Board of Assessment Appeals of Zamboanga del Sur land cannot be considered an improvement

v. Samar Mining Company, Inc., 37 SCRA 734 subject to tax within the meaning of section 2 of
Commonwealth Act 470, and invoking further the
DECISION decision of this Court in the case of Bislig Bay Lumber
Company, Inc. v. The Provincial Government of
Surigao, G.R. No. L-9023, promulgated on November
ZALDIVAR, J.: 13, 1956. On February 10, 1965, after the parties had
submitted a stipulation of facts, Samar received a
resolution of the Board, dated December 22, 1964,
Appeal from the decision of the Court of Tax Appeals, affirming the validity of the assessment made by the
in its CTA Case No. 1705, declaring respondent Samar Provincial Assessor of Zamboanga del Sur under tax
Mining Company, Inc. (hereinafter referred to as declaration No. 3340, but holding in abeyance its
Samar, for short) exempt from paying the real enforceability until the lease contracts were duly
property tax assessed against it by the Provincial executed.
Assessor of Zamboanga del Sur.
On February 16, 1965, Samar moved to reconsider
the resolution of the Board, praying for the
There is no dispute as to the facts of this case. Samar
cancellation of tax declaration No. 3340, and on
is a domestic corporation engaged in the mining
August 3, 1965, Samar received Resolution No. 13 not
industry. As the mining claims and the mill of Samar
only denying its motion for reconsideration but
are located inland and at a great distance from the
modifying the Board’s previous resolution of
loading point or pier site, it decided to construct a
December 22, 1964 declaring the assessment
gravel road as a convenient means of hauling its ores
immediately enforceable, and that the taxes to
from the mine site at Buug to the pier area at
be paid by Samar should accrue or commence
Pamintayan, Zamboanga del Sur; that as an initial
with the year 1959. When its second motion for
step in the construction of a 42-kilometer road which
reconsideration was again denied by the Board,
would traverse public lands Samar, in 1958 and 1959,
Samar elevated the case to the Court of Tax Appeals.
filed with the Bureau of Lands and the Bureau of
Forestry miscellaneous lease applications for a road
The jurisdiction of the Court of Tax Appeals to take
right of way on lands under the jurisdiction of said
cognizance of the case was assailed by herein
bureaus where the proposed road would traverse;
petitioners (the Board and the Provincial Assessor of
that having been given temporary permit to occupy
Zamboanga del Sur) due to the failure of Samar to
and use the lands applied for by it, said respondent
first pay the realty tax imposed upon it before
constructed a road thereon, known as the
interposing the appeal, and prayed that the resolution
Samico road; that although the gravel road was
of the Board appealed from be affirmed. On June 28,
finished in 1959, and had since then been used by the
respondent in hauling its iron from its mine site to the 1967, the Court of Tax Appeals ruled that it had
jurisdiction to entertain the appeal and then reversed
pier area, and that its lease applications were
the resolution of the Board. The Court of Tax
approved on October 7, 1965, the execution of the
Appeals ruled that since the road is constructed
corresponding lease contracts were held in abeyance
on public lands such that it is an integral part of
even up to the time this case was brought to the
the land and not an independent improvement
Court of Tax Appeals. 1
thereon, and that upon the termination of the
lease the road as an improvement will
On June 5, 1964, Samar received a letter from the
automatically be owned by the national
Provincial Assessor of Zamboanga del Sur assessing
government, Samar should be exempt from
the 13.8 kilometer road 2 constructed by it for real
paying the real estate tax assessed against it.
estate tax purposes in the total sum of
Dissatisfied with the decision of the Court of Tax
P1,117,900.00. On July 14, 1964, Samar appealed
Appeals, petitioners Board and Placido L. Lumbay, as
to the Board of Assessment Appeals of
Provincial Assessor of Zamboanga del Sur, interposed
Zamboanga del Sur, (hereinafter referred to as
the present petition for review before this Court.
Board, for short), contesting the validity of the
assessment upon the ground that the road
having been constructed entirely on a public The issue to be resolved in the present appeal is
whether or not respondent Samar should pay
realty tax on the assessed value of the road it "We are inclined to uphold the theory of appellee. In
constructed on alienable or disposable public the first place, it cannot be disputed that the
lands that are leased to it by the government. ownership of the road that was constructed by
appellee belongs to the government by right of
Petitioners maintain that the road is an improvement accession not only because it is inherently
and, therefore, taxable under Section 2 of the incorporated or attached to the timber land leased to
Assessment Law (Commonwealth Act No. 470) which appellee but also because upon the expiration of the
provides as follows:jgc:chanrobles.com.ph concession, said road would ultimately pass to the
national government (Articles 440 and 445, new Civil
"Sec. 2. Incidence of real property tax. — Except in Code; Tobatabo v. Molero, 22 Phil., 418). In the
chartered cities, there shall be levied, assessed, and second place, while the road was constructed by
collected, an annual, ad valorem tax on real property appellee primarily for its use and benefit, the privilege
including land, buildings, machinery, and other is not exclusive, for, under the lease contract entered
improvements not hereinafter specifically into by the appellee and the government, its use can
exempted."cralaw virtua1aw library also be availed of by the employees of the
government and by the public in general. . . . In other
There is no question that the road constructed by words, the government has practically reserved the
respondent Samar on the public lands leased to it by rights to use the road to promote its varied activities.
the government is an improvement. But as to whether Since, as above shown, the road in question cannot
the same is taxable under the aforequoted provision be considered as an improvement which belongs
of the Assessment Law, this question has already to appellee, although in part is for its benefit, it is
been answered in the negative by this Court. In the clear that the same cannot be the subject of
case of Bislig Bay Lumber Co., Inc. v. Provincial assessment within the meaning of section 2 of
Government of Surigao, 100 Phil. 303, where a similar Commonwealth Act No. 470.
issue was raised as to whether the timber
concessionaire should be required to pay realty tax for "We are not oblivious of the fact that the present
the road it constructed at its own expense within the assessment was made by appellant on the strength of
territory of the lumber concession granted to it, this an opinion rendered by the Secretary of Justice, but
Court, after citing Section 2 of Commonwealth Act we find that the same is predicated on authorities
470, held:jgc:chanrobles.com.ph which are not in point, for they refer to
improvements that belong to the lessees
"Note that said section authorizes the levy of real tax although constructed on lands belonging to the
not only on lands, buildings, or machinery that may government. It is well settled that a real tax, being a
be erected thereon, but also on any other burden upon the capital, should be paid by the owner
improvements, and considering the road constructed of the land and not by a usufructuary (Mercado v.
by appellee on the timber concession granted to it as Rizal, 67 Phil., 608; Article 597, new Civil Code).
an improvement, appellant assessed the tax now in Appellee is but a partial usufructuary of the road
dispute upon the authority of the above provision of in question."cralaw virtua1aw library
the law.
Again, in the case of Municipality of Cotabato, Et. Al.
"It is the theory of appellant that, inasmuch as the v. Santos, Et Al., 105 Phil. 963, this Court ruled that
road was constructed by appellee for its own use and the lessee who introduced improvements consisting of
benefit it is subject to real tax even if it was dikes, gates and guard-houses on swamp lands leased
constructed on a public land. On the other hand, it is to him by the Bureau of Fisheries, in converting the
the theory of appellee that said road exempt from real swamps into fishponds, is exempt from payment of
tax because (1) the road belongs to the national realty taxes on those improvements. This Court
government by right of accession, (2) the road held:jgc:chanrobles.com.ph
belongs to the be removed or separated from the land
on which it is constructed and so it is part and parcel "We however believe that the assessment on the
of the public land, and (3), according to the evidence, improvements introduced by defendant on the
the road was built not only for the use and benefit of fishpond has included more than what is authorized
appellee but also of the public in general. by law. The improvements as assessed consist of
dikes, gates and guard-houses and bodegas totals
P6,850.00 which appellants are not now questioning,
but they dispute the assessment on the dikes and The extent and scope of the jurisdiction of the Court
gates in this wise: ‘After the swamps were leased to of Tax Appeals regarding matters related to
appellants, the latter cleared the swamps and built assessment or real property taxes are provided for in
dikes, by pushing the soil to form these dikes in the Section 7, paragraph (3) and Section 11 of Republic
same way that paddies are built on lands intended for Act No. 1125, which partly read as
the cultivation of palay, the only difference being that follows:jgc:chanrobles.com.ph
dikes used in fishponds are relatively much larger
than the dikes used in ricelands.’ We believe this "SEC. 7. Jurisdiction. — The Court of Tax Appeals shall
contention to be correct, because those dikes can exercise exclusive appellate jurisdiction to review by
really be considered as integral parts of the fishponds appeal, as herein provided —
and not as independent improvements. They cannot
be taxed under the assessment law. The assessment, x       x       x
therefore, with regard to improvements should be
modified excluding the dikes and gates."
(3) Decisions of provincial or city Board of Assessment
Appeals in cases involving the assessment and
It is contended by petitioners that the ruling in the taxation of real property or other matters arising
Bislig case is not applicable in the present case under the Assessment Law, including rules and
because if the concessionaire in the Bislig case was regulations relative thereto."cralaw virtua1aw library
exempt from paying the realty tax it was because the
road in that case was constructed on a timberland "SEC. 11. Who may appeal; effect of appeal. — Any
or on an indisposable public land, while in the person, association or corporation adversely affected
instant case what is being taxed is 13.8 kilometer by a decision or ruling of . . . any provincial or city
portion of the road traversing alienable public lands. Board of Assessment Appeals may file an appeal in
This contention has no merit. The pronouncement in the Court of Tax Appeals within thirty days after the
the Bislig case contains no hint whatsoever that the receipt of such decision or ruling."cralaw virtua1aw
road was not subject to tax because it was library
constructed on inalienable public lands. What is
emphasized in the lease is that the improvement In this connection the Court of Tax Appeals, in the
is exempt from taxation because it is an integral decision appealed from, said:jgc:chanrobles.com.ph
part of the public land on which it is constructed
and the improvement is the property of the "Prior to the enactment of Republic Act No. 1125, all
government by right of accession. Under Section civil actions involving the legality of any tax, impost or
3(a) of the Assessment Law (Com. Act 470), all assessment were under the jurisdiction of the Court of
properties owned by the government, without any First Instance (Sec. 44, Republic Act No. 296). It is
distinction, are exempt from taxation. clear, therefore, that before the creation of the Court
of Tax Appeals all cases involving the legality of
It is also contended by petitioners that the Court of assessments for real property taxes, as well as the
Tax Appeals cannot take cognizance of the appeal of refund thereof, were properly brought and taken
Samar from the resolution of the Board assessing cognizance by the said court. However, with the
realty tax on the road in question, because Samar had passage by Congress and the approval by the
not first paid under protest the realty tax assessed President of Republic Act No. 1125, the jurisdiction
against it as required under the provisions of Section over cases involving the validity of realty tax
54 of the Assessment Law (Com. Act 470), which assessment were transferred from the Court of First
partly reads as follows:jgc:chanrobles.com.ph Instance to the Court of Tax Appeals (See Sec. 22,
Rep. Act No. 1125). The only exception to the grant of
"SEC. 54. Restriction upon power of Court to impeach exclusive appellate jurisdiction to the Tax Court
tax. — No court shall entertain any suit assailing the relates to cases involving the refund of real property
validity of a tax assessment under ‘this Act until the taxes which remained with the Court of First Instance
taxpayer shall have paid under protest the taxes (See of Cabanatuan, Et. Al. v. Gatmaitan, Et Al., G.R.
assessed against him, no shall any court declare any No. L-19129, February 28, 1963).
tax invalid by reason . . ."cralaw virtua1aw library
"A critical and analytical study of Section 7 of Republic
Act No. 1125, in relation to subsections (1), (2) and "Should you find the same to be not in accordance
(3) thereof, will readily show that it was the intention with law or its valuation to be not satisfactory, you
of Congress to lodge in the Court of Tax Appeals the may appeal this assessment under Section 17 of
exclusive appellate jurisdiction over cases involving Commonwealth Act 470 to the Board of Assessment
the legality of real property tax assessment. as Appeals, through the Municipal Treasurer of Buug,
distinguished from cases involving the refund of real Zamboanga del Sur, within 60 days from the date of
property taxes. To require the taxpayer, as contended your receipt hereof." 3
by respondents, to pay first the disputed real property
tax before he can file an appeal assailing the legality Accordingly Samar appealed to the Board questioning
and validity of the realty tax assessment will render the validity of the assessment. The Board rendered a
nugatory the appellate jurisdictional power of the resolution over-ruling the contention of Samar that
Court of Tax Appeals as envisioned in Section 7 (3), in the assessment was illegal. Then Samar availed of its
relation to Section 11, of Republic Act No. 1125. If we right to appeal from the decision of the Board to the
follow the contention of respondents to its logical Court of Tax Appeals as provided in Section 11 of
conclusion, we cannot conceive of a case involving the Republic Act 1125. Section 11 does not require that
legality and validity of real property tax assessment, before an appeal from the decision of the Board of
decided by the Board of Assessment Appeals, which Assessment Appeals can be brought to the Court of
can be appealed to the Court of Tax Appeals, The Tax Appeals it must first be shown that the party
position taken by respondents is, therefore, in conflict disputing the assessment had paid under protest the
with the Explanatory Note contained in House Bill No. realty tax assessed. In the absence of such a
175, submitted during the First Session, Third requirement under the law, all that is necessary for a
Congress of the Republic of the Philippines, and the party aggrieved by the decision of the Board of
last paragraph of Section 21 of Republic Act No. 1125 Assessment Appeals is to file his notice of appeal to
which provide as follows:chanrob1es virtual 1aw the Court of Tax Appeals within 30 days after receipt
library of the decision of the Board of Assessment Appeals,
as provided in Section 11 of Republic Act 1125.
SEC. 21. General provisions. —
This Court, in the case of City of Cabanatuan v.
x       x       x Gatmaitan, 4 said:jgc:chanrobles.com.ph

". . . if the real estate tax has already been paid it is

Any law or part of law, or any executive order, rule or futile for a taxpayer to take the matter to the City
regulation or part thereof, inconsistent with the Board of Assessment Appeals for the jurisdiction of
provisions of this Act is hereby repealed. that body is merely confined to the determination of
the reasonableness of the assessment or taxation of
"Accordingly, we hold that this Court can entertain the property and is not extended to the authority of
and give due course to petitioner’s appeal assailing requiring the refund of the tax unlike cases involving
the legality and validity of the real property tax assessment of internal revenue taxes. In the
assessment here in question without paying first the circumstances, we hold that this case comes under
disputed real property tax as required by Section 54 the jurisdiction of the proper court of first instance it
of the Assessment Law."cralaw virtua1aw library involving the refund of a real estate tax which does
not come under the appellate jurisdiction of the Court
We agree with the foregoing view of the Court of Tax of Tax Appeals."cralaw virtua1aw library
Appeals. It should be noted that what is involved in
the present case is simply an assessment of realty From the aforequoted portion of the decision of this
tax, as fixed by the Provincial Assessor of Zamboanga Court, We gather that the only question that may be
del Sur, which was disputed by Samar before the brought before the City or Provincial Board of
Board of Assessment Appeals of said province. There Assessment Appeals is the question which relates to
was no demand yet for payment of the realty tax. In the reasonableness or legality of the realty tax that is
fact the letter of Provincial Assessor, of June 5, 1964, assessed against a taxpayer. Such being the case, it
notifying Samar of the assessment, states as would be unjust to require the realty owner to first
follows:jgc:chanrobles.com.ph pay the tax, that he precisely questions, before he can
lodge an appeal to the Court of Tax Appeals. We 3. That neither the Party of the First Part nor the
believe that it is not the intendment of the law that in Party of the Second Part shall encumber, alienate or
questioning before the Court of Tax Appeals the dispose of in any manner their respective properties
validity or reasonableness of the assessment as bartered without the consent of the
approved by the Board of Assessment Appeals the other.chanroblesvirtualawlibrarychanrobles virtual law
taxpayer should first pay the questioned tax. It is library
Our view that in so far as appeals from the
decision or resolution of the Board of 4. That inasmuch as the bartered properties are not
Assessment Appeals, Section 54 of yet accordance with Act No. 496 or under the Spanish
Commonwealth Act 470 does not apply, and said Mortgage Law, they finally agreed and covenant that
section can be considered as impliedly repealed this deed be registered in the Office of the Register of
by Sections 7, 11 and 21 of Republic Act 1125. Deeds of Ilocos Norte pursuant to the provisions of
Act No. 3344 as amended. (p. 28, rollo)
IN VIEW OF THE FOREGOING, the decision of the
Court of Tax Appeals, appealed from, is affirmed, On May 6, 1975 Antonio Obendencio filed with the
without pronouncement as to costs. It is so ordered. Court of First Instance of Ilocos Norte the present
complaint to recover the above-mentioned residential
Baluran v. Navarro,79 SCRA 309 lot from Avelino Baluran claiming that he is the
rightful owner of said residential lot having acquired
MUÑOZ PALMA, J.:chanrobles virtual law library the same from his mother, Natividad Paraiso
Obedencio, and that he needed the property for
Spouses Domingo Paraiso and Fidela Q. Paraiso were Purposes Of constructing his house thereon inasmuch
the owners of a residential lot of around 480 square as he had taken residence in his native town, Sarrat.
meters located in Sarrat, Ilocos Norte. On or about Obedencio accordingly prayed that he be declared
February 2, 1964, the Paraisos executed an owner of the residential lot and that defendant
agreement entitled "BARTER" whereby as party of the Baluran be ordered to vacate the same forfeiting his
first part they agreed to "barter and exchange" with (Obedencio) favor the improvements defendant
spouses Avelino and Benilda Baluran their residential Baluran had built in bad faith.1 chanrobles virtual law
lot with the latter's unirrigated riceland situated in library
Sarrat, Ilocos Norte, of approximately 223 square
meters without any permanent improvements, under Answering the complaint, Avelino Baluran alleged
the following conditions: inter alia (1) that the "barter agreement" transferred
to him the ownership of the residential lot in exchange
1. That both the Party of the First Part and the Party for the unirrigated riceland conveyed to plaintiff's
of the Second Part shall enjoy the material possession Predecessor-in-interest, Natividad Obedencio, who in
of their respective properties; the Party of the First fact is still in On thereof, and (2) that the plaintiff's
Part shall reap the fruits of the unirrigated riceland cause of action if any had prescribed. 2chanrobles
and the Party of the Second Part shall have a right to virtual law library
build his own house in the residential
lot.chanroblesvirtualawlibrarychanrobles virtual law At the pre-trial, the parties agreed to submit the case
library for decision on the basis of their stipulation of facts. It
was likewise admitted that the aforementioned
2. Nevertheless, in the event any of the children of residential lot was donated on October 4, 1974 by
Natividad P. Obencio, daughter of the First Part, shall Natividad Obedencio to her son Antonio Obedencio,
choose to reside in this municipality and build his own and that since the execution of the agreement of
house in the residential lot, the Party of the Second February 2, 1964 Avelino Baluran was in possession of
Part shall be obliged to return the lot such children the residential lot, paid the taxes of the property, and
with damages to be constructed a house thereon with an value of
incurred.chanroblesvirtualawlibrarychanrobles virtual P250.00. 3 On November 8, 1975, the trial Judge
law library Ricardo Y. Navarro rendered a decision the dispositive
portion of which reads as follows:
Consequently, the plaintiff is hereby declared owner of the children of Natividad Paraiso Obedencio, daughter
the question, the defendant is hereby ordered to of spouses Paraiso, shall choose to reside in the
vacate the same with costs against defendant. municipality and build his house on the residential lot,
Avelino Baluran shall be obliged to return the lot to
Avelino Baluran to whom We shall refer as petitioner, said children "With damages to be incurred."
now seeks a review of that decision under the (Condition No. 2 of the Agreement) Thus, the mutual
following assignment of errors: agreement - each party enjoying "material
possession" of the other's property - was subject to a
I - The lower Court erred in holding that the barter resolutory condition the happening of which would
agreement did not transfer ownership of the lot in suit terminate the right of possession and
to the petitioner.chanroblesvirtualawlibrarychanrobles use.chanroblesvirtualawlibrarychanrobles virtual law
virtual law library library

II - The lower Court erred in not holding that the right A resolutory condition is one which extinguishes rights
to re-barter or re- exchange of respondent Antonio and obligations already existing. 7 The right of
Obedencio had been barred by the statute of "material possession" granted in the agreement of
limitation. (p. 14, Ibid.) February 2, 1964, ends if and when any of the
children of Natividad Paraiso, Obedencio (daughter of
spouses Paraiso, Party of the First Part) would reside
The resolution of this appeal revolves on the nature of
in the municipality and build his house on the
the undertaking contract of February 2, 1964 which is
property. Inasmuch as the condition opposed is not
entitled "Barter Agreement." chanrobles virtual law
dependent solely on the will of one of the parties to
library
the contract - the spouses Paraiso - but is Part
dependent on the will of third persons - Natividad
It is a settled rule that to determine the nature of a Obedencio and any of her children - the same is
contract courts are not bound by the name or title valid. 8 chanrobles virtual law library
given to it by the contracting parties. 4This Court has
held that contracts are not what the parties may see
When there is nothing contrary to law, morals, and
fit to call them but what they really are as determined
good customs Or Public Policy in the stipulations of a
by the principles of law. 5Thus, in the instant case, the
contract, the agreement constitutes the law between
use of the, term "barter" in describing the agreement
the parties and the latter are bound by the terms
of February 2, 1964, is not controlling. The
thereof. 9 chanrobles virtual law library
stipulations in said document are clear enough
to indicate that there was no intention at all on
the part of the signatories thereto to convey the Art. 1306 of the Civil Code states:
ownership of their respective properties; all that
was intended, and it was so provided in the Art. 1306. The contracting parties may establish such
agreement, was to transfer the material stipulations, clauses, terms and conditions as they
possession thereof. (condition No. 1, see page I of may deem convenient, provided they are not contrary
this Decision) In fact, under condition No. 3 of the to law, Morals, good customs, public order, or public
agreement, the parties retained the right to alienate policy.chanroblesvirtualawlibrarychanrobles virtual law
their respective properties which right is an element library
of ownership.chanroblesvirtualawlibrarychanrobles
virtual law library Contracts which are the private laws of the
contracting parties, should be fulfilled according to the
With the material ion being the only one transferred, literal sense of their stipulations, if their terms are
all that the parties acquired was the right of clear and leave no room for doubt as to the intention
usufruct which in essence is the right to enjoy of the contracting parties, for contracts are obligatory,
the Property of another. 6 Under the document in no matter what their form may be, whenever the
question, spouses Paraiso would harvest the crop of essential requisites for their validity are present.
the unirrigated riceland while the other party, Avelino (Philippine American General Insurance Co., Inc. vs.
Baluran, could build a house on the residential lot, Mutuc, 61 SCRA 22)
subject, however, to the condition, that when any of
The trial court therefore correctly adjudged that property was donated to
Antonio Obedencio is entitled to recover the him.chanroblesvirtualawlibrarychanrobles virtual law
possession of the residential lot Pursuant to the library
agreement of February 2,
1964.chanroblesvirtualawlibrarychanrobles virtual law One last point raised by petitioner is his alleged right
library to recover damages under the agreement of February
2, 1964. In the absence of evidence, considering that
Petitioner submits under the second assigned error the parties agreed to submit the case for decision on a
that the causa, of action if any of respondent stipulation of facts, We have no basis for awarding
Obedencio had Prescribed after the lapse of four years damages to
from the date of execution of the document of petitioner.chanroblesvirtualawlibrarychanrobles virtual
February 2, 1964. It is argued that the remedy of law library
plaintiff, now respondent, Was to ask for re-barter or
re-exchange of the properties subject of the However, We apply Art. 579 of the Civil Code and hold
agreement which could be exercised only within four that petitioner will not forfeit the improvement he
years from the date of the contract under Art. 1606 of built on the lot but may remove the same without
the Civil Code.chanroblesvirtualawlibrarychanrobles causing damage to the property.
virtual law library
Art. 579. The usufructuary may make on the property
The submission of petitioner is untenable. Art. 1606 of held in usufruct such useful improvements or
the Civil Code refers to conventional redemption expenses for mere pleasure as he may deem proper,
which petitioner would want to apply to the present provided he does not alter its form or substance; but
situation. However, as We stated above, the he shall have no right to be indemnified
agreement of the parties of February 2, 1964, is not therefor. He may, however. He may, however,
one of barter, exchange or even sale with right to removed such improvements, should it be
repurchase, but is one of or akin the other is the use possible to do so without damage to the
or material ion or enjoyment of each other's real property. (Emphasis supplied)
property.chanroblesvirtualawlibrarychanrobles virtual
law library Finally, We cannot close this case without touching on
the unirrigated riceland which admittedly is in the
Usufruct may be constituted by the parties for possession of Natividad
any period of time and under such conditions as Obedencio.chanroblesvirtualawlibrarychanrobles
they may deem convenient and beneficial virtual law library
subject to the provisions of the Civil Code, Book
II, Title VI on Usufruct. The manner of terminating In view of our ruling that the "barter agreement" of
or extinguishing the right of usufruct is primarily February 2, 1964, did not transfer the ownership of
determined by the stipulations of the parties which in the respective properties mentioned therein, it follows
this case now before Us is the happening of the event that petitioner Baluran remains the owner of the
agreed upon. Necessarily, the plaintiff or respondent unirrigated riceland and is now entitled to its
Obedencio could not demand for the recovery of Possession. With the happening of the resolutory
possession of the residential lot in question, not until condition provided for in the agreement, the right of
he acquired that right from his mother, Natividad usufruct of the parties is extinguished and each is
Obedencio, and which he did acquire when his mother entitled to a return of his property. it is true that
donated to him the residential lot on October 4, 1974. Natividad Obedencio who is now in possession of the
Even if We were to go along with petitioner in his property and who has been made a party to this case
argument that the fulfillment of the condition cannot cannot be ordered in this proceeding to surrender the
be left to an indefinite, uncertain period, nonetheless, riceland. But inasmuch as reciprocal rights and
in the case at bar, the respondent, in whose favor the obligations have arisen between the parties to the so-
resolutory condition was constituted, took immediate called "barter agreement", We hold that the parties
steps to terminate the right of petitioner herein to the and for their successors-in-interest are duty bound to
use of the lot. Obedencio's present complaint was filed effect a simultaneous transfer of the respective
in May of 1975, barely several months after the properties if substance at justice is to be
effected.chanroblesvirtualawlibrarychanrobles virtual Antecedent Facts
law library
On 24 October 1968, Proclamation No. 481 issued by
WHEREFORE, Judgment is hereby rendered: 1) then President Ferdinand Marcos set aside a 120-
declaring the petitioner Avelino Baluran and hectare portion of land in Quezon City owned by the
respondent Antonio Obedencio the respective owners NHA4 as reserved property for the site of the National
the unirrigated riceland and residential lot mentioned Government Center ("NGC"). On 19 September 1977,
in the "Barter Agreement" of February 2, 1964; 2) President Marcos issued Proclamation No. 1670, which
ordering Avelino Baluran to vacate the residential lot removed a seven-hectare portion from the coverage
and removed improvements built by of the NGC. Proclamation No. 1670 gave MSBF
thereon, provided, however that he shall not be usufructuary rights over this segregated portion, as
compelled to do so unless the unirrigated follows:
riceland shall five been restored to his
possession either on volition of the party Pursuant to the powers vested in me by the
concerned or through judicial proceedings which Constitution and the laws of the Philippines, I,
he may institute for the
FERDINAND E. MARCOS, President of the Republic of
purpose.chanroblesvirtualawlibrarychanrobles virtual
the Philippines, do hereby exclude from the operation
law library of Proclamation No. 481, dated October 24, 1968,
which established the National Government Center
Without pronouncement as to costs. So Ordered. Site, certain parcels of land embraced therein and
reserving the same for the Manila Seedling Bank
[G.R. NO. 148830. April 13, 2005] Foundation, Inc., for use in its operation and
projects, subject to private rights if any there be,
NATIONAL HOUSING and to future survey, under the administration of
AUTHORITY, Petitioners, v. COURT OF APPEALS, the Foundation.
BULACAN GARDEN CORPORATION and MANILA
SEEDLING BANK FOUNDATION, This parcel of land, which shall embrace 7
INC., Respondents. hectares, shall be determined by the future survey
based on the technical descriptions found in
DECISION Proclamation No. 481, and most particularly on the
original survey of the area, dated July 1910 to June
1911, and on the subdivision survey dated April 19-
CARPIO, J.:
25, 1968. (Emphasis added)
The Case
MSBF occupied the area granted by
Proclamation No. 1670. Over the years, MSBF's
This is a Petition for Review 1 seeking to set aside the occupancy exceeded the seven-hectare area
Decision2 dated 30 March 2001 of the Court of subject to its usufructuary rights. By 1987,
Appeals ("appellate court") in CA-G.R. CV No. 48382, MSBF occupied approximately 16 hectares. By
as well as its Resolution dated 25 June 2001 denying then the land occupied by MSBF was bounded by
the motion for reconsideration. The appellate court Epifanio de los Santos Avenue ("EDSA") to the west,
reversed the Decision3 of Branch 87 of the Regional Agham Road to the east, Quezon Avenue to the south
Trial Court of Quezon City ("trial court") dated 8 and a creek to the north.
March 1994 in Civil Case No. Q-53464. The trial court
dismissed the complaint for injunction filed by Bulacan
On 18 August 1987, MSBF leased a portion of the area
Garden Corporation ("BGC") against the National
it occupied to BGC and other stallholders. BGC leased
Housing Authority ("NHA"). BGC wanted to enjoin the
the portion facing EDSA, which occupies 4,590 square
NHA from demolishing BGC's facilities on a lot leased
meters of the 16-hectare area.
from Manila Seedling Bank Foundation, Inc. ("MSBF").
MSBF allegedly has usufructuary rights over the lot
leased to BGC. On 11 November 1987, President Corazon Aquino
issued Memorandum Order No. 127 ("MO 127") which
revoked the reserved status of "the 50 hectares, more
or less, remaining out of the 120 hectares of the NHA that Proclamation No. 1670 granted MSBF the right to
property reserved as site of the National Government determine the location of the seven-hectare area
Center." MO 127 also authorized the NHA to covered by its usufructuary rights. However, the
commercialize the area and to sell it to the public. appellate court ruled that MSBF did in fact assert this
right by conducting two surveys and erecting its main
On 15 August 1988, acting on the power granted structures in the area of its choice.
under MO 127, the NHA gave BGC ten days to vacate
its occupied area. Any structure left behind after the On 30 March 2001, the appellate court reversed the
expiration of the ten-day period will be demolished by trial court's ruling. Thus:
NHA.
WHEREFORE, premises considered, the Decision dated
BGC then filed a complaint for injunction on 21 April March 8, 1994 of the Regional Trial Court of Quezon
1988 before the trial court. On 26 May 1988, BGC City, Branch 87, is hereby REVERSED and SET ASIDE.
amended its complaint to include MSBF as its co- The National Housing Authority is enjoined from
plaintiff. demolishing the structures, facilities and
improvements of the plaintiff-appellant Bulacan
The Trial Court's Ruling Garden Corporation at its leased premises located in
Quezon City which premises were covered by
The trial court agreed with BGC and MSBF that Proclamation No. 1670, during the existence of the
Proclamation No. 1670 gave MSBF the right to contract of lease it (Bulacan Garden) had entered with
conduct the survey, which would establish the seven- the plaintiff-appellant Manila Seedling Bank
hectare area covered by MSBF's usufructuary rights. Foundation, Inc.
However, the trial court held that MSBF failed to act
seasonably on this right to conduct the survey. The No costs.
trial court ruled that the previous surveys conducted
by MSBF covered 16 hectares, and were thus SO ORDERED.6
inappropriate to determine the seven-hectare area.
The trial court concluded that to allow MSBF to The NHA filed a motion for reconsideration, which was
determine the seven-hectare area now would be denied by the appellate court on 25 June 2001.
grossly unfair to the grantor of the usufruct.
Hence, this petition.
On 8 March 1994, the trial court dismissed BGC's
complaint for injunction. Thus: The Issues

Premises considered, the complaint praying to enjoin The following issues are considered by this Court for
the National Housing Authority from carrying out the resolution:
demolition of the plaintiff's structure, improvements
and facilities in the premises in question is hereby
WHETHER THE PETITION IS NOW MOOT BECAUSE OF
DISMISSED, but the suggestion for the Court to rule
THE DEMOLITION OF THE STRUCTURES OF BGC;
that Memorandum Order 127 has repealed
andcralawlibrary
Proclamation No. 1670 is DENIED. No costs.
WHETHER THE PREMISES LEASED BY BGC FROM
SO ORDERED.5
MSBF IS WITHIN THE SEVEN-HECTARE AREA THAT
PROCLAMATION NO. 1670 GRANTED TO MSBF BY
The NHA demolished BGC's facilities soon thereafter. WAY OF USUFRUCT.

The Appellate Court's Ruling The Ruling of the Court

Not content with the trial court's ruling, BGC appealed We remand this petition to the trial court for a joint
the trial court's Decision to the appellate court. survey to determine finally the metes and bounds of
Initially, the appellate court agreed with the trial court
the seven-hectare area subject to MSBF's 4,590 square meter portion MSBF leased to BGC is
usufructuary rights. within the seven-hectare area held in usufruct by
MSBF. The owner of the property must respect the
Whether the Petition is Moot because of the lease entered into by the usufructuary so long as the
usufruct exists.11 However, the NHA has the right to
Demolition of BGC's Facilities evict BGC if BGC occupied a portion outside of the
seven-hectare area covered by MSBF's usufructuary
rights.
BGC claims that the issue is now moot due to NHA's
demolition of BGC's facilities after the trial court
dismissed BGC's complaint for injunction. BGC argues MSBF's survey shows that BGC's stall is within
that there is nothing more to enjoin and that there the seven-hectare area. On the other hand,
are no longer any rights left for adjudication. NHA's survey shows otherwise. The entire
controversy revolves on the question of whose land
survey should prevail.
We disagree.

MSBF's survey plots the location of the seven-hectare

BGC may have lost interest in this case due to the
portion by starting its measurement from Quezon
demolition of its premises, but its co-plaintiff, MSBF,
Avenue going northward along EDSA up until the
has not. The issue for resolution has a direct effect on
creek, which serves as the northern boundary of the
MSBF's usufructuary rights. There is yet the central
land in question. Mr. Ben Malto ("Malto"), surveyor for
question of the exact location of the seven-hectare
MSBF, based his survey method on the fact that
area granted by Proclamation No. 1670 to MSBF. This
MSBF's main facilities are located within this area.
issue is squarely raised in this petition. There is a
need to settle this issue to forestall future disputes
and to put this 20-year litigation to rest. On the other hand, NHA's survey determines the
seven-hectare portion by starting its measurement
from Quezon Avenue going towards Agham Road. Mr.
On the Location of the Seven-Hectare Area Granted
Rogelio Inobaya ("Inobaya"), surveyor for NHA, based
by
his survey method on the fact that he saw MSBF's
gate fronting Agham Road.
Proclamation No. 1670 to MSBF as Usufructuary
BGC presented the testimony of Mr. Lucito M. Bertol
Rule 45 of the 1997 Rules of Civil Procedure limits the ("Bertol"), General Manager of MSBF. Bertol
jurisdiction of this Court to the review of errors of presented a map,12 which detailed the area presently
law.7 Absent any of the established grounds for occupied by MSBF. The map had a yellow-shaded
exception,8 this Court will not disturb findings of fact portion, which was supposed to indicate the seven-
of lower courts. Though the matter raised in this hectare area. It was clear from both the map and
petition is factual, it deserves resolution Bertol's testimony that MSBF knew that it had
because the findings of the trial court and the occupied an area in excess of the seven-hectare area
appellate court conflict on several points. granted by Proclamation No. 1670. 13 Upon cross-
examination, Bertol admitted that he personally did
The entire area bounded by Agham Road to the east, not know the exact boundaries of the seven-hectare
EDSA to the west, Quezon Avenue to the south and by area.14 Bertol also admitted that MSBF prepared the
a creek to the north measures approximately 16 map without consulting NHA, the owner of the
hectares. Proclamation No. 1670 gave MSBF a property.15
usufruct over only a seven-hectare area. The BGC's
leased portion is located along EDSA. BGC also presented the testimony of Malto, a
registered forester and the Assistant Vice-President of
A usufruct may be constituted for a specified term and Planning, Research and Marketing of MSBF. Malto
under such conditions as the parties may deem testified that he conducted the land survey, which was
convenient subject to the legal provisions on used to construct the map presented by
usufruct.9 A usufructuary may lease the object held in Bertol.16 Bertol clarified that he authorized two
usufruct.10 Thus, the NHA may not evict BGC if the surveys, one in 1984 when he first joined MSBF, and
the other in 1986.17 In both instances, Mr. Malto hectare area shaded in yellow. MSBF made the first
testified that he was asked to survey a total of 16 survey in 1984 and the second in 1986, way before
hectares, not just seven hectares. Malto testified that the present controversy started. MSBF conducted the
he conducted the second survey in 1986 on the two surveys before the lease to BGC. The trial court
instruction of MSBF's general manager. According to ruled that MSBF did not act seasonably in exercising
Malto, it was only in the second survey that he was its right to conduct the survey. Confronted with
told to determine the seven-hectare portion. Malto evidence that MSBF did in fact conduct two surveys,
further clarified that he based the technical the trial court dismissed the two surveys as self-
descriptions of both surveys on a previously existing serving. This is clearly an error on the part of the trial
survey of the property.18 court. Proclamation No. 1670 authorized MSBF to
determine the location of the seven-hectare area. This
The NHA presented the testimony of Inobaya, a authority, coupled with the fact that Proclamation No.
geodetic engineer employed by the NHA. Inobaya 1670 did not state the location of the seven-hectare
testified that as part of the NHA's Survey Division, his area, leaves no room for doubt that Proclamation No.
duties included conducting surveys of properties 1670 left it to MSBF to choose the location of the
administered by the NHA.19 Inobaya conducted his seven-hectare area under its usufruct.
survey in May 1988 to determine whether BGC was
occupying an area outside the seven-hectare area More evidence supports MSBF's stand on the location
MSBF held in usufruct.20 Inobaya surveyed the area of the seven-hectare area. The main structures of
occupied by MSBF following the same technical MSBF are found in the area indicated by MSBF's
descriptions used by Malto. Inobaya also came to the survey. These structures are the main office, the
same conclusion that the area occupied by MSBF, as three green houses, the warehouse and the
indicated by the boundaries in the technical composting area. On the other hand, the NHA's
descriptions, covered a total of 16 hectares. He delineation of the seven-hectare area would cover
further testified that the seven-hectare portion in the only the four hardening bays and the display area. It
map presented by BGC,21 which was constructed by is easy to distinguish between these two groups of
Malto, does not tally with the boundaries BGC and structures. The first group covers buildings and
MSBF indicated in their complaint. facilities that MSBF needs for its operations. MSBF
built these structures before the present controversy
Article 565 of the Civil Code states: started. The second group covers facilities less
essential to MSBF's existence. This distinction is
ART. 565. The rights and obligations of the decisive as to which survey should prevail. It is clear
usufructuary shall be those provided in the title that the MSBF intended to use the yellow-shaded area
constituting the usufruct; in default of such title, or in primarily because it erected its main structures there.
case it is deficient, the provisions contained in the two
following Chapters shall be observed. Inobaya testified that his main consideration in using
Agham Road as the starting point for his survey was
In the present case, Proclamation No. 1670 is the title the presence of a gate there. The location of the gate
constituting the usufruct. Proclamation No. 1670 is not a sufficient basis to determine the starting
categorically states that the seven-hectare area shall point. MSBF's right as a usufructuary as granted by
be determined "by future survey under the Proclamation No. 1670 should rest on something more
administration of the Foundation subject to private substantial than where MSBF chose to place a gate.
rights if there be any." The appellate court and the
trial court agree that MSBF has the latitude to To prefer the NHA's survey to MSBF's survey will strip
determine the location of its seven-hectare usufruct MSBF of most of its main facilities. Only the main
portion within the 16-hectare area. The appellate building of MSBF will remain with MSBF since the main
court and the trial court disagree, however, whether building is near the corner of EDSA and Quezon
MSBF seasonably exercised this right. Avenue. The rest of MSBF's main facilities will be
outside the seven-hectare area.
It is clear that MSBF conducted at least two surveys.
Although both surveys covered a total of 16 hectares, On the other hand, this Court cannot countenance
the second survey specifically indicated a seven- MSBF's act of exceeding the seven-hectare portion
granted to it by Proclamation No. 1670. A usufruct is than fifty years. If it has been constituted, and
not simply about rights and privileges. A usufructuary before the expiration of such period the town is
has the duty to protect the owner's interests. One abandoned, or the corporation or association is
such duty is found in Article 601 of the Civil Code dissolved, the usufruct shall be extinguished by
which states: reason thereof. (Emphasis added)

ART. 601. The usufructuary shall be obliged to notify The law clearly limits any usufruct constituted in favor
the owner of any act of a third person, of which he of a corporation or association to 50 years. A usufruct
may have knowledge, that may be prejudicial to the is meant only as a lifetime grant. Unlike a natural
rights of ownership, and he shall be liable should he person, a corporation or association's lifetime may be
not do so, for damages, as if they had been caused extended indefinitely. The usufruct would then be
through his own fault. perpetual. This is especially invidious in cases where
the usufruct given to a corporation or association
A usufruct gives a right to enjoy the property of covers public land. Proclamation No. 1670 was issued
another with the obligation of preserving its form and 19 September 1977, or 28 years ago. Hence, under
substance, unless the title constituting it or the law Article 605, the usufruct in favor of MSBF has 22
otherwise provides.22 This controversy would not have years left.
arisen had MSBF respected the limit of the beneficial
use given to it. MSBF's encroachment of its MO 127 released approximately 50 hectares of the
benefactor's property gave birth to the confusion that NHA property as reserved site for the National
attended this case. To put this matter entirely to rest, Government Center. However, MO 127 does not affect
it is not enough to remind the NHA to respect MSBF's MSBF's seven-hectare area since under Proclamation
choice of the location of its seven-hectare area. MSBF, No. 1670, MSBF's seven-hectare area was already
for its part, must vacate the area that is not part of its "exclude[d] from the operation of Proclamation No.
usufruct. MSBF's rights begin and end within the 481, dated October 24, 1968, which established the
seven-hectare portion of its usufruct. This Court National Government Center Site."
agrees with the trial court that MSBF has abused the
privilege given it under Proclamation No. 1670. The WHEREFORE, the Decision of the Court of Appeals
direct corollary of enforcing MSBF's rights within the dated 30 March 2001 and its Resolution dated 25 June
seven-hectare area is the negation of any of MSBF's 2001 in CA-G.R. CV No. 48382 are SET ASIDE. This
acts beyond it. case is REMANDED to Branch 87 of the Regional Trial
Court of Quezon City, which shall order a joint survey
The seven-hectare portion of MSBF is no longer easily by the National Housing Authority and Manila Seedling
determinable considering the varied structures Bank Foundation, Inc. to determine the metes and
erected within and surrounding the area. Both parties bounds of the seven-hectare portion of Manila
advance different reasons why their own surveys Seedling Bank Foundation, Inc. under Proclamation
should be preferred. At this point, the determination No. 1670. The seven-hectare portion shall be
of the seven-hectare portion cannot be made to rely contiguous and shall include as much as possible all
on a choice between the NHA's and MSBF's survey. existing major improvements of Manila Seedling Bank
There is a need for a new survey, one conducted Foundation, Inc. The parties shall submit the joint
jointly by the NHA and MSBF, to remove all doubts on survey to the Regional Trial Court for its approval
the exact location of the seven-hectare area and thus within sixty days from the date ordering the joint
avoid future controversies. This new survey should survey.
consider existing structures of MSBF. It should as
much as possible include all of the facilities of MSBF SO ORDERED.
within the seven-hectare portion without sacrificing
contiguity.

A final point. Article 605 of the Civil Code states: SECOND DIVISION

ART. 605. Usufruct cannot be constituted in favor [G.R. NO. 152809 : August 3, 2006]
of a town, corporation, or association for more
MERCEDES MORALIDAD, Petitioner, v. SPS. women and children were victims of crossfire between
DIOSDADO PERNES and ARLENE government troops and the insurgents. Shocked and
PERNES, Respondents. saddened about this development, she immediately
sent money to Araceli, Arlene's older sister, with
DECISION instructions to look for a lot in Davao City where
Arlene and her family could transfer and settle down.
GARCIA, J.: This was why she bought the parcel of land covered
by TCT No. T-123125.
Under consideration is this Petition for Review
on Certiorari under Rule 45 of the Rules of Court to Petitioner acquired the lot property initially for the
nullify and set aside the following issuances of the purpose of letting Arlene move from Mandug to Davao
Court of Appeals (CA) in CA-G.R. SP No. 61610, to City proper but later she wanted the property to be
wit: also available to any of her kins wishing to live and
settle in Davao City. Petitioner made known this
1 intention in a document she executed on July 21,
1. Decision dated September 27, 2001,   affirming an
1986.3 The document reads:
earlier decision of the Regional Trial Court (RTC) of
Davao City which reversed that of the Municipal Trial
Court in Cities (MTCC), Davao City, Branch 1, in an I, MERCEDES VIÑA MORALIDAD, of legal age, single,
action for unlawful detainer thereat commenced by having been born on the 29th day of January, 1923,
the petitioner against the herein respondents; now actually residing at 8021 Lindbergh Boulevard,
andcralawlibrary Philadelphia, Pennsylvania, U.S.A., wishes to convey
my honest intention regarding my properties situated
2 at Palm Village Subdivision, Bajada, Davao City, 9501,
2. Resolution dated February 28, 2002,   denying
- and hereby declare:
petitioner's motion for reconsideration.

1. That it is my desire that Mr. and Mrs. Diosdado M.

At the heart of this controversy is a parcel of land
Pernes may build their house therein and stay as long
located in Davao City and registered in the name of
as they like;
petitioner Mercedes Moralidad under Transfer
Certificate of Title (TCT) No. T-123125 of the Registry
of Deeds of Davao City. 2. That anybody of my kins who wishes to stay on the
aforementioned real property should maintain an
atmosphere of cooperation, live in harmony and must
In her younger days, petitioner taught in Davao City,
avoid bickering with one another;
Quezon City and Manila. While teaching in Manila, she
had the good fortune of furthering her studies at the
University of Pennsylvania, U.S.A. While schooling, 3. That anyone of my kins may enjoy the privilege to
she was offered to teach at the Philadelphia Catholic stay therein and may avail the use thereof. Provided,
Archdiocese, which she did for seven (7) years. however, that the same is not inimical to the purpose
Thereafter, she worked at the Mental Health thereof;
Department of said University for the next seventeen
(17) years. 4. That anyone of my kins who cannot conform with
the wishes of the undersigned may exercise the
During those years, she would come home to the freedom to look for his own;
Philippines to spend her two-month summer vacation
in her hometown in Davao City. Being single, she 5. That any proceeds or income derived from the
would usually stay in Mandug, Davao City, in the aforementioned properties shall be allotted to my
house of her niece, respondent Arlene Pernes, a nearest kins who have less in life in greater
daughter of her younger sister, Rosario. percentage and lesser percentage to those who are
better of in standing.
Back in the U.S.A. sometime in 1986, she received
news from Arlene that Mandug at the outskirts of x x x
Davao City was infested by NPA rebels and many
Following her retirement in 1993, petitioner came To prove their point, they invited attention to her
back to the Philippines to stay with the respondents' written declaration of July 21, 1986, supra, wherein
on the house they build on the subject property. In she expressly signified her desire for the spouses to
the course of time, their relations turned sour because build their house on her property and stay thereat for
members of the Pernes family were impervious to her as long as they like.
suggestions and attempts to change certain practices
concerning matters of health and sanitation within The MTCC, resolving the ejectment suit in petitioner's
their compound. For instance, Arlene's eldest son, favor, declared that the respondent spouses, although
Myco Pernes, then a fourth year veterinary medicine builders in good faith vis - à-vis the house they built
student, would answer petitioner back with clenched on her property, cannot invoke their bona fides as a
fist and at one time hurled profanities when she valid excuse for not complying with the demand to
corrected him. Later, Arlene herself followed suit. vacate. To the MTCC, respondents' continued
Petitioner brought the matter to the local barangay possession of the premises turned unlawful upon their
lupon where she lodged a complaint for slander, receipt of the demand to vacate, such possession
harassment, threat and defamation against the Pernes being merely at petitioner's tolerance, and sans any
Family. Deciding for petitioner, the lupon apparently rental. Accordingly, in its decision dated November
ordered the Pernes family to vacate petitioner's 17, 1999, 4 the MTCC rendered judgment for the
property but not after they are reimbursed for petitioner, as plaintiff therein, to wit:
the value of the house they built thereon.
Unfortunately, the parties could not agree on the WHEREFORE, judgment is hereby rendered in favor of
amount, thus prolonging the impasse between them. herein plaintiff and against the defendants, as follows:

Other ugly incidents interspersed with violent a) Directing the defendants, their agents and other
confrontations meanwhile transpired, with the persons acting on their behalf to vacate the premises
petitioner narrating that, at one occasion in July 1998, and to yield peaceful possession thereof to plaintiff;
she sustained cuts and wounds when Arlene pulled
her hair, hit her on the face, neck and back, while her
b) Ordering defendants to pay P2,000.00 a month
husband Diosdado held her, twisting her arms in the
from the filing of this complaint until they vacate
process.
premises;

Relations having deteriorated from worse to worst,

c) Sentencing defendants to pay the sum
petitioner, on July 29, 1998, lodged a formal
of P120,000.00 5 as attorney's fees and to pay the
complaint before the Regional Office of the
cost of suit.
Ombudsman for Mindanao, charging the respondent
spouses, who were both government employees, with
conduct unbecoming of public servants. This Defendants counterclaim are hereby dismissed except
administrative case, however, did not prosper. with respect to the claim for reimbursement of
necessary and useful expenses which should be
litigated in an ordinary civil actions. (sic)
Then, on August 3, 1998, petitioner filed with the
MTCC of Davao City an unlawful detainer suit against
the respondent spouses. Petitioner alleged that she is Dissatisfied, the respondent spouses appealed to the
the registered owner of the land on which the RTC of Davao City.
respondents built their house; that through her
counsel, she sent the respondent spouses a letter In the meantime, petitioner filed a Motion for
demanding them to vacate the premises and to pay Execution Pending Appeal. The motion was initially
rentals therefor, which the respondents refused to granted by the RTC in its Order of February 29, 2000,
heed. but the Order was later withdrawn and vacated by its
subsequent Order dated May 9, 2000 6 on the ground
In their defense, the respondents alleged having that immediate execution of the appealed decision
entered the property in question, building their house was not the prudent course of action to take,
thereon and maintaining the same as their residence considering that the house the respondents
with petitioner's full knowledge and express consent. constructed on the subject property might even
be more valuable than the land site.
Eventually, in a decision 7 dated September 30, 2000, respondents' right to possess a portion of petitioner's
the RTC reversed that of the MTCC, holding that land had already expired or was already terminated
respondents' possession of the property in question was not yet resolved. To the CA, the unlawful detainer
was not, as ruled by the latter court, by mere suit presupposes the cessation of respondents' right
tolerance of the petitioner but rather by her express to possess. The CA further ruled that what governs
consent. It further ruled that Article 1678 of the Civil the rights of the parties is the law on usufruct but
Code on reimbursement of improvements introduced petitioner failed to establish that respondents' right to
is inapplicable since said provision contemplates of a possess had already ceased. On this premise, the CA
lessor-lessee arrangement, which was not the factual concluded that the ejectment suit instituted by the
milieu obtaining in the case. Instead, the RTC ruled petitioner was premature. The appellate court thus
that what governed the parties' relationship are affirmed the appealed RTC decision, disposing:
Articles 448 and 546 of the Civil Code, explaining
thus: WHEREFORE, premises considered, the instant
Petition for Review is hereby denied for lack of merit.
Since the defendants-appellees [respondents] are Accordingly, the petitioner's complaint for Unlawful
admittedly possessors of the property by permission Detainer is DISMISSED.
from plaintiff [petitioner], and builders in good faith,
they have the right to retain possession of the SO ORDERED.
property subject of this case until they have
been reimbursed the cost of the improvements With the CA's denial of her motion for reconsideration
they have introduced on the property. in its Resolution of February 28, 2002, petitioner is
now before this Court raising the following issues:
Indeed, this is a substantive right given to the
defendants by law, and this right is superior to the I. WHETHER OR NOT THE COURT OF APPEALS ERRED
procedural right to [sic] plaintiff to immediately ask IN DISMISSING THE UNLAWFUL DETAINER CASE FOR
for their removal by a writ of execution by virtue of a BEING PREMATURE WHICH DECISION IS NOT IN
decision which as we have shown is erroneous, and ACCORDANCE WITH LAW AND JURISPRUDENCE.
therefore invalid. (Words in brackets supplied),
II. WHETHER OR NOT THE COURT OF APPEALS ERRED
and accordingly dismissed petitioner's appeal, as IN APPLYING ARTICLES 448 AND 546 AND THE
follows: PROVISIONS OF THE CODE ON USUFRUCT INSTEAD
OF ARTICLE 1678 OF THE CIVIL CODE.
WHEREFORE, in view of the foregoing, the Decision
appealed from is REVERSED and declared invalid. The Court rules for the petitioner.
Consequently, the motion for execution pending
appeal is likewise denied.
The Court is inclined to agree with the CA that what
was constituted between the parties herein is one of
Counter-claims of moral and exemplary damages usufruct over a piece of land, with the petitioner being
claimed by defendants are likewise dismissed. the owner of the property upon whom the naked title
However, attorney's fees in the amount of fifteen thereto remained and the respondents being two (2)
thousand pesos is hereby awarded in favor of among other unnamed usufructuaries who were
defendants-appellants, and against plaintiffs. simply referred to as petitioner's kin. The Court,
however, cannot go along with the CA's holding that
SO ORDERED.8 the action for unlawful detainer must be dismissed on
ground of prematurity.
Therefrom, petitioner went to the CA in CA-G.R. SP
No. 61610. Usufruct is defined under Article 562 of the Civil Code
in the following wise:
On September 27, 2001, the CA, while conceding the
applicability of Articles 448 and 546 of the Civil Code ART. 562. Usufruct gives a right to enjoy the property
to the case, ruled that it is still premature to apply the of another with the obligation of preserving its form
same considering that the issue of whether
and substance, unless the title constituting it or the terminated. Now, has respondents' right to possess
law otherwise provides. the subject portion of petitioner's property expired or
terminated? Let us therefore examine respondents'
Usufruct, in essence, is nothing else but simply basis for occupying the same.
allowing one to enjoy another's property. 9 It is also
defined as the right to enjoy the property of another It is undisputed that petitioner expressly authorized
temporarily, including both the jus utendi and the jus respondents o occupy portion of her property on
fruendi, 10 with the owner retaining the jus disponendi which their house may be built. Thus - "it is my desire
or the power to alienate the same.11 that Mr. and Mrs. Diosdado M. Pernes may build their
house therein and stay as long as they like." From this
It is undisputed that petitioner, in a document dated statement, it seems that petitioner had given the
July 21, 1986, supra, made known her intention to respondents the usufructuary rights over the portion
give respondents and her other kins the right to use that may be occupied by the house that the latter
and to enjoy the fruits of her property. There can also would build, the duration of which being dependent on
be no quibbling about the respondents being given the how long respondents would like to occupy the
right "to build their own house" on the property and to property. While petitioner had already demanded
stay thereat "as long as they like." Paragraph #5 of from the respondents the surrender of the
the same document earmarks "proceeds or income premises, this Court is of the opinion that the
derived from the aforementioned properties" for the usufructuary rights of respondents had not been
petitioner's "nearest kins who have less in life in terminated by the said demand considering the
greater percentage and lesser percentage to those clear statement of petitioner that she is allowing
who are better of (sic) in standing." The established respondents to occupy portion of her land as long
facts undoubtedly gave respondents not only the right as the latter want to. Considering that respondents
to use the property but also granted them, among the still want to occupy the premises, petitioner clearly
12
petitioner's other kins, the right to enjoy the fruits cannot eject respondents.
thereof. We have no quarrel, therefore, with the CA's
ruling that usufruct was constituted between We disagree with the CA's conclusion of law on
petitioner and respondents. It is thus pointless to the matter. The term or period of the usufruct
discuss why there was no lease contract between the originally specified provides only one of the bases for
parties. the right of a usufructuary to hold and retain
possession of the thing given in usufruct. There are
However, determinative of the outcome of the other modes or instances whereby the usufruct
ejectment case is the resolution of the next issue, i.e., shall be considered terminated or extinguished.
whether the existing usufruct may be deemed to have For sure, the Civil Code enumerates such other modes
been extinguished or terminated. If the question is of extinguishment:
resolved in the affirmative, then the respondents'
right to possession, proceeding as it did from their ART. 603. Usufruct is extinguished:
right of usufruct, likewise ceased. In that case,
petitioner's action for ejectment in the unlawful (1) By the death of the usufructuary, unless a
detainer case could proceed and should prosper. contrary intention clearly appears;

The CA disposed of this issue in this wise: (2) By expiration of the period for which it was
constituted, or by the fulfillment of any resolutory
xxx Section 1, Rule 70 of the 1997 Rules of Civil condition provided in the title creating the usufruct;
Procedure, as amended, provides xxx
(3) By merger of the usufruct and ownership in the
xxx same person;

From the foregoing provision, it becomes apparent (4) By renunciation of the usufructuary;
that for an action for unlawful detainer to prosper, the
plaintiff [petitioner] needs to prove that defendants' (5) By the total loss of the thing in usufruct;
[respondents'] right to possess already expired and
(6) By the termination of the right of the person Thus, the Court rules that the continuing animosity
constituting the usufruct; between the petitioner and the Pernes family and the
violence and humiliation she was made to endure,
(7) By prescription. (Emphasis supplied.) despite her advanced age and frail condition, are
enough factual bases to consider the usufruct as
The document executed by the petitioner dated July having been terminated.
21, 1986 constitutes the title creating, and sets forth
the conditions of, the usufruct. Paragraph #3 thereof To reiterate, the relationship between the petitioner
states "[T]hat anyone of my kins may enjoy the and respondents respecting the property in question is
privilege to stay therein and may avail the use one of owner and usufructuary. Accordingly,
thereof. Provided, however, that the same is not respondents' claim for reimbursement of the
inimical to the purpose thereof" (Emphasis supplied). improvements they introduced on the property during
What may be inimical to the purpose constituting the the effectivity of the usufruct should be governed by
usufruct may be gleaned from the preceding applicable statutory provisions and principles on
paragraph wherein petitioner made it abundantly clear usufruct. In this regard, we cite with approval what
"that anybody of my kins who wishes to stay on the Justice Edgardo Paras wrote on the matter:
aforementioned property should maintain an
atmosphere of cooperation, live in harmony and must If the builder is a usufructuary, his rights will be
avoid bickering with one another." That the governed by Arts. 579 and 580. In case like this, the
maintenance of a peaceful and harmonious relations terms of the contract and the pertinent provisions of
between and among kin constitutes an indispensable law should govern (3 Manresa 215-216; se also
condition for the continuance of the usufruct is clearly Montinola v. Bantug, 71 Phil. 449).14 (Emphasis ours.)
deduced from the succeeding Paragraph #4 where
petitioner stated "[T]hat anyone of my kins who By express provision of law, respondents, as
cannot conform with the wishes of the undersigned usufructuary, do not have the right to reimbursement
may exercise the freedom to look for his own." In for the improvements they may have introduced on
fine, the occurrence of any of the following: the loss the property. We quote Articles 579 and 580 of the
of the atmosphere of cooperation, the bickering or the Civil Code:
cessation of harmonious relationship between/among
kin constitutes a resolutory condition which, by Art. 579. The usufructuary may make on the property
express wish of the petitioner, extinguishes the held in usufruct such useful improvements or
usufruct. expenses for mere pleasure as he may deem proper,
provided he does not alter its form or substance; but
From the pleadings submitted by the parties, it is he shall have no right to be indemnified therefor. He
indubitable that there were indeed facts and may, however, remove such improvements, should it
circumstances whereby the subject usufruct may be be possible to do so without damage to the property.
deemed terminated or extinguished by the occurrence (Emphasis supplied.)
of the resolutory conditions provided for in the title
creating the usufruct, namely, the document adverted Art. 580. The usufructuary may set off the
to which the petitioner executed on July 21, 1986. improvements he may have made on the property
against any damage to the same.
As aptly pointed out by the petitioner in her
Memorandum, respondents' own evidence before the Given the foregoing perspective, respondents will
MTCC indicated that the relations between the parties have to be ordered to vacate the premises without
"have deteriorated to almost an irretrievable any right of reimbursement. If the rule on
level." 13 There is no doubt then that what impelled reimbursement or indemnity were otherwise, then the
petitioner to file complaints before the local barangay usufructuary might, as an author pointed out, improve
lupon, the Office of the Ombudsman for Mindanao, the owner out of his property.15 The respondents may,
and this instant complaint for unlawful detainer before however, remove or destroy the improvements they
the MTCC is that she could not live peacefully and may have introduced thereon without damaging the
harmoniously with the Pernes family and vice versa. petitioner's property.
Out of the generosity of her heart, the petitioner has 3. ID.; ID.; A USUFRUCTUARY RIGHT IS AN
allowed the respondent spouses to use and enjoy the "INTEREST IN LAND. — If the usufructuary right is
fruits of her property for quite a long period of time. one which may be leased or sold, it must logically
They opted, however, to repay a noble gesture with follow that such a right is an "interest" in real
unkindness. At the end of the day, therefore, they property, within the meaning of section 450 of the
really cannot begrudge their aunt for putting an end Code of Civil Procedure.
to their right of usufruct. The disposition herein
arrived is not only legal and called for by the law and 4. ID.; ID.; ATTACHMENT; REAL TEST AS TO
facts of the case. It is also right. WHETHER PROPERTY CAN BE ATTACHED AND SOLD.
— The real test, as to whether or not property can be
WHEREFORE, the petition is GRANTED. The assailed attached and sold upon execution is: Does the
Decision and Resolution of the CA are REVERSED and judgment debtor hold such a beneficial interest in the
SET ASIDE. Accordingly, the decision of the MTCC is property that he can sell or otherwise dispose of it for
REINSTATED with MODIFICATION that all of value? If he does, then the property is subject to
respondents' counterclaims are dismissed, including execution and to the payment of his debts. The right
their claims for reimbursement of useful and of usufruct is such an interest and when the sheriff, in
necessary expenses. this case, sold the plaintiff’s usufructuary right by
virtue of an execution, the plaintiff had no further
No pronouncement as to costs. interest in the property.

[G.R. No. 6969. December 20, 1911.] D E C I S I O N

VICENTE REYES, Plaintiff-Appellant, v. JOSE

GREY ET AL., Defendants-Appellees. TRENT, J.:

Ramon Salinas for Appellant.

Judgment having been rendered by the Court of First
D. R. Williams for Appellees. Instance of the city of Manila, the Hon. Charles S.
Lobingier presiding, dismissing the complaint in this
SYLLABUS case upon its merits, the plaintiff appealed.

1. USUFRUCTUARY RIGHT; SALE UNDER EXECUTION; The only question raised by this appeal is purely one
"PROPERTY," UNDER SECTION 450, CODE OF CIVIL of law.
PROCEDURE, DEFINED. — The term "property," in
section 450 of the Code of Civil Procedure, Remedios Grey, wife of the plaintiff, died intestate in
comprehends every species of title, inchoate or 1905 without ascendants or descendants, leaving a
complete, legal or equitable. The said code authorizes surviving husband and one sister and three brothers.
the sale, under execution, of every kind of property Under the law, the sisters and brothers are called to
and every interest in property which is, or may be, inherit all of the estate of the deceased, subject only
the subject of private ownership and transfer. It deals to the right of the surviving husband, the plaintiff, to
with equitable rights and interests, as it deals with a usufructuary interest in one-half thereof.
legal, without anywhere expressly recognizing or
making any distinction between them. Administration proceedings in the estate of the
deceased wife were not taken out until June 15, 1907,
2. ID.; ID.; RIGHTS OF USUFRUCTUARY, UNDER THE when Jose Grey, one of the defendants, was
CIVIL CODE. — Article 480 of the Civil Code provides appointed administrator. In these administration
that: "The usufructuary may personally enjoy the proceedings, the Court of First Instance of this city
thing in usufruct, lease it to another person, or issued a decree on December 3, 1910, declaring that
alienate his right to the usufruct, even for a good each one of the defendants in the case at bar was
consideration . . . ."cralaw virtua1aw library entitled to one-fourth part of the estate of the
deceased Remedios Grey, subject to the plaintiff’s
(Vicente Reyes’) right to the usufruct. comprehends every species of title, inchoate or
complete; legal or equitable. This statute authorizes
Prior to the appointment of the administrator for the the sale under execution of very kind of property, and
estate of the deceased Remedios Grey, and as the every interest in property which is, or may be, the
result of certain judicial proceedings had against her subject of private ownership and transfer. It deals
surviving husband (the plaintiff in the case at bar), his with equitable rights and interests as it deals with
usufructuary interest in the estate of his deceased legal, without anywhere expressly recognizing or
wife was sold under execution and deeds issued making any distinction between them.
therefor to the purchaser, the defendant Jose Grey.
Such deeds still subsist in full force and effect, no Article 480 of the Civil Code
steps ever having been taken either to annul or set reads:jgc:chanrobles.com.ph
them aside or to redeem the interest of the plaintiff
thus sold. "The usufructuary may personally enjoy the thing in
usufruct, lease it to another person, or alienate his
The plaintiff, as surviving husband of the deceased right to the usufruct. even for a good
Remedios Grey, now sues the sister and brothers of consideration; . . ."cralaw virtua1aw library
his deceased wife, claiming of them the payment of
his usufructuary interest in the property of the If the usufructuary right is one which may be leased
deceased, basing his claim upon two grounds: first. or sold, it must logically and necessarily follow that
that the execution sale and the sheriff’s deeds such a right is an "interest" in real property within the
executed pursuant thereto did not divest him of his meaning of section 450 of the Code of Civil Procedure,
usufructuary interest in the property and that the above quoted. It was the plaintiff’s usufructuary right
defendants still remain charged with its payment; and in real property which was sold under execution. This
second, the defendants having failed to appeal from right was conferred upon him at the death of his wife
the order of the probate court dated December 3, by operation of law, and by virtue of such a right he
1910, which order was issued some three years after was entitled to receive all the natural, industrial, and
an attempt was made to sell under execution the civil fruits of said real property in usufruct. He was
plaintiff’s usufructuary interest, and that order having entitled to hold the actual, material possession of such
become final, it settled the plaintiff’s right to a property during his lifetime, and was obligated only to
usufructuary interest, and the defendants can not now preserve its form and substance. In other words, he
deny this fact. was entitled, subject to this restriction, to use the
property as his own. He was the real owner of this
Counsel for the plaintiff now insists that a interest, and article 480, supra, conferred upon him
usufructuary interest in real property is not such an the right to enjoy the possession of the property or
interest or right as can be sold under execution. With lease it to another or to sell such interest outright. We
this contention we can not agree. Section 450 of the think the real test, as to whether or not property can
Code of Civil Procedure provides as be attached and sold upon execution is — does the
follows:jgc:chanrobles.com.ph judgment debtor hold such a beneficial interest in
such property that he can sell or otherwise dispose of
"SEC. 450. Property liable to execution. — All goods, it for value? If he does, then the property is subject to
chattels, moneys, and other property, both real and execution and payment of his debts. The right of
personal, or any interest therein of the judgment usufruct is such an interest, and when the sheriff sold
debtor, not exempt by law, and all property and rights the plaintiff’s usufructuary right by virtue of an
of property seized and held under attachment in the execution, he had no further interest in said property.
action, shall be liable to execution. Shares and
interests in any corporation or company, and debts, The plaintiff’s second contention that the defendants,
credits, and all other property, both real and personal, by failing to appeal from the order of the court in the
or any interest in either real or personal property, and administration proceedings dated December 3, 1910,
all other property not capable of manual delivery, may wherein the right of plaintiff to a usufructuary interest
be attached on execution, in like manner as upon in the property was recognized, have lost their right to
writs of attachment."cralaw virtua1aw library refuse such payment to him at this time, is not well
founded. The plaintiff had no interest in this property
The term "property" as here applied to lands at the time the probate court issued this order. The
order only set out the fact that under the law the establishing the basic rule of industrial accession,
plaintiff was entitled to a usufructuary interest in one- prescribes that — "Whatever is built, planted or sown
half of the estate of his deceased wife. It was not a on the land of another, and the improvements or
finding that in the meantime the plaintiff had not sold, repairs made thereon, belong to the owner of the land
leased, or otherwise disposed of or lost such right of subject to the provisions of the following articles"
participation. This order merely fixed the legal status while Article 449 states: "He who builds, plants or
of the plaintiff and did not have the effect of canceling sows in bad faith on the land of another, loses what is
or annuling the sale made by the sheriff. Again, the built, planted or sown without right to indemnity."
plaintiff instituted the action in the case at bar on Articles 447 and 455, in turn, treat of accession
June 1, 1910, several months prior to the order of produced by the landowner’s building, planting and
December 3, 1910. The right to recover was traversed sowing "with the materials of another" and when the
by the defendants on July 1 of that same year, and "materials, plants or seeds belong to a third person"
the question was pending and undetermined at the other than the landowner or the builder, planter or
time the probate court issued its order. sower. Nowhere in these articles on industrial
accession is there any mention of the case of a
The validity of the execution sale was not an issue in landower building on his own land with materials
those administration proceedings, and the order of owned by himself (which is the case of appellees
December 3d cannot, under any circumstances, be Mercedes and Antonio Cui). The reason for the
held to affect the validity of such a sale. omission is readily apparent: recourse to the rules of
accession are totally unnecessary and inappropriate
The judgment appealed from is therefore affirmed, where the ownership of land and of the materials used
with costs against the Appellant. to build thereon are concentrated on one and the
JESUS M. GABOYA, as Administrator of the same person. Even if the law did not provide for
Estate of DON MARIANO CUI, Plaintiff-Appellant, accession, the landowner would necessarily own the
v. ANTONIO MA. CUI, MERCEDES CUl-RAMAS, building, because he has paid for the materials and
and GIL RAMAS, defendants-appellees, JESUS labor used in constructing it. We deem it unnecessary
MA. CUI, JOSE MA. CUI, SERAFIN MA. CUI, to belabor this obvious point.
JORGE MA. CUI, ROSARIO CUI DE
ENCARNACION, PRECILLA C. VELEZ, and 2. ID.; CONTRACTS; MORTGAGE; MORTGAGOR, NOT
LOURDES C. VELEZ, intervenors-appellants, DIRECTLY LIABLE FOR LOAN SECURED BY
VICTORINO REYNES, defendant-in-counterclaim MORTGAGE. — Appellants urge that the loan for the
and appellee. construction of the building was obtained upon the
security of a mortgage not only upon the share of
Vicente Jayme, for Plaintiff-Appellant. appellees but also upon the undivided interest of Don
Manano Cui in the lots in question. That factor is
Hector L. Hofileñia, Candido Vasquez & Jaime R. irrelevant to the ownership of the building, because
Nuevas for Defendants-Appellees. the money used for the building was loaned
exclusively to the appellees, and they were the ones
Jose W. Diokno for Intervenors-Appellants. primarily responsible for its repayment. Since the
proceeds of the loan was exclusively their property,
the building constructed with the funds loaned is
SYLLABUS likewise their own. A mortgagor does not become
directly liable for the payment of the loan secured by
the mortgage, in the absence of stipulation to that
1. CIVIL LAW; PROPERTY; OWNERSHIP; INDUSTRIAL effect; and his subsidiary role as guarantor does not
ACCESSION BY EDIFICATION; RULE; NOT entitle him to the ownership of the money borrowed,
APPLICABLE IN CASE AT BAR — Under the articles of for which the mortgage is mere security.
the Civil Code on industrial accession by edification on
the principal land (Articles 445 to 456 of the Civil 3. ID. ID.; RESCISSION; WITHOUT SUFFICIENT
Code), such accession is limited either to buildings BASIS IN CASE AT BAR. — The alleged breach of
erected on the land of another, or buildings contract by the appellees Antonio and Mercedes Cui
constructed by the owner of the land with materials could only consist in their failure to pay to the
owned by someone else. Thus, Article 445, usufructuary the rental value of the area occupied by
the building constructed by them. But as the rental meters and 2,362 square meters, respectively, or a
value in question had not been ascertained or fixed total extension of 2,658 square meters, on March 8,
either by the parties or by the court prior to the 1946, sold said three lots to three of his children
decision of 31 October 1961, now under appeal, nor named Rosario C. de Encarnacion, Mercedes C. de
had Don Mariano Cui, or anyone else in his behalf, Ramas and Antonio Ma. Cui, pro indiviso for the sum
made any previous demand for its payment, the of P64,000. Because Rosario C. de Encarnacion for
default, if any, can not be exclusively blamed upon lack of funds was unable to pay her corresponding
the defendants-appellees. Hence, the breach is not share of the purchase price, the sale to her was
"so substantial and fundamental as to defeat the cancelled and the one-third of the property
object of the parties in making the agreement" as to corresponding to her was returned to the vendor.
justify the radical remedy of rescission. This Court, in These three lots are commercial. The improvements
Banahaw, Inc. v. Dejarme, 55 Phil. 338, ruled that thereon were destroyed during the last Pacific War so
—." .. Under the third paragraph of Article 1124 (Now that at the time of the sale in 1946, there were no
Article 1191, Civil Code of the Philippines) of the Civil buildings or any other improvements on them.
Code, the court is given a discretionary power to allow Because of the sale of these lots pro indiviso and
a period within which a person in default may be because of the cancellation of the sale to one of the
permitted to perform the stipulation upon which the three original vendees, Don Mariano and his children
claim for resolution of the contract is based. The right Mercedes and Antonio became co-owners of the whole
to resolve or rescind a contract for nonperformance of mass in equal portions. In the deed of sale vendor
one of its stipulations is therefore, not absolute." Don Mariano retained for himself the usufruct of
the property in the following words:chanrob1es
virtual 1aw library
DECISION
‘. . . do hereby sell, transfer, and convey to Messrs.
Rosario C. de Encarnacion, Mercedes C. de Ramas and
Antonio Ma, Cui, the above-mentioned parcel of land
REYES, J.B.L., J.:
in equal parts, . . . and the further consideration,
that I, shall enjoy the fruits and rents of the
same, as long as my natural life shall last.
Direct appeal (before Republic Act 5440) from a Granting and conveying unto the said buyers the full
decision of the Court of First Instance of Cebu (in its rights as owners to enjoy the constructive possession
Civil Case No. R-1720) denying resolution of a of the same, improve, construct and erect a building
contract of sale of Lots 2312, 2313 and 2319 in the lot, or do whatever they believe to be proper
executed on 20 March 1946 by the late Don Mariano and wise, as long as the same will not impair nor
Cui in favor of three of his children, Antonio Ma. Cui, obstruct my right to enjoy the fruits and rents of the
Mercedes Cui de Ramas and Rosario Cui de same. . .’
Encarnacion, but sentencing the first two, Antonio Cui
and Mercedes Cui, to pay, jointly and severally (in "Subsequently, a building was erected on a portion of
solidum), to the Judicial Administrator of the Estate of this mass facing Calderon street and was occupied by
Mariano Cui (appellant Jesus M. Gaboya) the amount a Chinese businessman for which he paid Don Mariano
of P100,088.80, with legal interest from the P600 a month as rental. The date when the building
interposition of the complaint (5 November 1951), was constructed and by whom do not appear in the
plus P5,000.00 attorney’s fees and the costs. record.
The antecedents of the case are stated in the previous
"Sometime after the sale to Mercedes and Antonio the
decision of this Supreme Court rendered on 31 Julytwo applied to the Rehabilitation Finance Corporation
1952, in the case of Antonio and Mercedes Cui v. (RFC) for a loan of P130,000 with which to construct a
Judge Piccio, Et Al., 91 Phil.
12-door commercial building presumably on a portion
712:jgc:chanrobles.com.ph of the entire parcel corresponding to their share. In
order to facilitate the granting of the loan and
"Don Mariano Cui, widower, as owner of lots Nos. inasmuch as only two of the three co-owners applied
2312, 2313 and 2319 situated in the City of Cebu, for the loan, Don Mariano on January 7, 1947,
with an area of 152 square meters, 144 square executed an authority to mortgage (Annex U)
authorizing his two children co-owners to mortgage the deed of sale of the three lots in question on
his share, the pertinent portion of said authority the ground that they belonged to the conjugal
reading thus:chanrob1es virtual 1aw library partnership of Don Mariano and his deceased
wife Antonia Perales. Thereafter, plaintiffs Jesus
‘That by virtue of these presents, I hereby agree, and Jorge applied for the appointment of a receiver to
consent, permit and authorize my said co-owners to take charge of the lots and of the rentals of the
mortgage, pledge my share so that they may be able building. This petition was denied on November 8,
to construct a house or building in the said property, 1948.
provided however, that the rents of the said land shall
not be impaired and will always be received by me.’ On March 19, 1949, Rosario C. Encarnacion, that
daughter of Don Mariano who was one of the original
The loan was eventually granted and was secured by vendees, filed a petition to declare her father
a mortgage on the three lots in question, Don Mariano incompetent and to have a guardian appointed for his
being included as one of the three mortgagors and property, in Special Proceeding No. 481-R of the Court
signing the corresponding promissory note with his of First Instance of Cebu. In May 1949 the petition
two co-owners. He did not however, join in the was granted and Don Mariano was declared
construction of the 12-door commercial building as incompetent and Victorino Reynes was appointed
may be gathered from the "Convenio de Asignacion de guardian of his property. Thereafter, the complaint in
Parte’ (Annex V) wherein it was agreed among the civil case No. 599-R seeking to annul the deed of sale
three co-owners to assign to Don Mariano that one- of the three lots in favor of Mercedes and Antonio was
third of the whole mass facing Calderon street and on amended so as to include as plaintiffs not only the
which was erected the building already referred to as guardian Victorino Reynes but also all the other
being occupied by a Chinese businessman and for children of Don Mariano.
which he was paying Don Mariano P600 a month
rental. The area of this one-third portion was fixed at On June 15, 1949, guardian Victorino Reynes filed a
900 square meters approximately one-third of the motion in the guardianship proceedings seeking
total area of these three lots. The pertinent portion of authority to collect the rentals from the three lots in
this Annex V reads as follows:chanrob1es virtual 1aw question and asking the Court to order Antonio and
library Mercedes to deliver to him as guardian all the rentals
they had previously collected from the 12-door
‘Que como quiera que, la propiedad arriba descrita est commercial building, together with all the papers
actualmente hipotecada a la Rehabilitation Finance belonging to his ward. This motion was denied by
Corporation para garantizar la construccion que mis Judge Piccio in his order of July 12, 1949. The
condueños contruyeron en la parte que les guardian did not appeal from this order.
corresponde;
"On May 22, 1951, Judge Saguin rendered a decision
‘Y que como quiera que, el Sr. Don Mariano Cui, uno in civil case No. 599-R and found that the three
de los condueños, no ha querido unirse a la lots in question were not conjugal property but
construccion de dicho edificio, y desea que la parte belonged exclusively to Don Mariano and so
que le corresponda sea la 1/3 que est dando frente a upheld the sale of two-thirds of said lots to
la Calle Calderon.’ Antonio and Mercedes. The plaintiffs appealed to
the Court of Appeals where the case is now
The 12-door commercial building was eventually pending."cralaw virtua1aw library
constructed and the builder-owners thereof Mercedes
and Antonio received and continued to receive the From the Court of Appeals the case was brought to
rents thereof amounting to P4,800 a month and the Supreme Court, and the decision of Judge Saguin
paying therefrom the installments due for payment on upholding the validity of the sale in favor of Antonio
the loan to the Rehabilitation Finance Corporation. and Mercedes Cui was finally affirmed on 21 February
1957, in Cui v. Cui, 100 Phil. 914.
On March 25, 1948, two other children of Don
Mariano named Jesus and Jorge brought an This third case now before Us was started by the
action (Civil case No. 599-R) in the Court of First erstwhile guardian of Don Mariano Cui (while the
Instance of Cebu for the purpose of annulling latter was still alive) in order to recover P126,344.91
plus legal interest from Antonio Cui and Mercedes Cui to rescind, or more properly, resolve the contract of
(Record on Appeal, pages 2-3) apparently as fruits sale. In the third place, should the two preceding
due to his ward by virtue of his usufruct. The issues be resolved affirmatively, whether the action
guardian’s complaint was supplemented and amplified for rescission due to breach of the contract could still
by a 1957 complaint in intervention (duly admitted) be enforced and was not yet barred.
filed by the other compulsory heirs of Mariano Cui,
who had died on 29 July 1952, some nine months The court below declared that the reserved right of
after the present case was instituted in the court usufruct in favor of the vendor did not include, nor
below (Record on Appeal, pages 67-68). was it intended to include, the rentals of the building
subsequently constructed on the vacant lots, but that
In essence, the complaint alleges that the it did entitle the usufructuary to receive a reasonable
usufructuary right reserved in favor of Don Mariano rental for the portion of the land occupied by the
Cui extends to and includes the rentals of the building building, which the Court a quo fixed at P1,858.00 per
constructed by Antonio Cui and Mercedes Cui on the month; and that the rentals for the land from
land sold to them by their father; that the defendants November, 1947, when the building was rented, to 29
retained those rentals for themselves; that the July 1952, when Don Mariano died, amounted to
usufructuary rights of the vendor were of the essence P100,088.80. It also found no preponderant evidence
of the sale, and their violation entitled him to rescind that the seller, Don Mariano Cui, had ever waived his
(or resolve) the sale. It prayed either for rescission right of usufruct, as contended by the defendants;
with accounting, or for delivery of the rentals of the and that the Supreme Court, in denying
building with interests, attorneys’ fees and costs reconsideration of its second (1957) decision (100
(Record on Appeal, pages 12-38). Phil. 914), had, like the court of origin, refused to
pass upon the extent of the usufructuary rights of the
The amended answer, while admitting the reserved seller, specially because the present cases was
usufruct and the collection of rentals of the building already pending in the Court of First Instance, hence
by the defendants, denied that the usufructuary rights no res judicata existed. No attorney’s fees were
included or extended to the said rentals, or that such awarded to the defendants, but they were sentenced
usufruct was of the essence of the sale; that the to pay counsel fees to plaintiffs.
vendor (Don Mariano Cui) had waived and renounced
the usufruct and that the defendants vendees gave Both parties appealed from the decision of the court a
the vendor P400.00 a month by way of aid; that the quo.
original complaint having sought fulfillment of the
contract, plaintiff can not thereafter seek rescission; We find no error in the decision appealed from. As
that such action is barred by res judicata (on account therein pointed out, the terms of the 1946 deed of
of the two previous decisions of the Supreme Court sale of the vacant lots in question made by the late
and by extinctive prescription. Defendants counter Don Mariano Cui in favor of his three children,
claimed for actual and moral damages and attorney’s Rosario, Mercedes and Antonio Cui, in consideration of
fees. the sum of P64,000.00 and the reserved usufruct of
the said lot in favor of the vendor, as amplified by the
Plaintiffs denied the allegations in the counterclaim. deed of 7 January 1947, authorizing Mercedes, and
Antonio Cui to borrow money, with the security of a
From a consideration of the pleadings, the basic and mortgage over the entirety of the lots, in order to
pivotal issue appears to be whether the usufruct enable them to construct a house or building thereon
reserved by the vendor in the deed of sale, over —
the lots in question that were at the time vacant
and unoccupied, gave the usufructuary the right "provided, however, that the rents of said land shall
to receive the rentals of the commercial building not be impaired and will always received by
constructed by the vendees with funds borrowed me."cralaw virtua1aw library
from the Rehabilitation and Finance Corporation,
the loan being secured by a mortgage over the clearly prove that the reserved usufruct in favor of the
lots sold. Similarly, if the usufruct extended to the vendor, Mariano Cui, was limited to the rentals of the
building, whether the failure of the vendees to pay land alone. Had it been designed to include also the
over its rentals to the usufructuary entitled the latter rents of the buildings intended to be raised on the
land, an express provision would have been included
to that effect, since in both documents (heretofore Nowhere in these articles on industrial accession is
quoted) the possibility of such construction was there any mention of the case of landowner building
clearly envisaged and mentioned. on his own land with materials owned by himself
(which is the case of appellees Mercedes and Antonio
Appellants, however, argue that the terms of the deed Cui). The reason for the omission is readily apparent:
constituting the usufruct are not determinative of the recourse to the rules of accession are totally
extent of the right conferred; and that by law, the unnecessary and inappropriate where the ownership
enjoyment of the rents of the building subsequently of land and of the materials used to build thereon are
erected passed to the usufructuary, by virtue of concentrated on one and the same person. Even if the
Article 571 of the Civil Code of the Philippines (Article law did not provide for accession, the landowner
479 of the Spanish Civil Code of 1889) prescribing would necessarily own the building, because he
that:jgc:chanrobles.com.ph has paid for the materials and labor used in
constructing it. We deem it unnecessary to belabor
"Art. 571. The usufructuary shall have the right to this obvious point.
enjoy any increase which the thing in usufruct may
acquire through accession, the servitudes established There is nothing in the authorities (Manresa,
in its favor, and, in general, all the benefits inherent Venezian, Santamaria, and Borrell) cited by appellants
therein", that specifically deals with constructions made by a
party on his own land, with his own materials, and at
inasmuch as (in the appellants’ view) the building his own expense. The authorities cited merely indicate
constructed by appellees was an accession to the the application in general of the rules of accession.
land. But as already stated above, the Civil Code itself limits
the cases of industrial accession to those involving
This argument is not convincing. Under the articles of land and materials belonging to different owners.
the Civil Code on industrial accession by edification on Anyway, commentators’ opinions are not binding
the principal land (Articles 445 to 456 of the Civil where not in harmony with the law itself.
Code) such accession is limited either to buildings
erected on the land of another, or buildings The author that specifically analyses the situation of
constructed by the owner of the land with materials the usufructuary vis-a-vis constructions made by the
owner by someone else. landowner with his own materials is Scaevola (Codigo
Civil, 2d Edition, pages 288 to 297); and his
Thus, Article 445, establishing the basic rule of conclusion after elaborate discussion is that, at the
industrial accession, prescribes that — most —

"Whatever is built, planted or sown on the land of "(b) El nudo propietario no podria, sin el
another, and the improvements or repairs made consentimiento del usufructuario, hacer
thereon, belong to the owner of the land subject to construcciones. plantaciones y siembras en el predio
the provisions of the following articles."cralaw objecto del usufructo; y en el caso de que aqul las
virtua1aw library cosintiese, la utilizacion ser comun en los frutos y
productos de lo sembrado y plantado, y con respecto
while Article 449 states:jgc:chanrobles.com.ph a las construcciones, el usufructuario tendra derecho
a la renta que de mutuo acuerdo se fije a las mismas;
"He who builds, plants or sows in bad faith on the land en su defecto, por la autoridad judicial." (Author
of another, loses what is built, planted or sown cit., Emphasis supplied)
without right to indemnity." (Emphasis supplied)
Scaevola’s opinion is entirely in harmony with Article
Articles 447 and 445, in turn, treat of accession 595 of the Civil Code of the Philippines, prescribing
produced by the landowner’s building, planting and that —
sowing "with the materials of another" and when "the
materials, plants or seeds belong to a third person" "The owner may construct any works and make
other than the landowner or the builder, planter or any improvements of which the immovable in
sower. usufruct is susceptible, or make new plantings
thereon if it be rural, provided that such acts do become directly liable for the payment of the
not cause a diminution in the value of the loan secured by the mortgage, in the absence of
usufruct or prejudice the right of the stipulation to that effect; and his subsidiary role
usufructuary."cralaw virtua1aw library as guarantor does not entitle him to the
ownership of the money borrowed, for which the
Note that if the income from constructions made by mortgage is mere security.
the owner during the existence of the usufruct should
be held to accrue automatically to the usufructuary We agree with the trial court that there was no
under Article 571, such improvements could not adequate proof that the vendor, Don Mariano Cui,
diminish the value of the usufruct nor prejudice the ever renounced his usufruct. The alleged waiver was
right of the usufructuary; and the qualifications by purely verbal, and is supported solely by the
Article 595 on the owner’s right to build would be testimony of Antonio Cui, one of the alleged
redundant. The limitations set by Article 595 to the beneficiaries thereof. As a gratuitous renunciation of a
construction rights of the naked owner of the land are real right over immovable property that was created
evidently premised upon the fact that such by public document, the least to be expected in the
constructions would necessarily reduce the area of the regular course of business is that the waiver should
land under usufruct, for which the latter should be also appear in writing. Moreover, as pointed out in the
indemnified. This is precisely what the court a quo has appealed decision (Record on Appeal, page 184, et
done in sentencing the appellee owners of the building seq.), in previous pleadings sworn to by Antonio Cui
to pay to the usufructuary a monthly rent of himself, in Civil Case No. 599 and Special Proceeding
P1,758.00 for the area occupied by their building, 481-R of the Cebu Court of First Instance (Exhibits
after mature consideration, of the rental values of "I," "J," and "20-A"), he and his sister Mercedes had
lands in the neighborhood. contended that Don Mariano Cui had been receiving
from them P400.00 per month as the value of his
Additional considerations against the thesis sustained usufruct, and never claimed that the real right had
by appellants are (1) that the amount invested in the been renounced or waived. The testimony of Antonio
building represents additional capital of the Cui on the alleged waiver, given after the
landowners not foreseen when the usufruct was usufructuary had been declared incompetent and
created; and (2) that no landowner would be could no longer contradict him, is obviously of
willing to build upon vacant lots under usufruct negligible probative value.
if the gain therefrom were to go to the
usufructuary while the depreciation of the value Turning now to the second issue tendered by herein
of the building (as distinguished from the appellants, that the non-compliance with the
necessary repairs) and the amortization of its provisions concerning the usufruct constituted
cost would burden exclusively the owner of the sufficient ground for the rescission (or resolution) of
land. The unproductive situation of barren lots would the sale under the tacit resolutory condition
thus be prolonged for an indefinite time, to the established by Article 1191 of the Civil Code. What
detriment of society. In other words, the rule that has been stated previously in discussing the import of
appellants advocate would contradict the general Don Mariano’s usufruct shows that the alleged breach
interest and be against public policy. of contract by the appellees Antonio and Mercedes Cui
could only consist in their failure to pay to the
Appellants urge, in support of their stand, that the usufructuary the rental value of the area occupied by
loan for the construction of the building was obtained the building constructed by them. But as the rental
upon the security of a mortgage not only upon the value in question had not been ascertained or fixed
share of appellees but also upon the undivided either by the parties or the court, prior to the decision
interest of Don Mariano Cui in the lots in question. of 31 October 1961, now under appeal, nor had Don
That factor is irrelevant to the ownership of the Mariano Cui, or anyone else in his behalf, made any
building, because the money used for the building was previous demand for its payment, the default, if any,
loaned exclusively to the appellees, and they were the can not be exclusively blamed upon the defendants-
ones primarily responsible for its repayment. Since appellees. Hence, the breach is not "so substantial
the proceeds of the loan was exclusively their and fundamental as to defeat the object of the parties
property, 1 the building constructed with the funds in making the agreement" 2 as to justify the radical
loaned is likewise their own. A mortgagor does not remedy of rescission. This Court, in Banahaw, Inc. v.
Dejarme, 55 Phil. 338, ruled that — no such default or breach could occur before
liquidation of the usufructuary’s credit; and the time
". . . Under the third paragraph of article 1124 3 of for paying such unliquidated claim can not be said to
the Civil Code, the court is given a discretionary have accrued until the decisions under appeal was
power to allow a period within which a person in rendered, fixing the rental value of the land occupied
default may be permitted to perform the stipulation by the building.
upon which the claim for resolution of the contract is
based. The right to resolve or rescind a contract for The filing of the initial complaint by Victoriano Reynes,
nonperformance of one of its stipulations is, therefore, then guardian of the late Don Mariano in 1951,
not absolute."cralaw virtua1aw library seeking to recover P126,344.91 plus interest, did not
place appellees in default, for that complaint
We have stated "the default, if any," for the reason proceeded on the theory that the usufructuary was
that without previous ascertainment of the exact entitled to all the rentals of the building constructed
amount that the defendants-appellees were obligated by the appellees on the lot under usufruct; and as We
to turn over to the usufructuary by way of reasonable have ruled, that theory was not legally tenable. And
rental value of the land occupied by their building, the 1957 complaint in intervention, seeking rescission
said parties can not be considered as having been in of the sale as alternative remedy, was only interposed
default (mora) for failure to turn over such monies to after the death of the usufructuary in 1952, and the
the usufructuary. "Ab illiquido non fit mora" : this consequent extinction of the usufruct, conformably to
principle has been repeatedly declared by the Article 603, paragraph (1), of the Civil Code.
jurisprudence of Spanish Supreme Court (v. Manresa,
Commentaries to the Spanish Civil Code [5th Ed.], It is also urged by the appellants that the usufruct
Vol. 8, No. 1, page 134) that is of high persuasive was a condition precedent to the conveyance of
value in the absence of local adjudications on the ownership over the land in question to herein
point. appellees, and their failure to comply with their
obligations under the usufruct prevented the vesting
"No puede estimarse que incurre en mora el obligado of title to the property in said appellees. We need not
al pago de cantidad mientras esta no sea liquida, y consider this argument, since We have found that the
tenga aquél conocimiento por virtud de requirimiento usufruct over the land did not entitle the usufructuary
o reclamacion judicial de lo que debe abonar" (Sent. to either the gross or the net income of the building
TS of Spain, 13 July 1904) erected by the vendees, but only to the rental value of
the portion of the land occupied by the structure (in
"Segun tiene declarado esta sala con repeticion, no se so far as the usufructuary was prevented from
puede establecer que hay morosidad, ni condenar por utilizing said portion), and that rental value was not
tal razon al abono de intereses, cuando no se conoce liquidated when the complaints were filed in the court
la cantidad liquida reclamable" (Sent. TS of Spain, 29 below; hence, there was no default in its payment.
November 1912) Actually, this theory of appellants fails to take into
account that Don Mariano could not retain ownership
". . .es visto que no existiendo obligacion de entregar of the land and, at the same time, be the usufructuary
cantidad hasta tanto que se liquide, no puede thereof. His intention of the usufructuary rights in
estimarse, segun jurisprudencia, que los recurridos itself imports that he was no longer its owner. For
incurran en mora, y por tanto que hayan de pagar usufruct is essentially jus in re aliena; and to be a
intereses legales de la cantidad que en su caso usufructuary of one’s own property is in law a
resulte." (Sent. TS of Spain, 29 April 1914) contradiction in terms, and a conceptual absurdity.

In the absence of default on the part of the The decision (Exhibit "30") as well as the resolution of
defendants-vendees, Article 1592 of the Civil Code of this Court upon the motion to reconsider filed in the
the Philippines, 4 that is invoked by appellants in previous case (100 Phil. 914) refusing to adjudicate
support of their alleged right to rescind the sale, is not the usufructuary rights of Don Mariano in view of the
applicable: for said article (which is a mere variant of pendency of the present litigation (Exhibit "22") amply
the general principle embodied in Article 1191, of the support the trial court’s overruling of the defense of
same Code) presupposes default of the purchasers in res judicata.
the fulfillment of their obligations. As already noted,
Summing up, We find and hold:chanrob1es virtual
1aw library
SYLLABUS
(1) That the usufructuary rights of the late Don
Mariano Cui, reserved in the deed of sale (Exhibit "A"
herein), was over the land alone and did not entitle 1. USURFRUCT; RENTALS ON LAND AND BUILDING;
him to the rents of the building later constructed EFFECT OF DESTRUCTION OF BUILDING. — A life
thereon by defendants Mercedes and Antonio Cui at usufruct constituted on the rentals of the "fincas
their own expense. situadas" located at a certain place includes the
rentals both on the building and the land on which it is
(2) That said usufructuary was entitled only to the rejected, because the building can not exist without
reasonable rental value of the land occupied by the the land. hence, the usufruct is not extinguished by
building aforementioned. the destruction of the building, for under the law
usufruct is extinguished only by the total loss of the
(3) That such rental value not having been liquidated thing subject of the encumbrance.
until the judgment under appeal was rendered,
Antonio and Mercedes Cui were not in default prior
thereto, and the deed of sale was, therefore, not D E C I S I O N
subject to rescission.

(4) That, as found by the court below, the reasonable BAUTISTA ANGELO, J.:
rental value of the land occupied by the defendants’
building totalled P100,088.80 up to the time the
usufructuary died and the usufruct terminated.
Doña Rosario Fabie y Grey was the owner of a lot
(5) That pursuant to Articles 2208 (No. 11), 2210 and situated in the City of Manila with a building and
2213 of the Civil Code, 5 the trial court had discretion improvements thereon erected at 950-956 Ongpin as
to equitably award legal interest upon said sum of evidenced by Original Certificate of Title No. 5030,
P100,088.80, as well as P5,000.00 attorney’s fees, and by a will left by her upon her death which was
considering that defendants Cui have enjoyed the said duly probated she devised the naked ownership of the
rental value of the land during all those years. whole property to Rosario Grey Vda. de Albar, Et. Al.
but its usufruct to Josefa Fabie for life.
WHEREFORE, finding no reversible error in the
appealed decision, the same is hereby affirmed. Costs The pertinent provision of the will reads as follows:
"Lego a mi a ahijada menor de edad, Maria Josefa de
against appellant-intervenors, Jesus Ma. Cui, Jose Ma.
Cui, Serafin Ma. Cui, Jorge Ma. Cui, Rosario Cui de la Paz Fabie, en usufructo vitalicio las rentas de las
fincas . . . en la calle Ongpin, Numeros 950 al 956 del
Encarnacion, Precilla C. Velez, and Lourdes C. Velez.
Distrito de Santa Cruz, Manila, . . . y prohibo enajene,
hipoteque, permuta o transfiera de algun modo
Concepcion, C.J., Dizon, Makalintal, Zaldivar,
Teehankee, Barredo, Villamor and Makasiar, JJ., mientras que ella sea menor de edad." Said property
was registered in the name of Rosario Grey Vda. de
concur.
Albar, Et. Al. as naked owners and the right of Josefa
Fabie as life usufructuary was expressly noted on the
[G.R. No. L-13361. December 29, 1959.] new title. Pursuant to the 9th clause of the will, an
encumbrance was likewise noted on the title
ROSARIO GREY VDA. DE ALBAR and JOSE M. prohibiting the usufructuary from selling, mortgaging
or transferring her right of usufruct during her
GREY, Petitioners, v. JOSEFA FABIE DE
CARANGDANG, Respondent. minority.

Jose W. Diokno, for Petitioners. During liberation, as a consequence of the fire that

gutted the buildings in many portions of Manila, the
Ambrosio Padilla, Ciriaco Lopez, Jr. and Santiago building on the Ongpin lot was burned, leaving only
the walls and other improvements that were not
P. Blanco for Respondent.
destroyed by the fire. On August 10, 1953, the trial court rendered
judgment the dispositive part of which
One Au Pit, a Chinaman, offered to lease the property reads:jgc:chanrobles.com.ph
for a period of five years at a monthly rental of
P500.00, at the same time agreeing to construct on "EN VIRTUD DE TODO LO CUAL, el Juzgado promulga
the lot a new building worth P30,000.00 provided the decisión a favor de la demandada usufructuaria,
naked owners as well as the usufructuary sign the declarando:chanrob1es virtual 1aw library
agreement of lease. As the usufructuary maintains
that she has the exclusive right to cede the property (a) Que su usufructo vitalicio continua sobre la finca
by lease and to receive the full rental value by virtue en Ongpin con derecho exclusivo de percibir durante
of her right of usufruct while on the other hand the su vida la totalidad de sus rentas, sin que los
naked owners maintain that the right of usufruct was demandantes tengan derecho de inmiscuirse en la
extinguished when the building was destroyed, the administracion de dicha finca;
right of the usufructuary being limited to the legal
interest on the value of the lot and the materials, in (b) Con derecho de percibir el 6% de la cantidad de
order that the agreement of lease may be effected, P8,574.00 percibidos como indemnizacion de guerra
the parties agreed on a temporary compromise desde Enero 11, 1950;
whereby the naked owners would receive P100.00, or
20% of the monthly rental of P500.00 and the (c) Al reembolso de la suma de P1,989.27 pagados o
usufructuary the balance of 80% or P400.00 of said abonados por la demandada como pagos del
monthly rental. It was likewise stipulated in the amillaramiento desde la fecha de la Contestacion,
agreement that the title to the building to be Octubre 22, 1953;
constructed would accrue to the land upon its
completion as an integral part of the lot covered by (d) Mas la suma de P2,000.00 como daños y
the transfer certificate of title issued in the name of perjuicios en forma de honorarios de abogado y
the naked owners but subject to the right of usufruct gastos de litigio.
of Josefa Fabie. The parties expressly reserved the
right to litigate their respective claims after the (e) Con las costas a cargo de los
termination of the contract of lease to determine demandantes."cralaw virtua1aw library
which of said claims was legally correct.
On appeal by plaintiffs, the Court of Appeals modified
By reason of the destruction of the building on the the decision as follows:jgc:chanrobles.com.ph
Ongpin property, the United States War Damage
Commission approved the claim that was presented "Wherefore, we hereby affirm the decision appealed
for the damage caused to the property in the amount from in so far as it holds that appellee’s right of life
of P8,574.00 which was paid to and received by the usufruct subsists and is in full force and effect upon
naked owners. In the meantime, the usufructuary the Ongpin lot and the building now existing thereon,
paid the real estate taxes due on the property at and that she is entitled to receive from appellants the
Ongpin for the years 1945 to 1952 in the total amount legal interest or 6% interest per annum of the amount
of P1,989.27, as well as the real estate taxes for the of P3,272.00 from the time it was actually received
years 1953 and 1954 in the annual sum of P295.80. from the Philippine War Damage Commission for the
whole period of the usufruct, and appellants are
On October 2, 1952, Rosario Grey Vda. de Albar, Et. hereby required to give sufficient security for the
Al. commenced the present action to settle the payment of such interest, and we hereby reverse said
dispute and conflicting views entertained by the decision, declaring that reimbursement to appellee of
parties in line with their agreement and prayed that the sum of P1,987.27 paid by her for real estate taxes
judgment be rendered declaring that the usufruct is deferred until the termination of the usufruct, and
in favor of Josefa Fabie is now only limited to that she is not entitled to any amount for attorney’s
receiving the legal interest on the value of the fees. Without pronouncement regarding costs."cralaw
land, and that her right to receive any rental virtua1aw library
under the contract entered into between the
parties has already ceased. Plaintiffs interposed the present petition for review.
The main issue to be determined hinges on the premises cannot be considered as having no rental
interpretation of that portion of the will which devises value whatsoever." Moreover, in the Spanish
to Josefa Fabie all the rentals of the property situated language, the term "fincas" has a broad scope; it
in Ongpin and Sto. Cristo Streets, City of Manila. The includes not only building but land as well.
pertinent provision of the will reads: "Lego a mi (Diccionario Ingles- Español, por Martines Amador)
ahijada menor de edad Maria Josefa de la Paz Fabie, Since only the building was destroyed and the
en usufructo vitalicio las rentas de las fincas situadas usufruct is constituted not only on the building but on
en la calle Santo Cristo . . . y en la calle Ongpin, the land as well, then the usufruct is not deemed
Numeros 950 al 956 del Distrito de Santa Cruz, extinguished by the destruction of the building for
Manila." Petitioners contend that this provision of the under the law usufruct is extinguished only by the
will should be interpreted as constituting only a life total loss of the thing subject of the encumbrance
usufruct on the rentals of the buildings erected on the (Article 603, old Civil Code).
lands and that once these buildings are destroyed the
usufruct is extinguished. Respondent, on the other In our opinion, this case comes under Article 517 of
hand, contends that that provision should be the same Code which provides: "If the usufruct is
interpreted as constituting a life usufruct both on the constituted on immovable property of which a building
buildings and the lands because the former cannot be forms part, and the latter should be destroyed in any
separated from the latter. manner whatsoever, the usufructuary shall have a
right to make use of the land and materials." This is a
In Lopez v. Constantino, 74 Phil., 160, we temporary measure calculated to maintain the
said:jgc:chanrobles.com.ph usufruct alive until the very thing that has been
destroyed be reconstructed or replaced. The reason is
"It may indeed seem at first blush that the rents out obvious: since the usufruct has not been extinguished
of which the pension was payable were earned by or by the destruction of the building and the usufruct is
paid for the building only, independently of the lot on for life as in this case, it is but fair that the
which it was erected; but further reflection will show usufructuary continue to enjoy the use of the land and
that such impression is wrong. When both land and the materials that may have been left by the fire or to
building belong to the same owner, as in this case, the use of the new building that may be constructed
the rents on the building constitute an earning of the on the land. To hold otherwise would be to affirm that
capital invested in the acquisition of both land and the usufruct has been extinguished.
building. There can be a land without a building, but
there can be no building without land. The land, being The question that now arises is: Who is called upon to
an indispensable part of the rented premises cannot undertake the new construction, and at whose cost?
be considered as having no rental value whatsoever." Of course, this is addressed to the wisdom and
(Emphasis supplied) discretion of the usufructuary who, to all intents and
purposes is deemed as the administrator of the
In another part of the decision, this Court said: "Since property. This has been clarified in the case of Fabie
appellant’s participation in the rents of the leased v. Gutierrez David, 75 Phil., 536, which was litigated
premises by way of life pension was part of the between the same parties and wherein the scope of
consideration of the sale, it cannot be deemed the same provision of the will has been the subject of
extinguished so long as she lives and so long as the interpretation. The following is what this Court
land exists, because that land may be rented to said:jgc:chanrobles.com.ph
anyone who may desire to erect a building thereon."
(Emphasis supplied) "Construing said judgment in the light of the ninth
clause of the will of the deceased Rosario Fabie y
From the above, it is clear that when the deceased Grey, which was quoted in the decision and by which
constituted the life usufruct on the rentals of the Josefa Fabie was made the usufructuary during her
"fincas situadas" in Ongpin and Sto. Cristo lifetime of the income of the property in question, we
streets, she meant to impose the encumbrance find that the said usufructuary has the right to
both on the building and the land on which it is administer the property in question. All the acts of
erected for indeed the building cannot exist administration — to collect the rents for herself, and
without the land. And as this Court well said, "The to conserve the property by making all necessary
land, being an indispensable part of the rented repair and paying all the taxes, special assessments,
and insurance premiums thereon — were by said actually received to the end of the life of the usufruct
judgment vested in the usufructuary. The pretension should, in my opinion, be modified in the sense that
of the respondent Juan Grey that he is the that obligation should only be valid up to the date the
administrator of the property with the right to choose new building was constructed by the Chinaman who
the tenants and to dictate the conditions of the lease leased the property upon the theory that the amount
is contrary to both the letter and spirit of the said of damage paid by the War Damage Commission
clause of the will, the stipulation of the parties, and which was intended to replace the old building has in
the judgment of the court. He cannot manage or turn been replaced by the new. However, the majority
administer the property after all the acts of is of the opinion that the same should also be subject
management or administration have been vested by to usufruct for life because it has not been used in the
the court, with his consent, in the construction of the new building, although they
usufructuary."cralaw virtua1aw library suggested the alternative that the naked owners may
turn over the money to the usufructuary so that she
In the instant case, however, a happy compromise may use it during her lifetime subject to its return to
was reached by the parties in view of the offer of one them after her death if they desire to be relieved of
Chinaman to lease the land for five years and to this encumbrance.
construct thereon a building worth P30,000.00 upon
the condition that upon its completion the building We find, however, merit in the contention that the
would become an integral part of the land on which it real estate taxes paid by respondent in her capacity
is erected. This means that its naked ownership as usufructuary for several years previous to the
should belong to petitioners and its beneficial present litigation should be paid by her, as she did,
ownership to Respondent. This is a happy medium instead of by petitioners not only because she is the
which fits into the purpose contemplated in Article only recipient of all the benefits of the property but
517 above referred to: that the usufruct should because she bound herself to pay such taxes in a
continue on the land and the new improvement that formal agreement approved by the court in Civil Case
may be constructed thereon. No. 1659 of the Court of First Instance of Manila
(Fabie v. Gutierrez David, supra). In that case, which
We therefore hold that the Court of Appeals did not involved the same parties and the same properties
err in finding that appellee’s right of usufruct subsists subject of usufruct, the parties submitted an amicable
and is in full force and effect upon the Ongpin lot and agreement which was approved by the court wherein
the building existing thereon, affirming the decision of the usufructuary, herein respondent, bound herself to
the trial court. pay all the real estate taxes, special assessment and
insurance premiums, and make all the necessary
Petitioners’ contention that the Court of Appeals erred repairs on each of the properties covered by the
in ruling that the damages paid by the War Damage usufruct and in accordance with said agreement,
Commission to said petitioners was intended to be an respondent paid all the taxes for the years 1945 to
indemnity for the destruction of the building in 1954. In said agreement, it was also stipulated that
question and in ordering them to pay respondent 6% the same "shall be in effect during the term of the
interest per annum on the amount of the damage paid usufruct and shall be binding on the successors and
is also untenable, for it cannot be denied that a war assigns of each of the parties." There is therefore no
damage payment is intended to replace part of the valid reason why petitioners should now be ordered to
capital invested in the building destroyed or to reimburse respondent for all the real taxes she had
assuage somewhat the material loss of its owner. It paid on the property. In this respect, the decision of
cannot be maintained that war damage payments are the Court of Appeals should be modified.
intended to be a mere gesture of appreciation of the
people of the United States of America towards our Wherefore, with the modification that petitioners
people for it is a well-known fact that countless of our should not be made to reimburse the real estate taxes
countrymen who suffered in the last war or whose paid by the respondent for the years abovementioned,
kin-folks lost their lives did not receive any war the decision appealed from is affirmed in all other
damage payment because they have no damaged respects, without pronouncement as to costs.
property that could be indemnified. The ruling that
6% interest per annum of such war damage payment Labrador, Endencia, Barrera and Gutierrez David, JJ.,
should be paid to respondent from the time it was concur.
Separate Opinions has a right to the use and the fruits not only of the
improvements, such as buildings on the land, but of
the land itself. Consequently, anything built on the
MONTEMAYOR, J., concurring and land would be subject to the usufruct, and the fruits
dissenting:chanrob1es virtual 1aw library thereof, such as rents, would go to the usufructuary.
This naturally includes the interest on the war damage
I concur in the learned opinion of the majority, payment for the old building destroyed during the
penned by Mr. Justice Bautista Angelo, with the war, which payment is the equivalent of said building.
exception of that portion thereof on page 10, which Had the owners of the land used the amount of said
holds that the payment to the usufructuary of the 6% payment to construct another building on the land, or
interest per annum of the war damage payment should they have used the sum to add another story
should end on the date of the construction of the new or extension of the building constructed thereon by
building by the Chinaman who leased the property, the Chinese lessee, there would surely be no question
from which ruling I dissent. that any rent therefrom would belong to the
usufructuary, because then it could be regarded as
It will be noticed that both the trial court and the improvement on the land, which, as already said, is
Court of Appeals were of the opinion that said the equivalent or a reproduction of said old building.
payment of interest should continue during the Just because the owners of the land kept said war
lifetime of the usufruct. I agree to said opinion. The damage payment for their own use did not relieve
reason is obvious. The war damage payment is the them of the obligation of paying the interest on the
equivalent of the building destroyed. Since the same to the usufructuary, because otherwise, they
usufructuary had a right to the use or the fruits of the would be having not only the naked ownership of the
building, she therefore had the right to the interest on equivalent of said building, but also its fruits.
the war damage payment during her lifetime. In my
opinion, the construction of the new building does not The foregoing are some of the reasons for my dissent.
relieve the owners of the land who received the war
damage payment from continuing the payment of Paras, C.J., Bengzon and Concepcion, JJ., concur.
interest. Had said owners of the land used the war
damage payment to construct the building, then they REYES, J. B. L., J., concurring:chanrob1es virtual 1aw
would be free from paying interest because the rent of library
the new building would correspond to the interest on
the war damage payment. But the fact is the new I concur in the opinion of Justice Montemayor,
building was not constructed by the owners of the specially because the usufructuary receives only a
land, but by the Chinese lessee. part of the rent of the new building.

The majority opinion states that the usufructuary

would then be receiving the interest on the war
damage payment and also the rent of the new
building — a sort of double benefit, which is said to be
unfair. That is one view. The other view is that at the
end of the usufruct, the owners of the land or their
heirs shall have received not only equivalent or value
of the old building destroyed, in the form of the war
damage payment but also the new building
constructed absolutely at no cost or expense to them
- also a double benefit, which might also be regarded
as unfair following the point of view of the majority
opinion. So, in this respect of double benefit, both
parties stand on the same footing. Viewed thus, there
is nothing unfair in the arrangement.

Furthermore, we should not lose sight of the fact that

the usufructuary, as the majority opinion well states