BOOK II PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Title I.

CLASSIFICATION OF PROPERTY PRELIMINARY PROVISIONS Considered as a subject or course in law, property is that branch of law which classifies and defines the different kinds of appropriable objects, provides for their acquisition and loss, and in general, treats of the nature and consequences of real rights. (1) CLASSIFICATION OF THINGS (a) Res nullius (belonging to no one) or those which have not yet been appropriated or because they have been abandoned by the owner with the intention of no longer owning them, e.g. fish still swimming in the ocean or wild animals; (b) Res communes (belonging to everyone), while in particular no one owns common property, still in another sense, res communes are really owned by everybody in that their use and enjoyment are given to all of mankind, e.g. air, sunlight, star light and so on; and (c) Res alicujus (belonging to someone), these are objects, tangible or intangible, which are owned privately, either in a collective or individual capacity. And precisely because they can be owned, they really should be considered property, e.g. book, shares of stock, parcel of land, and so on. (2) CLASSIFICATION OF PROPERTY Properties may be classified from different viewpoints. Among the most important bases are the following: (a) Mobility and non-mobility (Movable or personal property, and immovable or real property); (b) Ownership (Public dominion or ownership, and private dominion or ownership); (c) Alienability (those within the commerce of man or which may be the objects of contracts or judicial transactions, and those which are outside the commerce of man); (d) Existence (Present and future properties); (e) Materiality or Immateriality (tangible or corporeal, and intangible or incorporeal); (f) Dependence or Importance (Principles and accessory); (g) Capability of Substitution (Fungible and non-fungible); (h) Nature or Definiteness (Generic and specific); and (i) Whether in Custody of the Court or Free. (3) CHARACTERISTICS OF PROPERTY (a) Utility for the satisfaction of moral or economic wants; (b) susceptibility of appropriation; and (c) individuality or substantively, in other words, it can exist by itself, and not merely as a part of the whole. ARTICLE 414 (1) JURISPRUDENCE ON THE CLASSIFICATION It is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property; and it is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property. Other situations are constantly arising, and from time to time are presented to this court, in which the proper classification of

one thing or another as real or personal property may be said to be doubtful.(Standard Oil Co. of New York vs. Jaranillo, 44 Phil. 630) However, the true reason why the agreement would be valid between the parties is the application of estoppels. It is important to note that under the Civil Code, it seems that it is only the law which may consider real property as personal property pursuant to Article 416, 2nd paragraph). (2) RECLASSIFICATION DISTINGUISHED FROM CONVERSION Reclassification is the act of specifying how agricultural lands shall be utilized for non-agricultural uses as embodied in the land use plan, subject to the requirements and procedure for land use conversion, while conversion is the act of changing the current use of a piece of agricultural land into some other use as approved by the Department of Agrarian Reform (DAR). Chapter 1 IMMOVABLE PROPERTY ARTICLE 415 (1) DEFINITION OF IMMOVABLE PROPERTY While it is true that the dictionary defines immovable property as that which is firmly fixed, settled, or fastened, and while in general, immovable property is that which is fixed in a definite place, still there are many exceptions to this general criterion. Articles 334 and 335 (now Articles 415, 416, and 417) of the Civil Code supply no absolute criterion for discriminating between real property and personal property for purpose of the application of the Chattel Mortgage Law. Those articles state rules which, considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under given conditions property may have character different from that imputed to it in said articles. (Standard Oil Co. of New York vs. Jaranillo, ibid) (2) ACADEMIC CLASSIFICATION OF REAL PROPERTIES (a) Real property by nature (like tree and plants); (b) Real property by incorporation (like building); (c) Real property by destination or purpose; and (d) Real property by analogy. (3) 1ST PARAGRAPH: Land, buildings, roads, and constructions of all kinds adhered to the soil. Buildings are considered immovable provided they are more or less of a permanent structure, substantially adhering to the land, and not mere superimpositions on the land like barong-barongs or Quonset fixtures and provided there is the intent of permanent annexations. And this is true, whether the building is built on ones own land, or on rented land. The reason is ubi lex non distinguit nec nos distinguire debemus. Though the law says construction of all kinds adhered to the soil, it is understood that the attachment must be more or less permanent. (3 Manresa 18) A wall or a fence would be a good example of this kind of real property by incorporation. This is true even if the fence or wall is built only of stones as long as there is an intent to permanently annex the same. Land is immovable by its very nature. It is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties1 could mean only one thing that a building is by itself

an immovable property, a doctrine already pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644. (Lopez vs. Orosa, et al., G.R. No. L-10817-18, 28 February 1958) The building of strong materials in which the rice-cleaning machinery was installed by the "Compaia Agricola Filipina" 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 its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned. (Leung Yee vs. Strong Machinery Co., 37 Phil., 644) The dismissal of the complaint was proper. A house is classified as immovable property by reason of its adherence to the soil on which it is built (Art. 415, par. 1, Civil Code). This classification holds true regardless of the fact that the house may be situated on land belonging to a different owner. But once the house is demolished, as in this case, it ceases to exist as such and hence its character as an immovable likewise ceases. It should be noted that the complaint here is for recovery of damages. This is the only positive relief prayed for by appellants. To be sure, they also asked that they be declared owners of the dismantled house and/or of the materials. However, such declaration in no wise constitutes the relief itself which if granted by final judgment could be enforceable by execution, but is only incidental to the real cause of action to recover damages. (Bicerra, et al. vs. Teneza, et al., G.R. No. L-16218 29 November 1962) The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as chattel "for its smallness and mixed materials of sawali and wood". In construing arts. 334 and 335 of the Spanish Civil Code (corresponding to arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, "a property may have a character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that which by nature would be real property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632-633)."There can not be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered as between the parties as personal property. ... The matter depends on the circumstances and the intention of the parties". "Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty ...". (42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada, et al., G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p. 3954.) The view that parties to a deed of chattel mortgagee may agree to consider a house as personal property for the purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based partly, upon the principles of estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In a case, a mortgage house built on a rented land, was held to be a personal property, not only because the deed of mortgage considered it as such, but also because it did not form part of the land (Evangelista v. Abad [CA];36 O.G. 2913), for it is now well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. v. Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property is so stipulated in the document of mortgage. (Evangelista v. Abad, supra.) It should be noted, however, that the principle 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 (Ladera, et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The doctrine, therefore, gathered from these cases is that although in

some instances, a house of mixed materials has been considered as a chattel between them, has been recognized, it has been a constant criterion nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code). (Navarro vs. Pineda, et al., G.R. No. L-18456 30 November 1963) (4) 2ND PARAGRAPH: Trees, plants and growing crops, while they are attached to the land or form an integral part of an immovable. Trees and plants are considered real property, by nature if they are the spontaneous products of the soil, and by incorporation, if they were planted thru labor. But the moment they are detached or uprooted from the land, they become personal property, except in the case of uprooted timber, if the land is timber land, or trees blown by a typhoon. A sale of growing crops should be considered a sale of personal property. A harvest may indeed be classed as a sale of future or hereafter-acquired property. Inasmuch as the law makes no distinction, growing crops (or standing crops, or ungathered fruits, or growing fruits) whether on ones land or on anothers, as in the case of a usufructuary, a possessor or a tenant, should be considered real property. (3 Manresa 22) The important thing is for them to be still attached to the land. [T]rees and plants annexed to the land are parts thereof and unless rights or interests in such trees or plants are claimed in the registration proceedings by others, they become the property of the persons to whom the land is adjudicated. By timely proceedings in equity, matters of that character, if fraudulent, may sometimes be corrected, but in the present case, the plaintiffs Apolonia and Isabel Alcantara did not prosecute their alleged rights until eleven years after the registration of the property, and it is obvious that whatever rights they may have had are now lost by prescription. (Lavarro vs. Labitoria, 54 Phil. 788) (5) 3RD PARAGRAPH: Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object. Under this paragraph, the injury or breakage or deterioration in case of separation referred to must be substantial, e.g. a fixed fire escape stairway firmly embedded in the walls of a house, an aqueduct or a sewer, or a well. The things referred to in this paragraph need not be placed by the owner. They are real properties by incorporation. It is believed that they should be regarded, however, as personal properties if the incorporation has ceased. (6) 4TH PARAGRAPH: Statutes, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on land by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements. The things referred to under this paragraph may be separated from the immovable without breaking or deterioration. They must be placed by the owner of the immovable, or by his agent, express or implied. They may be either real properties by incorporation or destination. (7) 5TH PARAGRAPH: Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. If the machine is still needed for the industry, but separated from the tenement temporarily, the property continues to be immovable, inasmuch as the 5th paragraph refers to real property by destination or purpose, not to real property by incorporation.

Essential requisites: (1) The placing must be made by the owner of the tenement, his agent, or duly authorized legal representative; (2) So that movable equipments to be immobilized in contemplation of the law 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." We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidental and retain their movable nature. (Mindanao Bus Company vs. City Assessor, G.R. No. L-17870, 29 September 1962); and (3) Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land. (Mindanao Bus Company vs. City Assessor, Ibid) Exception; when the machinery is placed on the land or tenement by a tenant, otherwise the presumption that he intended to give the property permanently away in favor of the owner of the premises would arise. (Davao Sawmill vs. Castillo, 61 Phil 709) Exception of the exception; when the tenant had promised to leave the machinery on the tenement at the end of the lease, or when he aced only as agent of the owner of the land. (Valdez vs. Central Altagracia, Inc., 225 U.S. 58) The facts in the Davao Sawmill case, however, are not on all fours with the ones obtaining in the present. In the former, the Davao Sawmill Company, Inc., had repeatedly treated the machinery therein involved as personal property by executing chattel mortgages thereon in favor of third parties, while in the present case the parties had treated the "after acquired properties" as real properties by expressly and unequivocally agreeing that they shall automatically become subject to the lien of the real estate mortgages executed by them. In the Davao Sawmill decision it was, in fact, stated that "the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties" (61 Phil. 112, emphasis supplied). In the present case, the characterization of the "after acquired properties" as real property was made not only by one but by both interested parties. There is, therefore, more reason to hold that such consensus impresses upon the properties the character determined by the parties who must now be held in estoppel to question it. (Peoples Bank and Trust Company vs. Dahican Lumber Company, G.R. No. L-17500, 16 May 1967) The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are 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. They can not be included under paragraph 3, as they are

not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land. Petitioner is not engaged in an industry or works in the land in which the steel supports or towers are constructed. (Board of Assessment Appeals, Quezon City vs. Meralco, 10 SCRA 68) (8) 6TH: Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included. It is submitted that even if the animals are temporarily outside, they may still be considered as real property, as long as the intent to return is manifest, as in the case of a homing pigeon. When the animals inside the permanent animal houses are alienated onerously or gratuitously, it is believed that the transaction is an alienation of personal property, unless the building or the tenement is itself also alienated. This is because in said alienation, the animal structures must of necessity be detached from the immovable. Chapter 2 MOVABLE PROPERTY ARTICLE 416 [I]t appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the products corresponding to the agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides otherwise. (Sibal vs. Valdez, 50 Phil. 512) The immovability of a growing crop is in the order of things temporary, for the crop passes from the state of a growing to that of a gathered one, from an immovable to a movable. The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired thereon. (Sibal vs. Valdez, ibid) With regard to the nature of the property thus mortgaged, which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code, and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.) (Involuntary Insolvency of Stochecker vs. Ramirez, 44 phil. 933) Three tests to determine whether properly is movable or immovable: (a) If the object is not one of those enumerated or included in Article 415 (test by exclusion); if the property is capable of being carried from place to place; and if such change in location can be made without injuring the real property to which it may in the meantime be attached (test by description). Then the inevitable conclusion is that the property is

personal property. (3 Manresa 46-47) A patent, a copyright, the right to an invention these are intellectual properties which should be considered as personal property. ARTICLE 417 A promissory note is personal property; the right to collect it is also personal property; but a mortgage on real estate is real property by analogy. The certificate itself evidencing ownership of the share, as well as the share itself, is regarded as personal property. It is submitted that all shares in all juridical persons should be considered personal property for there is no reason to discriminate between shares in corporation, and shares in other juridical persons. The term stock should be understood, therefore, in its generic meaning of participation, as it were. However, a half-interest in a drugstore, considered as a building (and not a business) is a real right in real property and is, therefore, by itself real property. ARTICLE 418 If it is agreed that the identical thing be returned, it is non-fungible, even though by nature it is consumable. Hence, if I borrow a sack of rice, not for consumptions but for display or exhibition merely, the rice is considered non-fungible. If it is agreed that the equivalent be returned, the property is fungible. Hence, if I borrow vinegars (to consumer) and promise to return an equivalent amount of the same quality, the property is not only consumable; it is also fungible In the law of credit transactions, a loan of rice for consumption is considered a simple loan or mutuum; while a loan of rice for exhibition is commodatum. It is evident, however, that fungibles are those replaceable by an equal quality and quantity, either by the nature of things, or by common agreement. If irreplaceable, because the identical objects must be returned, they are referred to as non-fungibles.