Classification of Property

Excerpted from Civil Law, Vol. 2 by Justice Jose Vitug, pp. 3-6.

Strictly, the concept of "property" is more confined than "things"; in point of reference to the Civil Code of the Philippines, however, the two terms have been used rather inter-change-ably and may thus be considered synonymous (see Art. 426, Civil Code). The Code defines "property as all things which are or may be the object of appropriation" (Art. 414, Civil Code). It is generally said that property should have these elements: utility (capability of the thing to satisfy a human need), substantiality (independent exist­ence) and appropriability (susceptibility to ownership).

Immovable property may, in fine, be categorized into the following groupings:

1. By nature, such as land, roads, mines and quarries, wells and sewers (pars. 1 and 8, Art. 415, Civil Code) regardless of any other consideration;
   
2. By incorporation, such as buildings and other constructions adhered to the soil and, in general, those which are attached to an immovable in a fixed manner (pars. 1-3, Art. 415, Civil Code) irrespective of the ownership thereof (see Punzalan vs. Lacsama, 121 SCRA 381; lya vs. Valino, 103 Phil. 972);
   
3. By destination, such as objects for use or ornamentation placed in buildings or on lands by the owner of the immovable or his agent in such a manner that it reveals the intention to attach thpm permanently thereto, as well as machinery and other implements intended by the owner of the tenement for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work (pars. 4-7 and 9, Art. 415, Civil Code); and
   
4. By analogy, such as real rights over immovable property (par. 10, Art. 415, Civil Code).

Exceptionally, a house of light or mixed materials constructed on rented land has been held to be a valid object of a chattel mortgage, anchored on the rule that the parties to a contract may, by agreement, treat as personal property that which would otherwise be real property (Standard Oil Company vs. Jaramillo, 44 Phil. 632; see also Luna vs. Encarnacion, 91 Phil. 531). This pronouncement, however, has been clarified to mean that the exceptional rule is "good only insofar as the contracting parties are concerned" (Evangelista vs. Alto Surety & Insurance Co., Inc., 103 Phil. 401; see, however, Chua PengHian us. Court of Appeals, 133 SCRA 572), and thus inconclusive on third persons. In Tumalad us. Vicencio (41 SCRA 143), the Supreme Court, ruling on the effects of a chattel mortgage over real property, has added:

"Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise." x x x

The Tumalad decision is quoted with approval in Makati Leasing and Finance Corporation vs. Wearever Textile Mills, Inc. (122 SCRA 296). The Court has elaborated that while the chattel mortgage over real property may bind the parties thereto, neither third person acting in good faith nor the law would be affected by such agreement. Consonantly, a mortgagee under a real estate mortgage over the same property has preference over the chattel mortgage as long as he is in good faith. Similarly, in the foreclosure of the real property under a chattel mortgage, the procedure for such foreclosure should be those that are legally mandated for the foreclosure of a real estate mortgage (see Evangelista vs. Alto Surety & Insurance Co, Inc., 103 Phil. 401; see also Serg's Products, Inc. vs. PCU Leasing and Finance, Inc., 338 SCRA 499).

Real property by incorporation is immovable irrespective of the ownership thereof. In respect of real property by destination, however, ownership may be determinative of its character as such. Accordingly, if statues and machinery are placed not by the owner of the tenement but by a person having only a temporary right, such as by a lessee or usufructuary, the property could be considered personal (Burgos vs. Chief of Staff, 133 SCRA 800), except that where the contract of lease provides that the said improvements would belong to the lessor upon the termination of the lease, the lessee, in introducing the improvements, may be deemed the agent of the owner for purposes of then immobilizing the property (see Berkenkotter vs. Cu Unjieng, 61 Phil. 363; Davao Sawmill Co., Inc. vs. Castillo, 61 Phil. 709).

Held to be as real property by destination were a rice cleaning machinery installed on the owner's building for its industry (Leung Yee vs. Strong Machinery Co., 37 Phil. 644), as well as liquid containers and instruments intended by the owner of the premises to meet the needs of his work or industry (People's Bank & Trust Co. vs. Dahican Lumber Co., 20 SCRA 84; see also Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 7). Repair equipment to service a transportation business placed on a cement platform that could be moved around the shop, however, was held to be movable property since the equipment was merely to service the business (not a principal element thereof) and it was not affixed permanently on the land or building (Mindanao Bus Co. vs. City Assessor of Cagayan de Oro, 6 SCRA 197).

Vessels, irrespective of size, are movable property although such vessels have been treated in common law as a peculiar kind of personal property because of their value and registration requirements (see Philippine Refining Co. vs. Jarque, 61 Phil. 229).

Things which, in general, may readily be moved from place to place without destroying their nature or substance or impairing the real property to which they are fixed are movable property. Certain real property may also, by special law, be deemed to be personal property Pursuant to Article 417 of the Code, intangibles, like obligations and actions which have for their object movables or demandable sums or shares of stock in corporations or interest in partnerships, although they may have real property, are considered personalty.

Under the Chattel Mortgage Law, for purposes of sale, growing fruits may be considered personal property. Forces of nature which are brought under control by science are, under Article 416 of the Civil Code, also declared to be movable property.

Movable property is further classified into con­sumable or non-consumable. The consumable movables are those which cannot be used in a manner appropriate to their nature without being consumed; all others belong to non-consumables. Money may be considered consum­able (although physically it may belong to the category of non-consumables) because when money is used it leaves the owner who thereby loses it. Movables may also be fungibles, which are replaceable quantitatively and qualitatively, and non-fungibles which are not as replaceable in such equivalents.

Personal rights (rights in personam) and real rights (rights in rem) may either be real or personal property depending on the nature of the property upon which the right is exercised. Hence, ownership (a real right enforceable against the whole world) may be personal property if the thing owned is movable property and real property if that ownership is on an immovable property.

Home Page

Legal Aspects
  Philippines Civil Code
   Legal Foundations

Articles
  Explore “Exotic Cebu”
  Real Estate Basics
  Discrete Realty Cases

Helpful Supplements
  Documentation Guides
  Real Estate Forms
  Government Documents

Find Properties
  More Properties
  Setup Buyer Profile
  List Your Properties

Meet the Agents
Search diligent real estate executives nationwide, read agents’ profile & more.

Current Events
Latest real estate updates all over Cebu and Philippines & more.

Conversion Tables
Factors for computing equal monthly amortizations at various interest rates & more.