G.R. No.

152809 August 3, 2006

MORALIDAD vs. SPOUSES PERNES

GARCIA, J:

FACTS: Petitioner, being single, would usually stay in Mandug, Davao City, in the house of
her niece, respondent Arlene Pernes. She received news from Arlene that Mandug was
infested by NPA rebels. She immediately sent money to Araceli, Arlenes older sister, with
instructions to look for a lot in Davao City where Arlene and her family could transfer and
settle down. Later, petitioner wanted the property to be also available to any of her kins
wishing to live and settle in Davao City. Petitioner made known this intention in a document.
Following her retirement, petitioner came back to the Philippines to stay with the respondents.
In the course of time, their relations turned sour, having deteriorated from worse to worst.
Petitioner filed with the MTCC of Davao City an unlawful detainer suit. Petitioner alleged that
she is the registered owner of the land on which the respondents built their house; that
through her counsel, she sent the respondent spouses a letter demanding them to vacate the
premises and to pay rentals therefor, which remained unheeded. In their defense, the
respondents alleged having built heir house thereon and maintaining the same as their
residence with petitioners full knowledge and express consent. The MTCC, resolved the
ejectment suit in petitioners favor. The RTC reversed that of the MTCC, holding that
respondents possession of the property in question was not by mere tolerance of the
petitioner but rather by her express consent. The CA ruled that what governs the rights of the
parties is the law on usufruct but petitioner failed to establish that respondents right to
possess had already ceased. The appellate court thus affirmed the appealed RTC decision.

ISSUE: Whether or not the CA erred in applying articles 448 and 546 and the provisions of
the code on usufruct instead of article 1678 of the civil code.

RULING: The Court rules for the petitioner. The Court is inclined to agree with the CA that
what was constituted between the parties herein is one of usufruct over a piece of land.
Usufruct is defined under Article 562 of the Civil Code in the following wise: ART. 562.
Usufruct gives a right to enjoy the property of another with the obligation of preserving its form
and substance, unless the title constituting it or the law otherwise provides. The usufruct
betweent the parties were likewise extinguished upon the expiration of the period granted
which is a mode of extinguishing a usufruct as provided in Article 603 of the Civil Code. The
relationship between the petitioner and respondents respecting the property in question is
one of owner and usufructuary. Accordingly, respondents claim for reimbursement of the
improvements they introduced on the property during the effectivity of the usufruct should be
governed by applicable statutory provisions and principles on usufruct. In this regard, we cite
with approval what Justice Edgardo Paras wrote on the matter: If the builder is a
usufructuary, his rights will be governed by Arts. 579 and 580. By express provision of
law, respondents, as usufructuary, do not have the right to reimbursement for the
improvements they may have introduced on the property. Given the foregoing perspective,
respondents will have to be ordered to vacate the premises without any right of
reimbursement. Given the foregoing perspective, respondents will have to be ordered to
vacate the premises without any right of reimbursement.
G.R. No. 148830 August 3, 2006

NHA vs. CA

Carpio, J:

FACTS: Proclamation No. 481 issued by then President Ferdinand Marcos set aside a 120-
hectare portion of land in Quezon City owned by the NHA as reserved property for the site of
the National Government Center (NGC). President Marcos issued Proclamation No. 1670,
which removed a seven-hectare portion from the coverage of the NGC. Proclamation No.
1670 gave Manila Seedling Bank Foundation (MSBF) usufructuary rights over this
segregated portion. Over the years, MSBF occupied approximately 16 hectares which
exceeded the seven-hectare area subject to its usufructuary rights. MSBF leased a portion of
the area it occupied to BGC and other stallholders. President Corazon Aquino issued
Memorandum Order No. 127 which revoked the reserved status of the 50 hectares, more or
less, remaining out of the 120 hectares of the NHA property reserved as site of the National
Government Center. MO 127 also authorized the NHA to commercialize the area and to sell
it to the public. Acting on the power granted under MO 127, the NHA gave BGC ten days to
vacate its occupied area. Any structure left behind after the expiration of the ten-day period
will be demolished by NHA. BGC then filed a complaint for injunction before the trial court.
BGC amended its complaint to include MSBF as its co-plaintiff. The trial court agreed with
BGC and MSBF that Proclamation No. 1670 gave MSBF the right to conduct the survey,
which would establish the seven-hectare area covered by MSBFs usufructuary rights.
However, the trial court held that MSBF failed to act seasonably on this right to conduct the
survey. The trial court concluded that to allow MSBF to determine the seven-hectare area
now would be grossly unfair to the grantor of the usufruct. The trial court dismissed BGCs
complaint for injunction. The CA reversed and set aside the ruling of the lower court.

ISSUE: Whether the premises leased by BGC from MSBF is within the seven-hectare area
that proclamation no. 1670 granted to msbf by way of usufruct.

RULING: Yes. Art. 565 states that, the rights and obligations of the usufructuary shall be
those provided in the title constituting the usufruct; in default of such title, or in case it is
deficient, the provisions contained in the two following Chapters shall be observed. In the
present case, Proc. No. 1670 is the title constituting the usufruct. It categorically states that
the 7-hectare area shall be determined by future survey under the administration of the
Foundation subject to private rights if there be any. It authorized MSBF to determine the
location of the 7-hectare area. It is clear that MSBF conducted at least two surveys. Although
both surveys covered a total of 16 hectares, the second survey specifically indicated a seven-
hectare area shaded in yellow. However, in 1987, MSBF occupied the 16 hectares portion
which is more than the 7 hectares granted by Proc. No. 1670. A usufruct is not simply about
rights and privileges. A usufructuary has the duty to protect the owners interests. The
controversy would not have arisen had MSBF respected the limit of the beneficial use given
to it. Hence, there is a need for a new survey, conducted jointly by the NHA and MSBF,
consider existing structures of MSBF and as much as possible include all of the facilities of
MSBF within the 7-hectare portion without sacrificing contiguity. Therefore, the case is
remanded to the RTC.
G.R. No. L-2659 October 12, 1950

Bachrach v. Seifert

OZAETA, J:

FACTS: The deceased E. M. Bachrach, who left no forced heir except his widow Mary
McDonald Bachrach, in his last will and testament made various legacies in cash and willed
the remainder of his estate as follows: Sixth: It is my will and do herewith bequeath and devise
to my beloved wife Mary McDonald Bachrach for life all the fruits and usufruct of the remainder
of all my estate after payment of the legacies, bequests, and gifts provided for above; and
she may enjoy said usufruct and use or spend such fruits as she may in any manner wish.
The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge
Mining Co., Inc., received from the latter 54,000 shares representing 50 per cent stock
dividend on the said 108,000 shares. Mary McDonald Bachrach, as usufructuary or life tenant
of the estate, petitioned the lower court to authorize the Peoples Bank and Trust Company
as administrator of the estate of E. M. Bachrach, to her the said 54,000 share of stock dividend
by endorsing and delivering to her the corresponding certificate of stock, claiming that said
dividend, although paid out in the form of stock, is fruit or income and therefore belonged to
her as usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the
deceased, opposed said petition on the ground that the stock dividend in question was not
income but formed part of the capital and therefore belonged not to the usufructuary but to
the remainderman. While appellants admits that a cash dividend is an income, they contend
that a stock dividend is not, but merely represents an addition to the invested capital. so-
called Massachusetts rule, which prevails in certain jurisdictions in the United States,
supports appellants' contention . It regards cash dividends, however large, as income, and
stock dividends, however made, as capital. On the other hand, so called Pennsylvania rule,
which prevails in various other jurisdictions in the United States, supports appellee's
contention. This rule declares that all earnings of the corporation made prior to the death of
the testator stockholder belong to the corpus of the estate, and that all earnings, when
declared as dividends in whatever form, made during the lifetime of the usufructuary or life
tenant.

ISSUE: Whether or not a dividend is an income and whether it should go to the usufructuary.

RULING: The Court held that the Pennsylvania rule is more in accord with our statutory laws
than the Massachusetts rule. Under section 16 of our Corporation Law, no corporation may
make or declare any dividend except from the surplus profits arising from its business. Any
dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil
Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and
civil fruits of the property in usufruct. The 108,000 shares of stock are part of the property in
usufruct. The 54,000 shares of stock dividend are civil fruits of the original investment. They
represent profits, and the delivery of the certificate of stock covering said dividend is
equivalent to the payment of said profits. Said shares may be sold independently of the
original shares, just as the offspring of a domestic animal may be sold independently of its
mother. Therefore, a dividend, whether in the form of cash or stock, is income and,
consequently, should go to the usufructuary. The order appealed from, being in accordance
with the above-quoted provisions of the Civil Code, his hereby affirmed.