CLASSIFICATION OF OWNERSHIP

There are three (3) types of ownership under the New Civil Code, namely: (1)
public dominion (Art.420); (2) patrimonial (Art. 421 and 422); (3) private (Art.425)
1. Public Dominion refers to those properties that belong to the State in its public
capacity. The State has control and administration over them, and the power to dispose
pursuant to special laws, thus:
a. For public use such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, railroads, and others of similar character. Art.
420, par. (1)
Property for public use is not within the commerce of man and,
consequently is inalienable and not subject to prescription or execution. Vda. de
Tan Toco v. Municipal Council of Iloilo, 49 Phil. 52 (1926)
c. For public enjoyment The national parks, wildlife sanctuaries, flora
and fauna are examples. There are 67 national parks, and (7) wildlife sanctuaries
covering 1.3-million hectares in the Philippines.
2. Patrimonial These are real property of the State that may be alienated and
disposed of: (a) pursuant to (1) the Philippine Constitution and (2) special laws such as
Public Land Act, or (b) because it had ceased to be intended for public use, services or
enjoyment under Article 421, New Civil Code.
---------------------------------------------------------------------------------------------The testator cannot dispose of that portion of his estate called LEGITIMATE
which is reserved for his compulsory heirs, namely: the legitimate children or
descendants, legitimate parents and ascendants, his widow: acknowledged natural
children, and natural children by legal fiction as well as illegitimate children.
-------------------------------------------------------------------------------------------PRIVATE LAND, therefore, may be, as it has been, defined as any land of
private ownership. It includes lands owned by private individuals as well as those
classified as patrimonial property of the State, or its branches, agencies and
instrumentalities.
1. Private Property

Private property connotes ownership of an immovable or real property,

and/or a movable or personal property. Specifically, it is comprised of all
property that belongs to private persons, natural or juridical, either judicially or
collectively.
And, real property is described in the New Civil Code as (1) the immovable
or property which consists principally of land: (2) those movables as buildings,
trees, plants, statues or other subjects placed on land that reveals the intention to
have them permanently attached to the land; and (3) the real rights over the
immovable property.
2. Patrimonial Property
Property ownership, or land private ownership and private property are
synonymous. It also means, and includes the patrimonial property of the
State, provinces, cities and municipalities. These are property of public
dominion that are no longer intended or needed: (1) for public use; (2) for
public service; or (3) for the development of national wealth. Some of these
are rivers, shores, banks, ports, fortresses, roads and streets, parks and others.
-----------------------------------------------------------------------------------Real Estate may be classified according to (a) its nature or use; such as (1) it is
agricultural or forest, one of the natural resources of the country, and (2) by conversion, it
has become residential, commercial or industrial in actual use.
And (b) by ownership, real estate (1) original belongs to the State, as of public
dominion or domain, or patrimonial which is for private use by the State. It may also (2)
belong to private person and/or associations and corporations, by virtue of the right of
ownership conferred upon them by law. These may be designated as (a) the community or
conjugal partnership property, or (b) exclusive property of each spouse, (c) the exclusive
property of each spouse, (d) the property assigned to each spouse after legal separation,
or by the regime of separation of property, or due to the liquidation of any of the regime
of property ownership, and (e) the property regime under union of man and woman
without marriage.
-----------------------------------------------------------------1. Types of Sales Agreement There are several types of Sales Agreement from
which the contracting parties in realty sales may choose to suit their needs and
convenience, namely:
a. Absolute Sale This is an agreement that has no condition whatever. Rather, it
imposes upon the VENDOR the obligation to deliver the real estate, subject matter of the
agreement, to the VENDEE who, upon receipt of the property, hands over and pays the
purchase price that has been previously agreed upon to the VENDOR.

There are two (2) kinds of transaction under this category:

(1) The Deed of Absolute Sale where both parties (VENDOR and VENDEE)
agree on, and accept the real estate to be, or being conveyed, and price therefore that the
VENDEE should pay for it. This transaction is most common where the title of the real
estate, subject sale, is free from, and clear of, any alien or encumbrance whatever. No
other condition is necessary, except that the actual delivery and transfer of the property to
the VENDEE should be done without delay. Then, the Deed of Absolute Sale is registered
in the proper Registry of Deed pursuant to the requirements of Torrens Registration Law.
(2) Sale in Exchange, or Barter where the real property is the subject of the
transaction, is deeded in exchange of, and for, another real property that is acceptable to
the VENDOR, with or without additional monetary consideration. It is essential in the
transaction that the title of both subject properties in the exchange is valid and
unencumbered, or free from any liens or encumbrances of whatever nature.
(b) Conditional Sale. This is an agreement, to Sell and Buy real estate with
certain conditions that must be accomplished by either, or both, the VENDOR
and VENDEE, so as to extinguish and/or create ownership over the subject over
subject property. This is merely an executory contract in contemplation of the
Civil Law, and the right of ownership is withheld in the meantime. In other
words, the certificate of title (original or Transfer) of the real property is not
turned over the VENDEE until and after certain conditions have been
accomplished by either, or both the VENDOR. Thereafter, it becomes, in fact
and law, an executed contract. This agreement may be one on:
(1) Sale on Installments This is commonly adopted for the sale of lots in a land
subdivision, or units in a condominium or townhouse project. The principal features of
the Agreement are:
(1-a) The purchase price is fixed at a certain amount that shall be paid in equal
monthly or yearly installments for a period of five (5), or ten (10) years;
(2) Contract to Sell This is similar to Sale on installments, except that the
period allowed for the final payment of the purchase price is much shorter in duration.
(3) Pacto de Retro The sale in which the VENDOR is granted the right to
repurchase the property sold on a certain date fixed in the Contract. This is
done by returning to the VENDEE; (a) the entire purchase price including (b)
the expenses for the preparation of the Contract, and (c) the necessary and
useful expenses on the property sold. (Art. 1616, New Civil Code). This
transaction is termed conventional redemption under Article 1691 of the
New Civil Code.

c. There are other forms of Conditional Sale where ownership and possession of
subject property are transferred to the VENDEE, upon execution of the Contract,
such as:
(1) Sale with Mortgage. A portion of the purchase price is initially paid by the
VENDEE, and the VENDOR delivers possession and ownership of subject property to
the VENDOR who, thereafter, executes a Deed of Mortgage on the same property in
favor of the VENDOR to guarantee payment in full of the balance of the purchase price.
(2) Sale with the Assumption of Mortgage. The VENDOR pays in cash a
portion of subject property to the VENDOR who assumes the payment of the existing
mortgage on the property that represents the balance of the purchase price.
(3) Dacion en Pago. This is an agreement where the encumbered property of
the VENDOR is sold by the latter to his creditor or mortgagee, as VENDEE, to satisfy, or
in payment of, his existing loan and other charges.
d. Option distinguished from Sale. An option is a mere promise or offer to buy
or sell real estate. An option to purchase, for instance, is a right of election (of a
prospective buyer) to purchase, which when exercised by him, it becomes a contract of
sale.
3. Transfer of Ownership
a. Ownership of real property is transferred to the vendee by actual or symbolic
delivery. Actual delivery is done when the property is placed in the control and
possession of the vendee. The execution of the public instrument authorizes the buyer to
use the document as proof of his ownership. This is symbolic delivery of possession of
property, or by legal fiction, the possession is transferred although a third person is
actually in possession of the property as lessee, as in the case of an existing lease for
fixed period. Thus, constructive possession is transferred to the vendee when the vendor,
at the moment of sale executed in a public instrument and delivered to the vendee, the
vendor has actual possession of the property.
(1) Rescission is defined by laws as the obligation to return: (a) the things or real
property that were the object/s of the Contract together with (a) their fruits, if any,
represented by the existing rentals, if the property is leased, and/or (b) the interests
arising from the current mortgage, or similar lien, if any.

------------------------------------------------The equity of redemption should not be confused with the right of redemption.
The former is exercised before the intended sale of the land. The purposed sale must be

communicated to all redemptioners. On the other hand, the latter is resorted to after the
sale has been perfected.
b. Conventional Redemption takes place when the vendor reserves the right to
repurchase the property sold by returning: (1) the purchase price, (2) the expenses of the
contract and other legitimate expenses, and (3) the necessary and useful expenses made
on the property. The necessary expenses are those for the preservation of the property,
and the useful expenses are the particular purpose the property is intended, the Court of
Appeals so declared.
The contract of sale may provide a period of repurchase within ten (10) years.
However, if the contract is silent on this, the law prescribes only four (4) years from the
execution of the contract.
e. Mortgage and Antichresis, distinguished. - Antchresis is an agreement
whereby the creditor (1) takes over the possession of the immovable (real estate) of the
debtor with (2) the right to receive the fruits or rentals of the property and (3) the
obligation to apply them in payment of (a) the interest, if any, of the loan extended by
him, and, thereafter, (b) the principal of the credit. Unless stipulated otherwise, the
creditor is also obliged to (c) pay the taxes and charges upon the property: and (d) bear
the expenses necessary for its preservation and repair.
(1) Aliens as Mortgagees. - An alien may accept mortgage but he is prohibited
from (1) taking possession of the mortgaged property during the existence of the
mortgage, and even after default of the mortgage except for the purpose of (a) foreclosure
of mortgage, or (b) receivership for a period of five (5) years from actual possession; and
(2) participating in the bidding, or taking part in any sale of the property mortgaged in
case of foreclosure.
(2) The mortgagee has the right to rely on what appears on the face of the
certificate of title. In the absence of anything to excite suspicion, the mortgagee is under
no obligation to look beyond thereon. However, if the title bears the name of the real
owner and the mortgage was constituted by an impostor without the consent of the owner,
the mortgage is null and void.
c. The mortgage contract must be in public instrument, and recorded in the
Registry of Deeds. Thus, it has been constituted in as much as the deed of mortgage is
mere private document and not registered.

Foreclosure of Mortgage. The proceeding by which the mortgagee-creditor

subjects the property mortgage to be sold at public auction, and the proceeds of the sale is
applied to the satisfaction of his credit.

a.Extra-Judicial Foreclosure. This is resorted to buy the mortgagee only when

a special power of attorney is provided in the original contract of mortgage authorizing
the mortgagee to sell the mortgaged property at public auction with the procedure
prescribed in Act No. 3135, as amended by Act No. 3135, as amended by Act No. 4110.
Pursuant to this authority, the mortgagee applies for foreclosure with the sheriff
who releases the publication of the sale at a fixed date, undertakes the sale in a public
auction, issues the certificates of sale to the winning bidder, and causes the certificate of
title.
b. Judicial Foreclosure. The mortgagee files the complaint with the proper
Court which, after due hearing, orders the mortgagor to pay the obligation within ninety
(90) days thereafter. Should the mortgagor fail to do so, the Court orders the sale of the
subject property in a public auction, and the sheriff issues the certificate of sale to the
winning bidder, and the Court confirms the sale. The mortgagor pays the balance of the
obligation if the proceeds of the sale is not sufficient. Execution follows thereafter.
-----------------------------------------Lease. The contract of lease is an agreement whereby one binds himself: (1) to
give the right to use or enjoy the possession of real estate, (2) for a certain price or rental,
and (3) for definite or indefinite period.
Implied New Lease. Where (a) after the expiration of the lease, (2) the lessee
continues enjoying the lease for fifteen (15) days thereafter, (3) with the acquiescence of
the lessor, and (4) without previous notice to vacate has been served upon him prior to the
expiration of the lease, a new IMPLIED LEASE is created for a period of time other than
that of the original contract, but for the term established by law. (Arts. 1670, 1682 &
1687, New Civil Code).
Lease of Private lands by foreign investors. - Republic Act No. 7652 declares
the policy of the State to encourage foreign investments consistent with constitutional
mandate to conserve and develop national patrimony. Towards this end, the law would
allow any foreign investors investing in the Philippines to lease private lands (1) for a
period not exceeding fifty (50) years, renewable for a period not more than twenty-five
(25) years.
----------------------------------------------

Termination of the Regime. The absolute community regime terminates: (a)

upon the death of either spouse, (b) by court decree of legal separation. (c) when the
marriage is annulled or declared void by the Court, and (d) by judicial separation of
property during the marriage under Chapter 5, Articles 134 to 142, Family Code.

-----------------------------------An alien may be a lessee for 30 years renewable for not more than 25 years. He
may also grant loans and becomes a mortgagee in certain cases specified by law. He is
allowed to purchase a condominium unit, or set up condominium project on leases land.
Juridical entities.- (1) Foreign embassies may acquire or lease private lands for
their official use pursuant to the Vienna Convention on Diplomatic Relations, effective
August 24, 1964, ratified by the Philippines, re Articles 21, 23 and 30, on October 11,
1965.
------------------------------------------------Land Use and Zoning. Land use plan designates certain areas of a city or
municipality into existing trends and patterns of growth. Zoning map indicates the
different land uses such as residential, commercial, industrial and others. These are
implemented upon approval by the local government after which it becomes legally
binding.
-----------------------------------------------In Republic Act 7279, The developer may also comply with this requirement by:
(1) the development of a new settlement; (2) slum upgrading or renewal of areas for
priority development; (3) joint-venture projects with the local government units or any of
the housing agencies, or (4) participation in the community mortgage program (CMP).
-------------------------------------------------Thus, any foreign investor investing in the Philippines shall be allowed to lease
private lands for a period of fifty (50) years, renewable ONCE for not more than twentyfive (25) years.
------------------------------------------------Acquisition of Land Ownership
There are several modes of acquiring ownership of land, namely: (a) occupation
and possession, (b) prescription, (c) tradition, (d) donation, (e) testate and intestate
succession, and (f) grant.
1. Occupation and possession. Occupation is the act of entering into, and
taking over a parcel of land that appears vacant and abandoned. If the land belongs to the
State, the requirements of the Public Land Act must be complied with, after the taking, to
acquire ownership thereof. Or, perhaps, it is temporarily out of the owners control.
Then, it is a private land. It cannot be acquired by the simple act of occupation and
possession.
2. Prescription. - Land ownership and other real rights or obligations may be
acquired through the lapse of time. (Art. 1106, NCCI). Thus, the peaceful and adverse

possession of land that is continuous and uninterrupted for certain period of time may be
ordinary prescription that is, with just title and in good faith, or by extraordinary
prescription without need of title and good faith, thirty (30) years.
-------------------------------------------------------------AGRICULTURAL LANDS of the public domain. The 1935 Philippine
Constitution classified agricultural lands into: (a) public agricultural land, and (b) private
agricultural land.
(1) Public Agricultural Land. This land may be acquired leased, or hold by (a)
qualified corporation or association with not more than 1024 hectares (b) Filipino citizens
with more than 144 hectares by purchase, or 1024 hectares by lease, and 24 hectares by
homestead. Grazing land may be leased to an individual or corporation covering not more
than 2000 hectares. Lease period is 25 years renewable for another 25 years.
(2) Private Agricultural Land. - The assignment or transfer of private
agricultural land is expressly limited to: (a) Filipino citizens or corporations and
associations, 60% of the capital of which belong to Filipino citizens: and (b) only by
hereditary succession. ALIENS are not, therefore, allowed to acquire or hold PRIVATE
AGRICULTURAL LAND.
The phrase private agricultural land in Section 3 and 5 Article XIII was
interpreted to include residential lands or private lands. The purchaser in the celebrated
case of Krivenko v. Register of Deeds, being an alien could not acquire an urban or
residential lot.
-----------------------------------------------------The Economics of Real Estate
1. ECONOMICS is a social science concerned with the study of human behavior
and choices towards an economic good such as real estate. It involves the description and
analysis of the production, distribution and consumption of real estate resources as well
as its transfer or exchange.
Urban land economics deals primarily with the utilization of land resources to
attain the objectives the community, and the country as a whole, seeks to attain for its
benefit and satisfaction. It consists of the development of real estate as an economic
commodity in relation to environment, and subject to government policies and
regulations.
---------------------------------------------------As regards hidden treasures below the surface of the land, the New Civil Code
provides:
Article 438. Hidden treasure belongs to the owner of the land, building or other
property on which it is found.

Nevertheless, when the discovery is made on the property of another, or of the

State, or any of the subdivision, and by chance, one-half thereof shall be allowed to the
finder. If the finder is trespasser, he shall not be entitled to any share of the treasure.
If the things found be of interest to science or the arts, the State may acquire them
at their just price, which shall be divided in conformity with the rule stated.
Article 459. By treasure is understood, for legal purposes, any hidden and
unknown deposit of money, jewelry, or other precious objects, the lawful ownership of
which does not appear.
Thus, hidden treasures belong to the owner of the land or building in which they
are found. For legal purposes, the treasure must be any hidden and unknown deposits of
money, jewelry, or other precious objects, the lawful ownership of which does not
appear. The finder, other than the owner, shall divide the value of the treasure in equal
share with the landowner. But, if the finder is a trespasser or squatter, he shall not be
entitled to any share.
------------------------------------------------1. Alienation of public land. Only Filipino citizens are qualified to acquire
alienable public lands. Private corporations or associations are not allowed to hold such
lands except by lease.
a. Homestead Settlement. The application for homestead must be (1) a Filipino
Citizens, over eighteen (18) years ago, or head of a family who does not own more than
24 hectares of land, or has not received any gratuitous allotment of more than 24 hectares
of land since the occupation of the Islands by the United States or (2) a married woman
when (a) she is living separately from her husband, or (b) her husband is insane, or
physically incapacitated to work. And, (3) a Non-Christian Filipino may apply for
homestead entry in any of the reservations set aside for Non-Christian Tribes prior to or
after the expiration of his lone (1) year of occupation for four (4) hectares.
Only one homestead entry is allowed, and no one has been granted his original
homestead may acquire a homestead, unless he has granted less than 24 hectares.
----------------------------------------------Sale A Filipino citizen, of legal age, or head of family (not necessarily of legal
age) may purchase not more than 144 hectares tract of disposable agricultural land.
FREE PATENT is deemed final and conclusive, thus action for the annulment of
the title can no longer be entertained by the Courts.
The land acquired by FREE PATENT and later sold may be repurchased within
five (5) years from the date of conveyance.

--------------------------------------------The real property declared for the first time is assessed for the period during
which it should have been liable, but not for more than TEN (10) YEARS prior to the
date of the initial assessment. Sec.222, LGC. See Section 223 for procedure of new or
revised Assessment.
Community Tax
1. Cities or municipalities may levy tax on (a) every inhabitant (of the
Philippines) eighteen (18) years of age or over, (b) who has been regularly employed on a
wage or salary basis for at least thirty (30) consecutive year, or (c) who is engaged in
business or occupation, or (d) who owns real property with an aggregate assessed value
of One Thousand (P1,000.00) pesos or more, or (e) who is required to file an income tax
return.
The annual community tax is Five (P5.00) pesos and an annual additional tax of
one (P1.00) pesos for every One thousand pesos (P1,000.00) of income, regardless of
whether from business, exercise of profession or from property which is no case shall
exceed Five thousand (P5,000.00) pesos.
In case of husband and wife, the additional tax shall be based upon the total
property owned by them and the total gross receipts or earnings derived by them.
Sec.157, LGC
2. Every corporation no matter how created or organized, whether domestic or
resident foreign, engaged in or doing business in the Philippines, shall pay an annual
community tax of Five hundred (P500.00) pesos, and annual additional tax which shall
not exceed Ten thousand (P10,000.00) pesos, as follows: (1) Two (P2.00) pesos for every
Five thousand (P5,000.00) pesos worth of real property in the Philippines owned by it
during the preceding year based on the valuation used for payment of real property tax
found in the assessment rolls of the city or municipality where the real property is
situated; and (2) Two (P2.00) pesos for every Five thousand (P5,000.00)pesos of gross
receipts or earnings derived by from its business in the Philippines during the preceding
year. And, the dividends received by a corporation from another corporation however
shall, for the purpose of the additional tax be considered as part of he gross receipts or
earnings of said corporation, Sec.158 LGC.
3. Payment of the tax. The community tax accrues on the first (1 st) day of
January, every year, which shall be paid na/, ot later than the last day of February of each
year. A corporation organized on or before the last day of June is liable for the community
tax for that year. But, those organized on or before the last day of March has twenty (20)
days within which to pay the community tax without becoming delinquent. And, those
established and organized on or after July first (1st) is not subject to the community tax
for that year. Sec. 161, LGC.

4. Community Tax Certificate. This is issued to every person or corporation

upon payment of the community tax, and each certificate issued costs One (P1.00) peso.
The presentation of this certificate is essential when an individual acknowledges any
document before a notary public. Sec. 162, (a), LGC.
------------------------------------------Deed of Exchange of real properties. - Parties to an exchange of real properties
located in the Philippines classified as capital assets are subject to the FIVE (5%)
PERCENT capital gains tax based on the Fair Market Value (Zonal Value) of the
properties exchanged. BIR Ruling No. 308-87, Thus:
(iii) In two (2) instances where the Deeds of Exchange of real property executed
by the parties, voluntarily and without consideration because in the second instance one
of the parties is jobless, exemption from the payment of capital gains tax on the exchange
transactions was denied, for gains presumed to have been realized from the sale,
exchange or other forms of conditional sales, by individuals including estate or other
forms of conditional sales, by individuals, including estate and trust, shall be taxed at the
rate of FIVE (5%) PERCENT based on the gross selling price or the fair market value
prevailing at the time of sale, whichever is higher. Wherefore, the exchanging parties are
subject separately and distinctly to capital gains based on the FAIR MARKET VALUE or
ZONAL VALUE, whichever is higher. BIR Ruling No. 029 and 032, both dated February
27, 1996
(iv) Joint Venture Agreement The Joint-Venture Development Agreement
between Fil- Estate and the owners of several parcels of land in Carmona, Cavite and
Binan, Laguna is not subject to corporate income tax under Section 24 of the Tax Code,
as amended. However, the co-venturers are separately subject to the regular income tax
on their taxable income during each taxable year respectively derived by them from the
construction period.