Q: Pedro is the registered owner of a parcel of land situated in Malolos, Bulacan.

In 1973,
he mortgaged the land to the Philippine National Bank (PNB) to secure a loan of P100,
000.00. For Pedro’s failure to pay the loan, the PNB foreclosed on the mortgage in 1980,
and the land was sold at public auction to PNB for being the highest bidder. PNB secured
the title thereto in 1987. In the meanwhile, Pedro, who was still in possession of the land,
constructed a warehouse on the property. In 1988, the PNB sold the land to Pablo. The
Deed of Sale was amended in 1989 to include the warehouse. Pedro, claiming ownership
of the warehouse, files a complaint to annul the amended Deed of Sale before the
Regional Trial Court of Quezon City, where he resides, against both the PNB and Pablo.
The PNB filed a motion to dismiss the complaint for improper venue contending that the
warehouse is real property under Art. 415(1) of the Civil Code and therefore the
action should have instead been filed in Malolos, Bulacan. Pedro claims otherwise.
The question arose as to whether the warehouse should be considered as real or
personal property. If consulted, what would your legal advice be? (1997 BAR

A: The warehouse which is a construction adhered to the soil is an immovable by nature

under Art. 415(1), and the proper venue of any case to recover ownership of the same
which is what the purpose of the complaint to annul he amended Deed of Sale amounts
to, should be the place where the property is located, or the RTC of Bulacan.

X constructed a house on a lot which he was leasing from Y. Later, X executed a chattel
mortgage over said house in favor of Z as security for a loan obtained from the
latter. Still later, X acquired ownership of the land where his house was constructed, after
which he mortgaged both house and land in favor of a bank, which mortgage was
annotated on the Torrens Certificate of Title. When X failed to pay his loan to the
bank, the latter, being the highest bidder at the foreclosure sale, foreclosed the
mortgage and acquired X’s house and lot. Learning of the proceedings conducted by
the bank, Z is now demanding that the bank reconvey to him X’s house or pay X’s
loan to him plus interests. Is Z’s demand against the bank valid and sustainable?
Why? (2003 Bar Question)

SUGGESTED ANSWER:
No, Z’s demand is not valid. A building is immovable or real property whether it is
erected by the owner of the land, by a usufructuary, or by a lessee. It may be treated
as a movable by the parties to a chattel mortgage but such is binding only
between them and not on third parties (Evangelista v. Alto Surety Co., Inc. 103
Phil. 401 [1958]). In this case, since the bank is not a party to the chattel mortgage, it
is not bound by it. As far as the Bank is concerned, the chattel mortgage does
not exist. Moreover, the chattel mortgage is void because it was not registered.
Assuming that it is valid, it does not bind the Bank because it was not annotated
on the title of the land mortgaged to the bank. Z cannot demand that the Bank pay him
the loan Z extended to X, because the Bank was not privyto such loan transaction.