a chattel
mortgage on a house, as between the parties to said contract, the same cannot and
does not bind third parties
(5) Classification of property into real or personal property, a question of law
(a) The Standard Oil case is telling us that the registration of a chattel mortgage
covering a real property before the chattel mortgage registry may not be prevented
by the register of deeds.
(i) What then is the effect of such registration?
1. In Associated Ins. & Surety Co., Inc. v. the Supreme Court held that the
registration of a chattel mortgage covering a building in the Chattel
Mortgage Registry produces no effect whatsoever, for where the interest
conveyed is in the nature of a real property, the registration of the
document in the registry of chattels is merely a futile act. Thus, the
registration of the chattel mortgage of a building of strong materials
produces no effect as far as the building is concerned.57 But then again, as
between the parties to said chattel mortgage, they are not allowed to assail
the validity of said agreement under the principle of estoppel.
b) Construction Adhered To the Soil
i) To be immovable, the construction must be attached permanently to the land. It becomes
immovable by incorporation. The adherence to the soil must not be of provisional or
temporary character but fi xed or integral.
ii) Board of Assessment Appeals v. Manila Electric Co., removable and merely attached to a
square metal frame by means of bolts, which when unscrewed could easily be dismantled
and moved from place to place.
5) Real Property under Article 415(2)
a) Trees and Plants
i) They are immovable by reason of their incorporation to the soil or because they form an
integral part of the immovable.
ii) If, therefore, the trees or plants are cut or uprooted for purposes of making them fi rewood
or timber they become movable property except when the timber constitutes the natural
product of the tenement and, therefore, forms an integral part of the immovable.
b) Growing Fruits
i) They are considered as real property so long as they are still attached to the soil. But for
certain purposes and while still attached to the soil,
ii) growing fruits may exceptionally be treated as personal property pursuant to the provisions
of Article 416(2) of the New Civil Code. By way of example, ungathered fruits are
considered personal property
(1) for the purpose of sale of the whole or part of the crops.
(2) For purposes of attachment and execution and in applying the provisions of the Chattel
Mortgage Law
(3) Sibal v. Valdez. The existence of a right on growing crops is mobilization by anticipation,
gathering as it were in advance, rendering the crop movable.
6) Real Property under Article 415(3)
a) Attachment Must Be In A Fixed Manner
i) these properties are immovable by incorporation.
ii) Need Not Be Attached By the Owner
iii) However, Intent of the Parties May Govern
(1) intent has to be looked into. Thus, if the parties treat the machinery as chattels, they are
bound by their agreement under the principle of estoppel
7) Real property under Article 415(4)
a) Requisites - These are real properties by destination. In order that the properties mentioned in
this paragraph may be considered as real property, the following requisites must concur:
i) They must be placed in buildings or on lands by the owner of the immovable or by his agent;
and
ii) The attachment must be intended to be permanent.
b) Distinguish From Paragraph 3
i) (1) here the incorporation must be made by the owner of the immovable either personally
or through an agent
8) Real Property under Article 415(5)
a) Requisites
i) They must be machinery, receptacles, instruments or implements;
ii) They must be placed by the owner of the tenement or by his agent;
iii) There must be an industry or work carried in such building or on the piece of land; and
iv) They must tend directly to meet the needs of said industry or work.
b) They Must Be Placed By the Owner or By His Agent
i) In Davao Sawmill Co. v. Castillo, the Supreme Court held that machinery which is movable
by nature becomes immobilized when placed by the owner of the tenement, property or
plant, but not so when placed by tenant, usufructuary, or any other person having only a
temporary right, unless such person acted as the agent of the owner.
(1) Exception to the Rule
(a) Should the machinery, be placed in the land or tenement by the lessee thereof, the
same remains personal because they are not placed by the owner of the tenement.
(i) An exception to exception, however, if in the contract of lease it is stipulated
that such machinery, receptacles, instruments or implements placed there by
the lessee will become, at the termination of the lease, the property of the
lessor for in that case they will be considered as immovable property since in
placing them the lessee will just be merely acting as an agent of the lessor.
c) They Must Tend Directly To Meet the Needs of Said Industry or Work
i) The properties mentioned in paragraph 5 are immovable by destination and they are
converted into real properties by reason of their purpose, not by reason of their attachment
to an immovable.
ii) Berkenkotter v. Cu Unjieng e Hijos, inasmuch as the central is permanent in character, the
necessary machinery and equipment installed for carrying on the sugar industry for which it
has been established must necessarily be permanent.
d) They Must Be Essential and Principal Elements of the Industry or Works
i) Before movables may be deemed immobilized in contemplation of paragraph 5 of Article
415, it is necessary that they must be essential and principal elements of the industry
or works without which such industry or works would be unable to function or carry on the
industrial purpose for which it was established.
ii) Mindanao Bus Co. v. City Assessor and Treasurer, in order that movable equipments to be
immobilized in contemplation of the law they must first be essential and principal elements
of an industry or works without which such industry or works would be unable to function
or carry on the industrial purpose for which it was established.
(1) Incidentals acquired as movables and used only for expediency to facilitate and/or
improve its service. Even without such stools and equipments, its business may be
carried on.
9) Real Property under Article 415(10)
a) Patrimonial rights, in turn, are either
i) Real the power belonging to a person over a specifi c thing, without a passive subject
individually determined against whom such right may be personally exercised; it is
enforceable against the whole world; or
ii) Personal the power belonging to one person to demand of another, as a defi nite passive
subject, the fulfi llment of a prestation to give, to do or not to do.
b) How Rights Classified
i) Whether a right is personal or real property shall depend on:
(1) whether it is a personal or real right, and
(2) whether the subject matter thereof is a personal or real property.
ii) all personal rights will fall under personal property regardless of the subject matter thereof.
(1) If the subject matter of the real right is a real property, then such real right is a real
property.
(2) If the subject matter of the real right is a personal property, as in the case of chattel
mortgage, such real right is classifi ed as personal property.
10) Definition of Real Property in Real Estate Taxation
a) Concept of Real Property in Realty Taxation
i) In Manila Electric Co. v. CBAA, a case involving two storage tanks, the Court held that the
imposition of real tax was proper even if the storage tanks were not embedded in the land.
ii) In Caltex (Phils.), Inc. v. CBAA, involving equipment and machinery permanently affi xed by
Caltex to its gas station rented from a certain lessor, the Court held that the issue of
whether the said equipment and machinery are subject to realty tax should be resolved
primarily under the provisions of the Assessment Law and the Real Property Tax Code.
b) Machinery and Improvements Subject to Realty Tax
i) Machinery
(1) Note that both under the old Real Property Tax Code and the present law on Real
Property Taxation,
(a) in order to classify machinery as realty for taxation purposes, what is important is
that the same must be essential or necessary to the operation of the business or
industry. If so, it is classifi ed as realty subject to real property tax, even if the other
requirements of paragraph (5) of Article 415 of the New Civil Code may not be
present.
(b) Thus, in Caltex (Phils.), Inc. v. CBAA, the equipment and machinery therein involved
were held to be subject to realty tax because they are necessary to the operation
of the gas station, for without them the gas station would be useless.
ii) Improvements
(1) Manila Electric Co. v. CBAA,105 involving two storage tanks, which while not embedded
in the land were nonetheless considered as improvements on the land because:
(a) They enhanced its utility and rendered it useful to the oil industry and
(b) They have been installed with some degree of permanence as receptacles for the
considerable quantities of oil needed by MERALCO for its operations.
11) Movable Property
a) What May Be Considered Movable Property, In General
i) all things susceptible of appropriation which can be transported from place to place without
impairment of the real property to which they are fi xed106 and not included in the
enumeration in Article are classifi ed as personal or movable property.
b) Chose in Action
i) a thing in and is the right of bringing an action,113 or a right to recover a debt or money,
chose in action is merely a personal right, it is to be classifi ed as a personal property.
c) Consumable and Non-consumable
(1) consumable is a movable which cannot be used in a manner appropriate to its nature
without itself being consumed.
(a) For example, a cigarette cannot be used in a manner appropriate to its nature, i.e.,
for smoking, without itself being consumed. A
(2) non-consumable, on the other hand, is a movable which can be used in a manner
appropriate to its nature without itself being consumed.
ii) Distinguished From Fungible and Non-Fungible
(1) basis of the classifi cation of movables into fungible or non-fungible is simply the
intention of the parties.
(a) fungible if, by the intention of the parties, it can be replaced by another of the same
kind; otherwise, it is a nonfungible.
12) Public Dominion and Private Ownership
a) Classifi cation of Property From the Point of View of Ownership
b) In relation to the State, its properties are either of
i) public dominion or patrimonial properties
c) In relation to the political subdivisions (provinces, cities and municipalities), their properties are
either of
(1) public dominion (for public use) or patrimonial proper
d) In relation to their properties are denominated as that of
(1) private ownership.
e) patrimonial properties of the State are not exactly in the same category as ordinary private
properties.
(1) The latter can be acquired thru adverse possession while the adverse possession of the
former cannot ipso facto ripen into ownership as it is an iron-clad dictum that
prescription can never lie against the State
13) Property of State: Public Dominion
a) three kinds of property of public dominion:
i) Intended for public use;
ii) Intended for some public service; and
iii) Intended for the development of national wealth.
b) Public Ownership Distinguished From State Ownership
i) In public ownership not even the State may make them the object of commerce. Hence,
they cannot be leased, donated, sold or be the object of any contract.
ii) With respect to natural resources, they are not, however, totally outside the commerce of
man.
c) Intent to devoute sufficient
i) If the property has been intended for such use or service, and it has not been devoted to
other uses and no measures have been adopted which amount to a withdrawal thereof
from public use or service, the same remains property of public dominion, the fact that it is
not actually devoted for public use or service notwithstanding
d) Public use and Public service Differenciated
i) Public Use may be used indiscriminately by the public
ii) public service although used for the benefi t of the public, cannot be used indiscriminately
by anyone but only by those that are authorized by proper authority.
e) Property of Public Dominion: For Public Use
i) Roads
(1) The roads referred to under Article 420(1) of the New Civil Code are the national
highways and roads constructed and maintained by the national government through
the Department of Public Works and Highways.
(a) Provincial, city and municipal roads and streets, on the other hand, are properties of
public dominion of the local government unit concerned and are governed by Article
424 of the Civil Code and the provisions of the Local Government Code.
ii) Canals
(1) if a canal is constructed by private person within his private land and devoted it
exclusively for private use, the same is of private ownership.
f) Property of Public Dominion: For Public Service
i) these properties cannot be used indiscriminately by anyone but only by those that are
authorized by proper authority
g) Property of Public Dominion:
i) This class of property constituted property of public dominion although employed for some
economic or commercial activity to increase the national wealth
h) The Regalian Doctrine and State Ownership of Natural Resources
i) Under the Regalian Doctrine, all lands not otherwise appearing to be clearly within private
ownership are presumed to belong to the State
14) Characteristics of Properties of Public Dominion
a) Outside the Commerce of Man
i) Being outside the commerce of man, it cannot be alienated or leased or otherwise be the
subject matter of contracts.Hence, the right of the public to use public property may not be
bargained away through contract.
b) Not Susceptible To Private Appropriation and Acquisitive Prescription
i) it is not registrable and its possession, no matter how lengthy, cannot convert it into private
property.
c) Not Subject To Attachment and Execution
i) Any encumbrance, levy on execution or auction sale of any property of public dominion is
void for being contrary to public policy
d) Cannot Be Burdened With Voluntary Easements
15) Patrimonial Property of the State
a) The State has the same rights and has the same power of disposition as private individuals
subject, of course, to existing rules and regulations.
b) Disposition of Patrimonial Property
i) Laurel v. Garcia, any conveyance of a real property falling under the patrimonial property of
the State must be authorized and approved by a law enacted by the Congress.
c) Not Susceptible To Acquisitive Prescription
i) unless the law expressly provides, a patrimonial property of the State is not subject to
acquisitive prescription (Art. 1113)
16) Conversion: From Public Dominion to Patrimonial Property
a) Ignacio v. Director of Lands case a property continues to be part of the public domain, not
available for private appropriation or ownership until there is a formal declaration on the part of
the government, either through the Executive department or the Legislative, to the effect that
the property is no longer needed for public service, for public use or for special industries.
b) The intention to reclassify must be clear, defi nite and must be based on correct legal premises.
Hence, the conversion can no longer be inferred from the non-use alone of the property for the
purpose to which it is intended
17) Classifi cation of Properties of Political Subdivisions
a) nature of properties owned by cities (municipalities and provinces) in this country is determined
by the character of the use or service for which they are intended or devoted.