Prudential Bank v. Panis

a. Preliminary Provisions (Art. 414) — Building as immovable; estoppel by treating it as chattel

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Case DigestChapter I — Classification of Property

Prudential Bank v. Panis

G.R. No. 50008 · August 31, 1987 · Supreme Court

a. Preliminary Provisions (Art. 414) — Building as immovable; estoppel by treating it as chattel

Gist

The controversy involves the validity of two real estate mortgages (REM) executed by respondent spouses over a two-story semi-concrete residential building and their occupancy rights on a lot which, at the time of the first mortgage, was still subject to their pending sales application with the government. The Supreme Court modified the trial court's decision, which had declared both mortgages void, by validating the first REM while affirming the nullity of the second.

Core Doctrine

The central doctrine established is that under Article 415 of the Civil Code, a "building" is an immovable property separate and distinct from "land"; consequently, a building may be validly mortgaged apart from the land on which it is built, even if the land belongs to another or the government.

Facts

On November 19, 1971, respondent spouses Fernando and Teodula Magcale secured a P70,000.00 loan from petitioner Prudential Bank, executing a Deed of Real Estate Mortgage over a two-story semi-concrete residential building and the "right of occupancy on the lot" where the building stood. At the time of this first mortgage, the lot was the subject of a pending Miscellaneous Sales Application filed by the spouses. The building was theirs and the land was not — which is exactly the case Article 415(1) provides for by listing "buildings" apart from "land." A building is an immovable in its own right, so it could be mortgaged on its own.
On April 24, 1972, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the said lot in favor of the spouses. On May 15, 1972, Original Certificate of Title (OCT) No. P-2554 was issued in the name of Fernando Magcale.
On May 2, 1973, the spouses secured an additional loan of P20,000.00 from petitioner and executed a second REM over the same properties, which was registered with the Registry of Deeds on the same date. Upon the spouses' default, petitioner extrajudicially foreclosed the mortgages. On April 12, 1978, the properties were sold at public auction with petitioner as the highest bidder. The date is the entire difference between the two mortgages: this one came after the sales patent issued, so the Public Land Act restrictions had attached and voided it, while the first, executed while the application was still pending, survived.
The spouses filed a complaint (Civil Case No. 2443-O) before the Court of First Instance (CFI) of Zambales to declare the REMs null and void. On November 13, 1978, the CFI declared both deeds null and void, reasoning that a building built on land belonging to another (the government) cannot be real property subject to a REM. Petitioner elevated the matter via a petition for review on certiorari. That reasoning is the error the case exists to correct — a building's character as an immovable does not depend on who owns the ground beneath it.

Issue

Whether a valid real estate mortgage can be constituted on a building erected on land belonging to another, such as the government, separate and apart from the land itself.

Secondary issues. (1) Whether the first REM was valid despite being executed prior to the issuance of a sales patent. (2) Whether the second REM was valid given its execution after the issuance of the patent and OCT.

Ruling

Main issue. YES — a building may be mortgaged as an immovable in its own right, separately from the land under it. Article 415(1) enumerates "land, buildings, roads and constructions of all kinds adhered to the soil," listing buildings separately and distinctly from land — which is the legislature's recognition that a building is itself an immovable. Article 2085 requires only that the mortgagor be the absolute owner of the thing mortgaged; the spouses owned the building even though the land beneath it belonged to the government, so they had capacity to mortgage it.

Secondary issues. (1) YES — the P70,000 mortgage is valid. It was executed before the sales patent issued, so the encumbrance restrictions of the Public Land Act (C.A. 141), which bite on land and improvements already acquired under that Act, had not yet attached. (2) NO — the P20,000 mortgage is null and void. It was executed after the patent and the OCT issued, placing it squarely within the prohibitions of Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730.

"PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may take against private respondents."

Ratio

The Court’s reasoning is anchored on the specific enumeration of immovable properties under Article 415(1) of the Civil Code, which lists "land, buildings, roads and constructions of all kinds adhered to the soil".
By listing "buildings" separate and distinct from "land," the law recognizes that a building is an immovable property in its own right.
Under Article 2085, the mortgagor must be the absolute owner of the thing mortgaged.
While the land belonged to the government, the building was owned by the spouses.
Thus, they possessed the capacity to mortgage the building as an independent immovable.
Regarding the first REM, the Court found it valid because it was executed before the issuance of the sales patent.
At that stage, the restrictions under the Public Land Act (C.A. 141)—which prohibit the encumbrance of land or improvements already acquired under said Act—had not yet attached.
However, the second REM is null and void because it was executed after the patent was issued, thereby falling squarely under the legal prohibitions against encumbering land and its improvements within the restricted period provided by Sections 121, 122, and 124 of the Public Land Act and Section 2 of Republic Act 730.

Doctrine

Separability of Building and Land: "While a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would still be a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land."
Character of Buildings as Immovables: "The inclusion of building in Art. 415 (immovable property) which is separate and distinct from 'land' means that a building is an immovable property by and in itself."
Estoppel and Void Contracts: Estoppel cannot validate a contract that is prohibited by law or against public policy. "Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy."

The validity of a mortgage over a building on another's land remains subject to the provisions of special laws. If the land is acquired via the Public Land Act, subsequent mortgages on the building may be voided if they violate the statutory restricted period for encumbrances.

Full Digest — Recitation Format

I. Gist and Central Doctrine

Relationship to requested topic: DIRECT. The controversy involves the validity of two real estate mortgages (REM) executed by respondent spouses over a two-story semi-concrete residential building and their occupancy rights on a lot which, at the time of the first mortgage, was still subject to their pending sales application with the government. The Supreme Court modified the trial court's decision, which had declared both mortgages void, by validating the first REM while affirming the nullity of the second. The central doctrine established is that under Article 415 of the Civil Code, a "building" is an immovable property separate and distinct from "land"; consequently, a building may be validly mortgaged apart from the land on which it is built, even if the land belongs to another or the government.

II. Chronological Narration of Material Facts

On November 19, 1971, respondent spouses Fernando and Teodula Magcale secured a P70,000.00 loan from petitioner Prudential Bank, executing a Deed of Real Estate Mortgage over a two-story semi-concrete residential building and the "right of occupancy on the lot" where the building stood.
At the time of this first mortgage, the lot was the subject of a pending Miscellaneous Sales Application filed by the spouses.
On April 24, 1972, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the said lot in favor of the spouses.
On May 15, 1972, Original Certificate of Title (OCT) No. P-2554 was issued in the name of Fernando Magcale.
On May 2, 1973, the spouses secured an additional loan of P20,000.00 from petitioner and executed a second REM over the same properties, which was registered with the Registry of Deeds on the same date.
Upon the spouses' default, petitioner extrajudicially foreclosed the mortgages.
On April 12, 1978, the properties were sold at public auction with petitioner as the highest bidder.
The spouses filed a complaint (Civil Case No. 2443-O) before the Court of First Instance (CFI) of Zambales to declare the REMs null and void.
On November 13, 1978, the CFI declared both deeds null and void, reasoning that a building built on land belonging to another (the government) cannot be real property subject to a REM.
Petitioner elevated the matter via a petition for review on certiorari.

III. Arguments of the Parties

A. Petitioner

Prudential Bank argued that the deeds of REM are valid because a building is an immovable property by itself under the Civil Code and can be mortgaged separately from the land. It further contended that the first mortgage was valid as it was executed prior to the issuance of the sales patent and thus was not subject to Public Land Act restrictions.

B. Respondent/Defense

The spouses maintained that a valid REM cannot be constituted on a building erected on land belonging to another. They further argued that the mortgages were invalidated by the supervening issuance of the sales patent and the restrictions appearing on the face of OCT No. P-2554, which prohibit encumbrances for a certain period.

C. Common Ground

The respondents did not deny the legitimacy of their debts to the petitioner.

IV. Issues

A. MAIN ISSUE

Whether a valid real estate mortgage can be constituted on a building erected on land belonging to another, such as the government, separate and apart from the land itself.

B. SECONDARY ISSUES

(1) Whether the first REM was valid despite being executed prior to the issuance of a sales patent. (2) Whether the second REM was valid given its execution after the issuance of the patent and OCT.

V. Ruling / Disposition

A. MAIN ISSUE

YES — a building may be mortgaged as an immovable in its own right, separately from the land under it. Article 415(1) enumerates "land, buildings, roads and constructions of all kinds adhered to the soil," listing buildings separately and distinctly from land — which is the legislature's recognition that a building is itself an immovable. Article 2085 requires only that the mortgagor be the absolute owner of the thing mortgaged; the spouses owned the building even though the land beneath it belonged to the government, so they had capacity to mortgage it.

B. SECONDARY ISSUES

(1) YES — the P70,000 mortgage is valid. It was executed before the sales patent issued, so the encumbrance restrictions of the Public Land Act (C.A. 141), which bite on land and improvements already acquired under that Act, had not yet attached. (2) NO — the P20,000 mortgage is null and void. It was executed after the patent and the OCT issued, placing it squarely within the prohibitions of Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730.

"PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may take against private respondents."

VI. Ratio Decidendi and Doctrines

A. Ratio Decidendi

The Court’s reasoning is anchored on the specific enumeration of immovable properties under Article 415(1) of the Civil Code, which lists "land, buildings, roads and constructions of all kinds adhered to the soil".
By listing "buildings" separate and distinct from "land," the law recognizes that a building is an immovable property in its own right.
Under Article 2085, the mortgagor must be the absolute owner of the thing mortgaged.
While the land belonged to the government, the building was owned by the spouses.
Thus, they possessed the capacity to mortgage the building as an independent immovable.
Regarding the first REM, the Court found it valid because it was executed before the issuance of the sales patent.
At that stage, the restrictions under the Public Land Act (C.A. 141)—which prohibit the encumbrance of land or improvements already acquired under said Act—had not yet attached.
However, the second REM is null and void because it was executed after the patent was issued, thereby falling squarely under the legal prohibitions against encumbering land and its improvements within the restricted period provided by Sections 121, 122, and 124 of the Public Land Act and Section 2 of Republic Act 730.

B. Doctrines/Rules

Separability of Building and Land: "While a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would still be a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land."
Character of Buildings as Immovables: "The inclusion of building in Art. 415 (immovable property) which is separate and distinct from 'land' means that a building is an immovable property by and in itself."
Estoppel and Void Contracts: Estoppel cannot validate a contract that is prohibited by law or against public policy. "Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy."

C. Limitations/Exceptions

The validity of a mortgage over a building on another's land remains subject to the provisions of special laws.
If the land is acquired via the Public Land Act, subsequent mortgages on the building may be voided if they violate the statutory restricted period for encumbrances.

D. Topic Integration

Relationship is DIRECT.
This case serves as a seminal authority on the classification of buildings under Article 415.
It clarifies that the legal nature of a building as an immovable is not dependent on the ownership of the land, settled the conflict regarding whether such mortgages are "real" or "chattel," and refined the application of Public Land Act restrictions to improvements on patented land.

VII. Separate Opinions

NOT IN RECORD (Unanimous decision).

Cited Laws & Provisions

Every statute, rule, and issuance the decision turns on — the text as written, and the work it does in this case.

Civil Code

Article 415, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title I (Classification of Property), Chapter 1 (Immovable Property)

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)

Why it is cited here

Paragraph (1) lists "[l]and, buildings, roads and constructions of all kinds adhered to the soil" — and the punctuation is the point of this case.

Land and buildings are named separately. The article does not treat a building as a mere component of the land; it recognises it as an immovable in its own right. So a building is "an immovable property separate and distinct from land."

Two consequences follow, and the second is the commercially important one.

A building may be validly mortgaged apart from the land on which it stands — by real estate mortgage, since it is immovable — and this holds even where the land belongs to another or to the government. The mortgagor is encumbering what he owns; he is not purporting to deal with the land at all.

That is why the case matters to anyone financing improvements on leased or public land. The absence of title to the ground is not an obstacle to giving security over the structure. Contrast Piansay: the problem there was not that a building cannot be mortgaged separately, but that it was mortgaged by the wrong instrument.

Civil Code

Article 2085, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title XVI (Pledge, Mortgage and Antichresis), Chapter 1 (Provisions Common to Pledge and Mortgage)

The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (1857)

Why it is cited here

The requisites that make the separate mortgage work, and the second one is why ownership of the land is irrelevant.

A mortgage requires that it "be constituted to secure the fulfillment of a principal obligation"; that "the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged"; and that the persons constituting it "have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose."

Apply that to a building on someone else's land. The mortgagor must be the absolute owner of the building — not of the land, which is not the thing mortgaged. Once he is, and has free disposal of it, every requisite is satisfied.

Article 2085 is worth memorising as a checklist for every security problem in this course: principal obligation, ownership of the thing, free disposal. Most failed mortgages fail on the second.

Cited laws & provisions

Article 415, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title I (Classification of Property), Chapter 1 (Immovable Property)

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;

(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)

Why it is cited here

Paragraph (1) lists "[l]and, buildings, roads and constructions of all kinds adhered to the soil" — and the punctuation is the point of this case.

Two consequences follow, and the second is the commercially important one.

Full entry below ↓

Article 2085, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title XVI (Pledge, Mortgage and Antichresis), Chapter 1 (Provisions Common to Pledge and Mortgage)

The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (1857)

Why it is cited here

The requisites that make the separate mortgage work, and the second one is why ownership of the land is irrelevant.

Article 2085 is worth memorising as a checklist for every security problem in this course: principal obligation, ownership of the thing, free disposal. Most failed mortgages fail on the second.

Full entry below ↓

Facts

On November 19, 1971, respondent spouses Fernando and Teodula Magcale secured a P70,000.00 loan from petitioner Prudential Bank, executing a Deed of Real Estate Mortgage over a two-story semi-concrete residential building and the "right of occupancy on the lot" where the building stood. At the time of this first mortgage, the lot was the subject of a pending Miscellaneous Sales Application filed by the spouses. The building was theirs and the land was not — which is exactly the case Article 415(1) provides for by listing "buildings" apart from "land." A building is an immovable in its own right, so it could be mortgaged on its own.
On April 24, 1972, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the said lot in favor of the spouses. On May 15, 1972, Original Certificate of Title (OCT) No. P-2554 was issued in the name of Fernando Magcale.
On May 2, 1973, the spouses secured an additional loan of P20,000.00 from petitioner and executed a second REM over the same properties, which was registered with the Registry of Deeds on the same date. Upon the spouses' default, petitioner extrajudicially foreclosed the mortgages. On April 12, 1978, the properties were sold at public auction with petitioner as the highest bidder. The date is the entire difference between the two mortgages: this one came after the sales patent issued, so the Public Land Act restrictions had attached and voided it, while the first, executed while the application was still pending, survived.
The spouses filed a complaint (Civil Case No. 2443-O) before the Court of First Instance (CFI) of Zambales to declare the REMs null and void. On November 13, 1978, the CFI declared both deeds null and void, reasoning that a building built on land belonging to another (the government) cannot be real property subject to a REM. Petitioner elevated the matter via a petition for review on certiorari. That reasoning is the error the case exists to correct — a building's character as an immovable does not depend on who owns the ground beneath it.

Issue

Whether a valid real estate mortgage can be constituted on a building erected on land belonging to another, such as the government, separate and apart from the land itself.

Ruling

"PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may take against private respondents."

Ratio

The Court’s reasoning is anchored on the specific enumeration of immovable properties under Article 415(1) of the Civil Code, which lists "land, buildings, roads and constructions of all kinds adhered to the soil".
By listing "buildings" separate and distinct from "land," the law recognizes that a building is an immovable property in its own right.
Under Article 2085, the mortgagor must be the absolute owner of the thing mortgaged.
While the land belonged to the government, the building was owned by the spouses.
Thus, they possessed the capacity to mortgage the building as an independent immovable.
Regarding the first REM, the Court found it valid because it was executed before the issuance of the sales patent.
At that stage, the restrictions under the Public Land Act (C.A. 141)—which prohibit the encumbrance of land or improvements already acquired under said Act—had not yet attached.
However, the second REM is null and void because it was executed after the patent was issued, thereby falling squarely under the legal prohibitions against encumbering land and its improvements within the restricted period provided by Sections 121, 122, and 124 of the Public Land Act and Section 2 of Republic Act 730.

Doctrine

Separability of Building and Land: "While a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would still be a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land."
Character of Buildings as Immovables: "The inclusion of building in Art. 415 (immovable property) which is separate and distinct from 'land' means that a building is an immovable property by and in itself."
Estoppel and Void Contracts: Estoppel cannot validate a contract that is prohibited by law or against public policy. "Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy."

Full Digest — Recitation Format

I. Gist and Central Doctrine

II. Chronological Narration of Material Facts

On November 19, 1971, respondent spouses Fernando and Teodula Magcale secured a P70,000.00 loan from petitioner Prudential Bank, executing a Deed of Real Estate Mortgage over a two-story semi-concrete residential building and the "right of occupancy on the lot" where the building stood.
At the time of this first mortgage, the lot was the subject of a pending Miscellaneous Sales Application filed by the spouses.
On April 24, 1972, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the said lot in favor of the spouses.
On May 15, 1972, Original Certificate of Title (OCT) No. P-2554 was issued in the name of Fernando Magcale.
On May 2, 1973, the spouses secured an additional loan of P20,000.00 from petitioner and executed a second REM over the same properties, which was registered with the Registry of Deeds on the same date.
Upon the spouses' default, petitioner extrajudicially foreclosed the mortgages.
On April 12, 1978, the properties were sold at public auction with petitioner as the highest bidder.
The spouses filed a complaint (Civil Case No. 2443-O) before the Court of First Instance (CFI) of Zambales to declare the REMs null and void.
On November 13, 1978, the CFI declared both deeds null and void, reasoning that a building built on land belonging to another (the government) cannot be real property subject to a REM.
Petitioner elevated the matter via a petition for review on certiorari.

III. Arguments of the Parties

A. Petitioner

B. Respondent/Defense

C. Common Ground

The respondents did not deny the legitimacy of their debts to the petitioner.

IV. Issues

A. MAIN ISSUE

Whether a valid real estate mortgage can be constituted on a building erected on land belonging to another, such as the government, separate and apart from the land itself.

B. SECONDARY ISSUES

(1) Whether the first REM was valid despite being executed prior to the issuance of a sales patent. (2) Whether the second REM was valid given its execution after the issuance of the patent and OCT.

V. Ruling / Disposition

A. MAIN ISSUE

B. SECONDARY ISSUES

VI. Ratio Decidendi and Doctrines

A. Ratio Decidendi

The Court’s reasoning is anchored on the specific enumeration of immovable properties under Article 415(1) of the Civil Code, which lists "land, buildings, roads and constructions of all kinds adhered to the soil".
By listing "buildings" separate and distinct from "land," the law recognizes that a building is an immovable property in its own right.
Under Article 2085, the mortgagor must be the absolute owner of the thing mortgaged.
While the land belonged to the government, the building was owned by the spouses.
Thus, they possessed the capacity to mortgage the building as an independent immovable.
Regarding the first REM, the Court found it valid because it was executed before the issuance of the sales patent.
At that stage, the restrictions under the Public Land Act (C.A. 141)—which prohibit the encumbrance of land or improvements already acquired under said Act—had not yet attached.
However, the second REM is null and void because it was executed after the patent was issued, thereby falling squarely under the legal prohibitions against encumbering land and its improvements within the restricted period provided by Sections 121, 122, and 124 of the Public Land Act and Section 2 of Republic Act 730.

B. Doctrines/Rules

Separability of Building and Land: "While a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would still be a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land."
Character of Buildings as Immovables: "The inclusion of building in Art. 415 (immovable property) which is separate and distinct from 'land' means that a building is an immovable property by and in itself."
Estoppel and Void Contracts: Estoppel cannot validate a contract that is prohibited by law or against public policy. "Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy."

C. Limitations/Exceptions

The validity of a mortgage over a building on another's land remains subject to the provisions of special laws.
If the land is acquired via the Public Land Act, subsequent mortgages on the building may be voided if they violate the statutory restricted period for encumbrances.

D. Topic Integration

Relationship is DIRECT.
This case serves as a seminal authority on the classification of buildings under Article 415.
It clarifies that the legal nature of a building as an immovable is not dependent on the ownership of the land, settled the conflict regarding whether such mortgages are "real" or "chattel," and refined the application of Public Land Act restrictions to improvements on patented land.

VII. Separate Opinions

NOT IN RECORD (Unanimous decision).