RE: Real Property Definition

CIVIL CODE
1. Relevant Provisions
Article 414. All things which are or may be the object of appropriation are considered
either:
(1) Immovable or real property; or
(2) Movable or personal property. (333)
Article 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are attached to the land or form
an integral part of an immovable;
(3) 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;
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in
buildings or on lands by the owner of the immovable in such a manner that it
reveals the intention to attach them permanently to the tenements;
(5) 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;
(6) 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;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the
bed, and waters either running or stagnant;
(9) Docks and structures which, though floating, are intended by their nature and
object to remain at a fixed place on a river, lake, or coast;

(10) Contracts for public works, and servitudes and other real rights over
immovable property. (334a)
2. Relevant Jurisprudence
Articles 334 and 335 of the Civil Code (now Articles 414 and 415 of the New 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. 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. (Standard Oil Co. of New York v. Jaramillo, G.R. No. L20329, March 16, 1923)
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
Land is the best example of immovable property. It is immovable by its very nature. And
even if land is moved by an earthquake, an extraordinary happening, the land should still be
considered immovable. A shovelful of land however, should be considered personal property,
since this no longer adheres to the soil. If land is rented, it is still immovable. (Paras,
Property Law)
The inclusion of building, separate and distinct from the land, in Art. 415, can only mean
that a building is by itself an immovable property. (Lopez v. Oroso, Jr., et al., L-10817-18,
Feb. 28, 1958; Assoc., Inc. and Surety Co., Inc. v. Iya, et al., L-10837-38, May 30, 1958).
The building is real property, therefore, its sale as annotated in the Chattel Mortgage Registry
can- not be given the legal effect of registration in the Registry of Real Property. The mere
fact that the parties decided to deal with the building as personal property does not change its
character as real property. Thus, neither the original registry in the chattel mortgage registry,
nor the annotation in said registry of the sale of the mortgaged property had any effect on the
building. (Leung Yee v. Strong Machinery Co., 37 Phil. 644)
The purchase of the land does not entail acquisition of the building as a building, by itself, is
an immovable property distinct from the land. It can be a separate subject of contracts.
(Midway Marine v Castro, G.R. No. 189061, August 6, 2014)
On the doctrine of estoppel, an immovable property may be an object of a chattel mortgage.
It can only be considered as movable between the parties involved and will not bind their
persons. (Tumalad v Vicencio, G.R. No. L-30173 September 30, 1971)
(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral
part of an immovable;
No matter what their size may be, 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. This is because
although no longer attached, the timber still forms an integral part of the timber land.
immovable. (Paras, Property Law, citing 3 Manresa 22)
trees 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 person to whom the land is adjudicated. (Lavarro v. Labitoria, 54 Phil. 788)
Growing crops, by express codal provisions, are considered real property by incorporation.
Moreover, under the Rules of Court, growing crops are attached in the same way as real
property. (Rule 57, Sec. 7)
Under the chattel mortgage law, growing crops may be considered as personal property, and
may thus be the subject of a chattel mortgage. (Sibal v. Valdez, 50 Phil. 512)
(3) 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, for the incorporated thing to be considered real property, the injury
or breakage or deterioration in case of separation, must be substantial. (Paras, Property Law)
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or
on lands by the owner of the immovable in such a manner that it reveals the intention to
attach them permanently to the tenements;
The objects must be placed by the owner of the im- movable (buildings or lands) and not
necessarily by the owner of the object. Of course, the owner of the building or land may act
thru his agent, or if he be insane, thru his duly appointed guardian. (See Valdez v. Altagracia,
225 U.S. 58).
If placed by a mere tenant, the objects must remain chattels or personalty for the purposes of
the Chattel Mortgage Law. (Davao Sawmill v. Castillo, 61 Phil. 709).
(5) 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;
Paras cited the following essential requisites to fall under paragraph 5 of Art. 415:
1) The placing must be made by the owner of the tenement, his agent, or duly authorized
legal representative.
2) The industry or works must be carried on in the building or on the land. A
transportation business is not carried on in a building or in the compound. (Mindanao
Bus Co. v. City Assessor, L-17870, Sep. 29, 1962).

3) The machines, etc., must tend directly to meet the needs of said industry or works.
(ADAPTABILITY).
4) The machines must be essential and principal elements in the industry, and not merely
incidental. [Thus, cash registers, typewriters, calculators, computers, fax machines,
etc., usually found and used in hotels, restaurants, theaters, etc. are merely
incidentals, and not and should not be considered immobilized by destination, for
these businesses can continue or carry on their functions without these equipments.
The same applies to the repair or service shop of the transportation business be- cause
the vehicles may be repaired or serviced in another shop belonging to another. On the
other hand, machineries of breweries used in the manufacture of liquor and soft
drinks, though movable by
Machines placed in a sugar central (and therefore, if the central has already been the subject of
a real estate mortgage, the machines become subject also to such mortgage). (Berkenkotter v.
Cu Unjieng, 61 Phil. 663)
Machines attached to concrete foundations of buildings in a fixed manner such that they
cannot be separated therefrom without unbolting the same and cutting some of their wooden
supports. (Machinery v. Pecson, L-7057, Oct. 29, 1954)
Although the tanks are not embedded in the land, they are considered as improvements on the
land, thereby increasing its utility and rendering it useful to the industry. It is also installed as
receptacles required for the industry. (Meralco v CBAA, G.R. No. L-47943 May 31, 1982)
Machinery which is movable in its nature becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed by a tenant, a usufructuary, or a person
having only a temporary right, unless such person acted as the agent of the ownerAs a rule,
the machinery should be considered as personal, since it was not placed on the land by the
owner of said land. Immobilization by destination or purpose cannot generally be made by a
person whose possession of the property is only temporary, otherwise we will be forced to
presume that he intended to give the property permanently away in favor of the owner of the
premises. (Davao Sawmill Co., Inc. v. Castillo 61 Phil. 709)
When a tenant had promised to give the machinery later to the owner of the land; or suppose
the tenant acted only as the agent of the owner of the land, the machinery would be considered
as real property in both instances. Machinery placed on property by a tenant does not become
immobilized: when however, a tenant places it there pursuant to a contract that it shall belong
to the owner, it becomes immobilized as to that tenant and his assigns having notice, although
it does not become so as to the creditors not having legal notice of the lease. (Paras, Property
Law, citing Valdez v. Central Altagracia, Inc. 225 U.S. 58)
The mortgage of a parcel of land generally includes all future improvements that may be found
on said parcellike the additional machines and sugar mill purchased. Said additional
machinery are real properties because they are essential and principal elements of the sugar
central. Without them, the sugar central would be unable to carry out its industrial purpose.
(Paras, Property Law, citing B.H. Berkenkotter v. Cu Unjieng 61 Phil. 663)

Where the mortgage deed also stated that the mortgage included essential after-acquired
properties such as machinery, fixtures, tools, and equipment and that the real mortgage was
then registered as such in the Registry of Deeds, the after-acquired properties therein would be
considered as immobilized by destination (they were used in the development of the lumber
concession). It is important to note however that the parties to the real mortgage had treated
the after-acquired properties as real properties by agreeing that they would be automatically
subject to the lien of the real estate mortgage executed by them. (Peoples Bank and Trust Co.
v. Dahican Lumber Co. L-17500, May 16, 1967) In the Davao Sawmill Co. v. Castillo case,
the parties had treated after-acquired properties, including the machines, as personal property
by executing chattel mortgages thereon. Hence, this Davao Sawmill case cannot apply to the
instant case. (Paras, Property Law)
While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199 (o) and 232 of the said Code, respectively, gives an extensive
definition of what constitutes "machinery" and unequivocally subjects such machinery to real
property tax. The Court reiterates that the machinery subject to real property tax under the
Local Government Code "may or may not be attached, permanently or temporarily to the real
property;" and the physical facilities for production, installations, and appurtenant service
facilities, those which are mobile, self-powered or self-propelled, or are not permanently
attached must (a) be actually, directly, and exclusively used to meet the needs of the particular
industry, business, or activity; and (2) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and,
buildings, roads and constructions of all kinds adhered to the soil." The land, buildings, and
roads are immovables by nature "which cannot be moved from place to place," whereas the
constructions adhered to the soil are immovables by incorporation "which are essentially
movables, but are attached to an immovable in such manner as to be an integral part thereof."
Article 415, paragraph (3) of the Civil Code, referring to "[e]verything 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," are likewise immovables by
incorporation. In contrast, the Local Government Code considers as real property machinery
which "may or may not be attached, permanently or temporarily to the real property," and even
those which are "mobile."
Article 415, paragraph (5) of the Civil Code considers as immovables or real properties
"[m]achinery, 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." The Civil Code, however,
does not define "machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by
destination, or "those which are essentially movables, 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." These properties, including machinery, become immobilized if the
following requisites concur: (a) they are placed in the tenement by the owner of such

tenement; (b) they are destined for use in the industry or work in the tenement; and (c) they
tend to directly meet the needs of said industry or works. The first two requisites are not found
anywhere in the Local Government Code.
MERALCO insists on harmonizing the aforementioned provisions of the Civil Code and the
Local Government Code. The Court disagrees, however, for this would necessarily mean
imposing additional requirements for classifying machinery as real property for real property
tax purposes not provided for, or even in direct conflict with, the provisions of the Local
Government Code.
As between the Civil Code, a general law governing property and property relations, and the
Local Government Code, a special law granting local government units the power to impose
real property tax, then the latter shall prevail. Therefore, for determining whether machinery is
real property subject to real property tax, the definition and requirements under the Local
Government Code are controlling. (MERALCO v. The City Assessor and City Treasurer of
Lucena City, G.R. No. 166102, August 5, 2015)
(6) 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;
(7) Fertilizer actually used on a piece of land;
Fertilizers still in the barn and even those already on the ground but wrapped inside some
newspapers or any other covering are still to be considered personal property, for they have
not yet been actually used or spread over the land. (Paras, Property Law)
Fertilizer, manure in this case, only forms part of the land as real property if it has been
spread out with the intention of improving the land. In this case, the manure has no use for
the street. (Haslem v. Lockwood, 37 Conn 500 (1871))
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and
waters either running or stagnant;
Mines, including the minerals still attached thereto, are real properties, but when the minerals
have been extracted, the latter become chattels. (See 40 C.J., pp. 903-904)
Slag dump is the dirt and soil taken from a mine and piled upon the surface of the ground.
Inside the dump can be found the minerals. (Nordstrom v. Sivertson-John- son Min., etc.
Co., 5 Alaska 204)
The waters referred to are those still attached to or running thru the soil or ground. But
water itself as distinguished from waters, is clearly personal property. Upon the other
hand, canals, rivers, lakes, and such part of the sea as may be the object of appropriation, are
classified as real property. (Paras, Property Law)

(9) Docks and structures which, though floating, are intended by their nature and object to
remain at a fixed place on a river, lake, or coast;
Vessels are considered personal property. As a matter of fact, they are indeed very movable.
(See Philippine Refining Co., Inc. v. Jarque, 61 Phil. 229) Because they are personal
property, they may be the subject of a chattel mortgage. (McMicking v. Banco EspaolFilipino, 13 Phil. 429; Arroyo v. Yu de Sane, 54 Phil. 7)
(10) Contracts for public works, and servitudes and other real rights over immovable
property
Sugar quotas are real property, for they are by law considered real rights over immovable
property just like servitudes and easements. (See Art. 415, No. 10). EO 873 regards them as
improvements attached, though not physically, to the land. (Presbitero v. Fernandez L-19527,
Mar. 30, 1963)
REAL PROPERTY TAXATION
1. DOF Department Order No. 037-09, October 19, 2009
2.1 Real Property is an interest in real estate. This interest is normally recorded in a
formal document, such as a title deed or lease. Therefore, property is a legal concept
distinct from real estate, which represents a physical asset. Real property encompasses all
the rights, interests, and benefits related to the ownership of real estate. In contrast, real
estate encompasses the land itself, all things naturally occurring on the land, and all
things attached to the land, such as buildings and site improvements.
A definition of immovable or real property is provided in Article Nos. 414 (1) & 415,
Book II of the Civil Code. Reference is made to real rights over immovable property,
however no reference is made regarding to interests in immovable property.
2. Local Government Code of 1991 (Republic Act No. 7160)
Section 232. Power to Levy Real Property Tax. - A province or city or a municipality
within the Metropolitan Manila Area my levy an annual ad valorem tax on real property
such as land, building, machinery, and other improvement not hereinafter specifically
exempted.
Section 199. Definitions. - When used in this Title:
(c) "Ad Valorem Tax" is a levy on real property determined on the basis of a fixed
proportion of the value of the property;
(d) "Agricultural Land" is land devoted principally to the planting of trees, raising of
crops, livestock and poultry, dairying, salt making, inland fishing and similar aquacultural
activities, and other agricultural activities, and is not classified as mineral, timber,
residential, commercial or industrial land;

(i) "Commercial Land" is land devoted principally for the object of profit and is not
classified as agricultural, industrial, mineral, timber, or residential land;
(m) "Improvement" is a valuable addition made to a property or an amelioration in its
condition, amounting to more than a mere repair or replacement of parts involving capital
expenditures and labor, which is intended to enhance its value, beauty or utility or to
adapt it for new or further purposes;
(n) "Industrial Land" is land devoted principally to industrial activity as capital
investment and is not classified as agricultural, commercial, timber, mineral or residential
land;
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments,
appliances or apparatus which may or may not be attached, permanently or temporarily,
to the real property. It includes the physical facilities for production, the installations and
appurtenant service facilities, those which are mobile, self-powered or self-propelled, and
those not permanently attached to the real property which are actually, directly, and
exclusively used to meet the needs of the particular industry, business or activity and
which by their very nature and purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial or agricultural purposes;
(p) "Mineral Lands" are lands in which minerals, metallic or non-metallic, exist in
sufficient quantity or grade to justify the necessary expenditures to extract and utilize
such materials;
(u) "Residential Land" is land principally devoted to habitation.
Section 215. Classes of Real Property for Assessment Purposes. - For purposes of
assessment, real property shall be classified as residential, agricultural, commercial,
industrial, mineral, timberland or special.
The city or municipality within the Metropolitan Manila Area, through their respective
sanggunian, shall have the power to classify lands as residential, agricultural,
commercial, industrial, mineral, timberland, or special in accordance with their zoning
ordinances.
Section 216. Special Classes of Real Property. - All lands, buildings, and other
improvements thereon actually, directly and exclusively used for hospitals, cultural, or
scientific purposes, and those owned and used by local water districts, and governmentowned or controlled corporations rendering essential public services in the supply and
distribution of water and/or generation and transmission of electric power shall be
classified as special.
Section 217. Actual Use of Real Property as Basis for Assessment. - Real property shall
be classified, valued and assessed on the basis of its actual use regardless of where
located, whoever owns it, and whoever uses it.

Section 237. Idle Lands, Coverage. - For purposes of real property taxation, idle lands
shall include the following:
(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation,
dairying, inland fishery, and other agricultural uses, one-half (1/2) of which
remain uncultivated or unimproved by the owner of the property or person having
legal interest therein. Agricultural lands planted to permanent or perennial crops
with at least fifty (50) trees to a hectare shall not be considered idle lands. Lands
actually used for grazing purposes shall likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city or municipality, more than one
thousand (1,000) square meters in area one-half (1/2) of which remain unutilized
or unimproved by the owner of the property or person having legal interest
therein.