Notes in Property 2011 - By Ice

REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

NOTES IN PROPERTY: FAQs, DOCTRINES and CASES 1. Why is it necessary to determine the difference between movables and immovables? a. Acquisitive prescription – movable properties are acquired through 4 or 8 years of prescription. Immovable properties, on the other hand, are acquired through 10 or 30 years of prescription b. Object of accessory contracts – In pledge and chattel mortgage, the subject matter is personal property; while in real estate mortgage, the subject matter is real property c. Formal Requirements in donation – personal property with value exceeding 5,000 must be with acceptance in writing, otherwise, donation is void; Donation and the acceptance of real property must always be embod ied in a public instrument, otherwise, the donation is void. d. Extrajudicial deposit – only personal property may be the subject of an extrajudicial deposit e. Criminal Law – only personal property can be the object of the crimes of theft and robbery; while the object of the crime of usurpation of real property is real property f. Procedural law – If the action affects title to or possession of real property or any interest therein referred to as a real action, its venue is in the place where the property is situated; otherwise, the venue of the action is either the residence of the plaintiff, or defendant at the option of the plaintiff. 2. What are the different classes of immovables? a. Immovable by nature – those which cannot be moved from place to place, such as those mentioned in Art. 415 (1) [with respect to lands and roads] and (8) Buildings or lands or essentially immovable by nature. Buildings, whether built on a land owned by another are still considered real property by nature b. Immovables by incorporation – those which are attached to an immovable in usch a manner as to for an integral part thereof such as those in Art. 415 (1) [except land and roads], (2), (3), and (4) of Art. 415. Constructed Buildings are always real property or immovable. But by agreement of the parties (such agreement is binding ONLY between th e parties), when a Building is the subject of a chattel mortgage, such building may be treated as a personal property. Hence, a chattel mortgage is constituted over a building will not necessarily render the chattel mortgage as void.

Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

Trees, plants and flowers are immovable, having been “planted” in the garden area, under Art. 415(2) which provides that “Trees, plants, and growing fruits while they are attached to the land or form an integral par t of the immovable” are likewise immovable property.

Living quarters, if attached to the immovable platform with permanence, becomes an immovable as well. Permanence means they cannot be separated without destroying the platform or the quarters (Art. 415[3], NCC). On the other hand, if the attachment is not permanent, or is merely superimposed on the platform, then the living quarters are movable property. (subject to differing opinions) c. Immovables by destination – those which are placed in an immovable for the use, exploitation or perfection of such immovable, such as those mentioned in Nos. 4,5,6,7 and 9 of Art. 415. Although the general rule is that once machineries are placed in factories as essential and principal elements in an industry or business such machineries are immobilized by destination and are considered as immovable, the machineries may, nevertheless be considered personal property by express agreement of the parties. Case in point: Serg’s Product Inc. vs. PCI Leasing and Finance, Inc. (338 SCRA 504, 22 August 2000) The issue in this case is Whether the machineries which are directly used in the regular course of business, when placed in the factory, are considered immovable, and therefore cannot be a proper subject of the Writ of Seizure (search warrant) ANS: Generally, such machineries are immovables by destination. However, considering that there was an express agreement under the Lease Contract that the subject machineries placed in the factory are deemed personal property, petitioners are now estopped from the denying the characterization of the subject machines as personal property. It should be stressed, however, that the Court’s ruling – that the machines should be deemed personal property pursuant to the Lease Agreement—is good only insofar as the contracting parties are concerned. Hence, while the parties are bound by the Lease Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machin ery as personal. Case in point: Fels Energy, Inc. vs. The Province of Batangas, G.R. No. 168557, 16 February 2007 A facility located on a floating platform made of wood and metal, upon which was permanently attached the heavy equipment for the petroleum operations and living quarters of the crew; containing a garden area, where trees, plants and flowers were painted; tethered to a ship, the MV101, which was anchored to seabed is an IMMOVABLE property by destination. Art. 415(9) of the NCC Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

considers as real property “docks” and structures which , though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coasts.”

d. Immovables by analogy – those which are considered immovables by operation of law such as those mentioned under Art. 415(10). Except for rights arising from contracts for public works which are classified as real property under paragraph 10 of Article 415, all personal rights will fall under personal property regardless of the subject matter thereof. With respect to real rights, however, the classification thereof will depend on its subject matter. If the subject matter of the real right is a real property, then such real right is a real property. This is clear from paragraph 10 of Article 415 which classifies as real property “real rights over immovable property”. Thus a real estate mortgage is a real right and a real property by itself (MBTC vs. Alejo, 364 SCRA 812). On the other hand, if the subject matter of the real right is a personal property, as in the case of chattel mortgage, such real right is classified as personal property. 3. What is the effect and legal consequences if a chattel mortgage is constituted over an immovable property? Ans: As between the parties who constituted chattel mortgage, the said chattel mortgage is valid. However, as to 3 rd parties validly claiming right over the property subject of the chattel mortgage, such chattel mortgage is void. Rationale: Under the Chattel Mortgage Law, only chattels or personalty may be the object of a contract of chattel mortgage. A building is certainly not a chattel or personalty. It is realty by incorporation. Therefore, it cannot be the object of a contract of chattel mortgage. True, in some cases decided by the SC, it has been held that the contract of chattel mortgage, applying the principle of estoppel, is binding. However, this rule can be applied only to a situation or controversy involving the contracting parties only. 4. Machineries placed by a person on the land owned by another: movable or immovable? Ans: It depends. Case in point: Davao Sawmill Co. vs. Castillo (61 Phil 709) : When machineries were installed by a Lessee on the land of the Lessor, such machineries have not become immovables. Under No. 6 of Art. 415 of NCC, such machineries should be been installed by the owner of the tenement, with the intention of making use of them for a certain industry or works which is being carried on in the building or land, and Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

should tend directly to meet the needs of the said industry o r works. So in a case where the lessee of a building established a shoe factory in the building and installed machineries therein, such machineries are movables. In order that machineries can be classified as immovables within the meaning of No. 5 of Art. 415 of the NCC, it is essential that the following requisites concur: a. The machinery must be placed by the owner of the tenement b. An industry or works must be carried on in the tenement c. The machinery must be intended for such industry or works; d. The machinery must tend directly to meet the needs of such industry or works Case in point: Berkenkotter vs. Cu Unjieng (61 Phil. 663): Machineries have become immovables by reason of the fact that the company installed the machineries in the central for the use of the industry which is being carried on in the said central. They have, therefore become immobilized because of their purpose. In other words, they tend directly to meet the needs of the industry which is being carried on in the central and in which the Company which installed them is engaged. And it cannot be said that their incorporation is not permanent in character, because, as essential and principal elements of a sugar central, without them the central would be unable to function or carry on the industrial purpose for which it was established.

5. What are the tests which must be applied in order to determine whether an object is movable or not? a. Whether the object can be transported from one place to another place; b. Whether the change of location can take place without injury to the immovable to which it may be attached; and c. Whether it is not included in the enumeration found in Art. 415 of the NCC 6. Public lands vs. Government Lands Public lands and public domain are synonymous --- they refer only to government land which are opened to private appropriation and settlement by homestead and other similar acts Government lands – wider coverage; includes NOT ONLY public lands, but also those other lands already reserved for or devoted to public use or subject to private right Property intended for public service: government buildings, military camps, navy ships, Roponggi property Property for Development of National Wealth: mineral lands, forest or timber lands and other natural resources. Sec.2 of Art. XII of the 1987 Philippine Constitution states that natural resources are not available for alienation but the State may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60% of whose capital is owned by Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

such citizens, in connection with the exploration, development and utilization of the same. Examples would be fishpond which are owned by the State and may not be alienated but only leased (Menchavez vs. Teves, Jr., 449 SCRA 380, 2005). Also, watershed reservation and submerged lands are part of the State’s natural resource and cannot therefore be alienated.

Section 3, Art. XII of the Constitution allows agricultural lands to be alien ated. Agriculture public lands are classified as patrimonial property of the State only if they are made available for alienation or disposition. Patrimonial Property of the State is not subject to acquisitive prescription: While patrimonial property is considered as a property of the State in what may be called the private sense, nonetheless, a patrimonial property of the State is not subject to acquisitive prescription, unless the law expressly provides. Thus, in Alonso v. Cebu Country Club, Inc., it was held that “possession of patrimonial property of the Government, whether spanning decades or centuries, cannot ipso facto ripen into ownership.” Conversion of property of public dominion to patrimonial must be through an affirmative act, either on the part of the executive or the legislative to reclassify property of the public dominion into patrimonial. Conversion cannot be inferred from the non-use alone of the property for the purpose for which it is intended. 7. Accretions Art. 457 and Republic vs. CA, 132 SCRA 514 (1984) – Accretions on river banks, belong to the owner of the lands adjoining the banks provided that the deposit is due to the effects of the current of the river. Tiongco vs. Director of Lands 16 C.A. Rep. 211 – those which attached to the owner of lands adjoining the banks as a consequence direct and deliberate intervention of man such as man-made accretions, are part of the public domain DE FACTO EMINENT DOMAIN – whenever the sea advances and private properties are permanently invaded by the waves, the properties so invaded become part of the shore and they then pass to the public domain. Consequently, it is not subject to indemnity by the State. Accretion on shores/sea are not the same as accretion on lakes. (Law and Cases: Art. 4 of the Spanish Law of Waters of 1866; Heirs of Emilano Navarro vs. IAC, 268 SCRA 74; Ignacio vs. Director of Lands and Valeriano 108 Phil. 225, 1960)

Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

8. Doctrine of Self-Help

Art. 429 includes as one of the rights of the owner of the property to defend his property. This is referred to as the Doctrine of Self-Help provided that there still exists a threatened physical invasion and there is a need to repel such actual physical invasion. In such case, an owner is authorized to use force during the actual act of invasion. The employment of force in defense of his property must be reasonable. But when the property has been fully possessed by another, force cannot be used anymore. The owner, to recover possession, must resort to proper judicial means. 9. Doctrine of State of Necessity This is the exception to the Doctrine of Self-Help: In the enjoyment of his property, the owner cannot prohibit the interference by another if the same is necessary to avert an imminent danger and the threa tened damage, compared to the damage arising to the owner from the interference is much greater (Art. 432, NCC). Thus, if the doctrine of state of necessity applies, the owner or the lawful possessor may not resort to the doctrine of self -help. Reason: the invasion or usurpation of his property is not unlawful. Requisites of state of necessity: a. There must be a situation of grave peril, an actual or imminent danger, either upon the person of the actor or a third person or their property b. The interference is necessary to avert such danger c. The threatened damage, compared to the damage arising to the owner from the interference, is much greater d. The state of necessity must not be brought about by intentional provocation of the party invoking the same 10. Actions for recovery of possession of real property: a. Accion Reivindicatoria – action for the recovery of the exercise of ownership, particularly possession as an attribute or incident of ownership; basis is the ownership which has not yet been lost Requisites: must prove the identity of the land claimed and claimant’s title thereto; the claimant must rely on the strength of his title and not on the weakness of the defendant’s title. b. Accion Publiciana – plenary action for the recovery of the better right of possession (juridical possession). It is also called plenaria de posesion which is used to refer to an ejectment suit filed after the expiration of one year from the accrual of the cause of action or from the unlawful withholding of possession of the realty. (Cruz vs. Torres, 316 SCRA 193) c. Accion interdictal – either forcible entry or unlawful detainer; for the purpose of recovery of material or physical possession Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

Distinctions: Accion interdictal – possession de facto Accion publiciana – who has better right of possession or real right of possession; possession de jure (jus possessionis) 11. Building, Planting, or sowing with one’s own materials on the land of another Four scenarios a. Land owner (LO) good faith  builder planter or sower and owner of materials (BPS-OM) good faith = Art. 448 of NCC applies b. If LO in good faith  BPS-OM in bad faith = Art. 449 to 452 of NCC applies c. If LO is in bad faith  BPS-OM in bad faith = Art. 448 of the NCC, in relation to Art. 453 applies d. If LO in bad faith  BPS-OM in good faith = Art. 447 in relation to Art. 454 of NCC applies 12. Correlations:  As to validity of sale of property whether land, buildings, house, machinery, correlate the provisions on property to Art. 1403 (unenforceability of contracts); those relating to special contracts and general provisions on contracts 

For conjugal properties, if sale is made only by one of the spouses, correlate it to Art. 96 and Art. 124 of the Family Code.



Correlate Rule 63 of the Rules of Court in cases involving Quieting of Title under Art. 476. Second paragraph of Sec. 1 of Rule 63 provides that a Petition for Declaratory relief may be availed of as a remedy involving a n action for the reformation of an instrument, to quiet title to real property or remove clouds therefrom, or to consolidate ownership under Article 1607 of the Civil Code Applicable case: Mario Siochi vs. Alfredo Gozon, et al./Inter -Dimensional Realty, Inc. Vs. Mario Siochi, et al., G.R. No. 169900/G.R. No. 169977, March 18, 2010

13. NEW CASES IN PROPERTY Topic: Builder in Good Faith; and who has better right over the subject property sold to two persons (Filomena R. Benedicto vs. Antonio Villaflores, G.R. No. 185020, 6 October 2010). FACTS: Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

Maria Villflores - owner of Lot in Bulacan. In 1980, Maria sold a portion of the said lot to her nephew, respondent Antonio Villaflores, latter took possession and constructed a house thereon. 12 years later, Maria executed in favor of Antonio a Kasulatan ng Bilihang Tuluyan covering the entire Lot 2-A. However, Antonio did not register the sale or pay the real property taxes for the subject land. 31 August 1994, Maria sold the same lot to Filomena with a deed of sale. Filomena registered the sale with the Registry of Deeds on 6 September 1994. Conseuqently, t he TCT under Maria's name was cancelled and new one was issued to Filomena. Since then, Filomena paid the real property taxes for the subject parcel of land. On 28 September 2000, Filomena filed a case for Accion Publiciana with Cancellation of Notice of Adverse Claim, Damages and Attorney's Fees against Antonio. She alleged that she acquired the lot in 1994 and that at the time of the sale, she was not aware that Antonio had any claim or interest over the subject property. Antonio traversed the complaint, asserting absolute ownership over Lot 2-A. He alleged that he purchased the subject property from Maria in 1980; and that he took possession of the same and constructed his house thereon. He came to know of the sale in favor of Filomena only in 2000 when the latter demanded that he vacate the property. He averred that Filomena was aware of the sale; hence, the subsequent sale in favor of Filomena was rescissible, fraudulent, fictitious, or simulated. After trial, the RTC rendered a decision sustaining Filomena’s ownership. According to the RTC, Filomena was the one who registered the sale in good faith; as such, she has better right than Antonio. It rejected Antonio’s allegation of bad faith on the part of Filomena because no sufficient evidence was adduced to prove it. Likewise, the RTC found Antonio’s evidence of ownership questionable. Nevertheless, it declared Antonio a builder in good faith. Both parties appealed to the CA. Filomena assailed theOrder declaring Antonio as a builder in good faith while Antonio assalied the Order rendering Filomena as having a better right over the property. CA affirmed RTC's decision. Hence, the present petition for review before the Supreme Court. The question as to whether a possessor/builder is in good faith or b ad faith is a factual matter that cannot be raised in a petition for Certiorari. Moreover, it is not disputed that the construction of Antonio’s house was undertaken long before the sale in favor of Filomena; that when Filomena bought the property from Mar ia, Antonio’s house which he used as residence had already been erected on the property. As explained by CA, Antonio claims not being aware of any flaw in his title. He believed being the owner of the subject premises on account of the Deed of Sale there of in his favor despite his inability to register the same. The improvement was, in fact, introduced by Antonio prior to Filomena’s purchase of the land. x x x. Thus, the Court sustained the finding that Antonio is a builder in good faith. Under Article 448, a landowner is given the option to either appropriate the improvement as his own upon payment of the proper amount of indemnity, or sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in

Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made.

The pronouncement of this Court in Pecson v. CA, which was reiterated in Tuatis v. Escol, is instructive, viz.: The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila [40 Phil. 717 (1920)] that the said provision was formulated in trying to adjust the rights of the owner and possessor in good faith of a piece of land, to administer complete justice to both of them in such a way as neither one nor the other may enrich himself of that which does not belong to him. Guided by this precept, it is therefore the current market value of the improvements which should be made the basis of reimbursement. A contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount. Consequently, the parties should therefore be allowed to adduce evidence on the present market value of the apartment building upon which the trial court should base its finding as to the amount of reimbursement to be paid by the landowner. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.

‫امئاد كعم هللا‬ Topic: On Mortgage of real property: Heirs of Estelita Burgos-Lipat namely: Alan B. Lipat and Alfredo B. Lipat, Jr. vs. Heirs of Eugenio D. Trinidad namely: Asuncion R. Trinidad, et al., G.R. No. 185644, March 2, 2010 The one-year redemption period applied by the CA is the rule that generally applies to foreclosure of mortgage by a bank. The period of redemption is not tolled by the filing of a complaint or petition for annulment of the mortgage and the foreclosure sale conducted pursuant to the said mortgage. However, considering the exceptional circumstances surrounding this case, we will not apply the rule in this instance pro hac vice. In Lipat, this Court upheld the RTC decision giving petitioners five months and 17 days from the finality of the trial court’s decision to redeem their foreclosed property. Lipat, already final and executory, has therefore become the law of the case between the parties, including their heirs who are petitioners and respondents in this c ase. Consequently, petitioners had five months and 17 days from the finality of Lipat to exercise their right of redemption, even though this period was beyond one year from the date of registration of the sale. Thus, the CA erred (and even committed a gr ave abuse of discretion) when it insisted on a contrary ruling. The CA had no power to reverse this Court’s final and executory judgment. The CA overstepped its authority when it held that the right of redemption had already expired one year after the date of the registration of the certificate of sale. Like all other courts in our judicial system, the Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.

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REVIEWER IN PROPERTY 2011 (Compiled from the Books of Justice Jurado and Atty. Rabuya and recent Supreme Court cases)

CA must take its bearings from the rulings and decisions of this Court. Nevertheless, we note that the amount tendered by petitioners to redeem their foreclo sed property was 10 determined by the sheriff at the rate of one percent per month for only one year. Section 78 of the General Banking Act requires payment of the amount fixed by the court in the order of execution, with interest thereon at the rate specifie d in the mortgage contract, and all the costs and other judicial expenses incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property. The rate of interest specified in the mortgage contract shall be applied for the one -year period reckoned from the date of registration of the certificate of sale in accordance with the General Banking Act. However, since petitioners effectively had more than one year to exercise the right of redemption, justice, fairness and equity require that they pay 12% p.a. interest beyond the one-year period up to June 16, 2004 when Partas consigned the redemption price with the RTC.

‫امئاد كعم هللا‬

Disclaimer: The following are merely compiled from the books of Justice Desiderio P. Jurado and Atty. Elmer Rabuya, and Recent Jurisprudence of the Supreme Court and the non-referral to the specific annotations thereon should not be construed as an act of plagiarism. This is NOT FOR SALE. This is only or ACADEMIC PURPOSES.