G.R. No.

L-19614 March 27, 1971

JESUS M. GABOYA, as Administrator of the Estate of DON MARIANO CUI, plaintiff-appellant,

vs.
ANTONIO MA. CUI, MERCEDES CUI-RAMAS and GIL RAMAS, defendants-appellees, JESUS MA. CUI, JOSE MA.
CUI, SERAFIN MA. CUI, JORGE MA. CUI, ROSARIO CUI DE ENCARNACION, PRECILLA C. VELEZ, and
LOURDES C. VELEZ, intervenors-appellants, VICTORINO REYNES, defendant-in-counterclaim-appellee.

REYES, J.B.L., J.:

Don Mariano Cui, widower, as owner of lots Nos. 2312, 2313 and 2319 situated in the City of Cebu, ,
on March 8, 1946, sold said three lots to three of his children named Rosario C. de Encarnacion,
Mercedes C. de Ramas and Antonio Ma. Cui, pro indiviso for the sum of P64,000. Because Rosario C.
de Encarnacion for lack of funds was unable to pay her corresponding share of the purchase price, the
sale to her was cancelled and the one-third of the property corresponding to her was returned to the
vendor. These three lots are commercial. The improvements thereon were destroyed during the last
Pacific War so that at the time of the sale in 1946, there were no buildings or any other
improvements on them. Because of the sale of these lots pro indiviso and because of the cancellation
of the sale to one of the three original vendees, Don Mariano and his children Mercedes and Antonio
became co-owners of the whole mass in equal portions. In the deed of sale vendor Don Mariano
retained for himself the usufruct of the property in the following words:

"...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 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. Granting and conveying unto the said
buyers the full rights as owners to enjoy the constructive possession of the
same, improve, construct and erect a building in the lot, or do whatever they believe to
be proper and wise, ..."

Subsequently, a building was erected on a portion of this mass facing Calderon street and was occupied
by a Chinese businessman for which he paid Don Mariano P600 a month as rental. The date when the
building, was constructed and by whom do not appear in the record.

Sometime after the sale to Mercedes and Antonio the two applied to the Rehabilitation Finance
Corporation (RFC) for a loan of P130,000 with which to construct a 12-door commercial building
presumably on a portion of the entire parcel corresponding to their share. In order to facilitate the
granting of the loan and inasmuch as only two of the three co-owners applied for the loan, Don Mariano
on January 7, 1947, executed an authority to mortgage (Annex U) authorizing his two children co-
owners to mortgage his share, the pertinent portion of said authority reading thus:

"That by virtue of these presents, I hereby agree, consent permit and authorize my said co-owners to
mortgage, pledge my share so that they may be able to construct a house or building in the said
property, provided however, that the rents of the said land shall not be impaired and will always be
received by me."

The loan was eventually granted and was secured by a mortgage on the three lots in question, Don
Mariano being included as one of the three mortgagors and signing the corresponding promissory note
with his two co-owners. He did not however, join in the construction of the 12-door commercial building
as may be gathered from the "Convenio de Asignacion de Parte' (Annex V) wherein it was agreed
among the three co-owners to assign to Don Mariano that one-third of the whole mass facing Calderon
street and on which was erected the building already referred to as being occupied by a Chinese
businessman and for which he was paying Don Mariano P600 a month rental. The area of this one-
third portion was fixed at 900 square meters approximately one-third of the total area of the three lots.

The 12-door commercial building was eventually constructed and the builder-owners thereof Mercedes
and Antonio received and continued to receive the rents thereof amounting to P4,800 a month and
paying therefrom the installments due for payment on the loan to the Rehabilitation Finance
Corporation.

On March 25, 1948, two other children of Don Mariano named Jesus and Jorge brought an action (Civil
case No. 599R) in the Court of First Instance of Cebu for the purpose of annulling the deed of sale of
the three lots in question on the ground that they belonged to the conjugal partnership of Don Mariano
and his deceased wife Antonia Perales. Thereafter, plaintiffs Jesus and Jorge applied for the
 appointment of a receiver to take charge of the lots and of the rentals of the building. This petition was
denied on November 8, 1948.

On March 19, 1949, Rosario C. Encarnacion, that daughter of Don Mariano who was one of the original
vendees, filed a petition to declare her father incompetent and to have a guardian appointed for his
property, in Special Proceeding No. 481-R of the Court of First Instance of Cebu. In May 1949 the
petition was granted and Don Mariano was declared incompetent and Victorino Reynes was appointed
guardian of his property.lâwphî1.ñèt Thereafter, the complaint in civil case No. 599-R seeking to annul
the deed of sale of the three lots in favor of Mercedes and Antonio was amended so as to include as
plaintiffs not only the guardian Victorino Reynes but also all the other children of Don Mariano.

On June 15, 1949, guardian Victorino Reynes filed a motion in the guardianship proceedings seeking
authority to collect the rentals from the three lots in question and asking the Court to order Antonio and
Mercedes to deliver to him as guardian all the rentals they had previously collected from the 12-door
commercial building, together with all the papers belonging to his ward. This motion was denied by
Judge Piccio in his order of July 12, 1949. The guardian did not appeal from this order.

On May 22, 1951, Judge Saguin rendered a decision in civil case No. 599-R and found that the three
lots in question were not conjugal property but belonged exclusively to Don Mariano and so upheld the
sale of two-thirds of said lots to Antonio and Mercedes. The plaintiffs appealed to the Court of Appeals
where the case is now pending.

From the Court of Appeals the case was brought to the Supreme Court, and the decision of Judge Saguin upholding
the validity of the sale in favor of Antonio and Mercedes Cui was finally affirmed on 21 February 1957, in Cui vs. Cui,
100 Phil, 914

-----------------------------------.

This third case now before Us was started by the erstwhile guardian of Don Mariano Cui (while the latter was still alive)
in order to recover P126,344.91 plus legal interest from Antonio Cui and Mercedes Cui (Record on Appeal, pages 2-3)
apparently as fruits due to his ward by virtue of his usufruct. The guardian's complaint was supplemented and amplified
by a 1957 complaint in intervention (duly admitted) filed by the other compulsory heirs of Mariano Cui, who had died on
29 July 1952, some nine months after the present case was instituted in the court below (Record on Appeal, pages 67-
68).

In essence, the complaint alleges that the usufructuary right reserved in favor of Don Mariano Cui extends to
and includes the rentals of the building constructed by Antonio Cui and Mercedes Cui on the land sold to them
by their father; that the defendants retained those rentals for themselves; that the usufructuary rights of the vendor
were of the essence of the sale, and their violation entitled him to rescind (or resolve) the sale. It prayed either for
rescission with accounting, or for delivery of the rentals of the building with interests, attorneys' fees and costs (Record
on Appeal, pages 12-38).

The amended answer, while admitting the reserved usufruct and the collection of rentals of the building by the
defendants, denied that the usufructuary rights included or extended to the said rentals, or that such usufruct was of the
essence of the sale; that the vendor (Don Mariano Cui ) had waived and renounced the usufruct and that the
defendants vendees gave the vendor P400.00 a month by way of aid; that the original complaint having sought
fulfillment of the contract, plaintiff can not thereafter seek rescission; that such action is barred by res judicata (on
account of the two previous decisions of the Supreme Court and by extinctive prescription. Defendants counterclaimed
for actual and moral damages and attorney's fees.

Plaintiffs denied the allegations in the counterclaim. .

From a consideration of the pleadings, the basic and pivotal issue appears to be whether the usufruct 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 to receive the rentals of the commercial building constructed by the vendees with funds
borrowed from the Rehabilitation and Finance Corporation, the loan being secured by a mortgage over the lots
sold. Similarly, if the usufruct extended to the building, whether the failure of the vendees to pay over its rentals to the
usufructuary entitled the latter to rescind, or more properly, resolve the contract of sale. In the third place, should the
two preceding issues be resolved affirmatively, whether the action for rescission due to breach of the contract could still
be enforced and was not yet barred.

The court below declared that the reserved right of usufruct in favor of the vendor did not include, nor was it intended to
include, nor was it intended to include, the rentals of the building subsequently constructed on the vacant lots, but that
it did entitle the usufructuary to receive a reasonable rental for the portion of the land occupied by the building,
which the Court a quo fixed at Pl,858.00 per month; and that the rentals for the land from November, 1947, when
the building was rented, to 29 July 1952, when Don Mariano died, amounted to P100,088.80. It also found no
preponderant evidence that the seller, Don Mariano Cui, had ever waived his right of usufruct, as contended by the
defendants; and that the Supreme Court, in denying reconsideration of its second (1957) decision (100 Phil. 914), had,
like the court of origin, refused to pass upon the extent of the usufructuary rights of the seller, specially because the
present case, was already pending in the Court of First Instance, hence no res judicata existed. No attorney's fees were
awarded to the defendants, but they were sentenced to pay counsel fees to plaintiffs.

Both parties appealed in the decision of the court a quo.

We find no the decision appealed from. As therein pointed out, the terms of the 1946 deed of sale of the vacant lots in
question made by the late Don Mariano Cui in favor of his three children, Rosario, Mercedes and Antonio Cui, in
consideration of the sum of P64,000.00 and the reserved usufruct of the said lot in favor of the vendor, as amplified by
the deed of 7 January 1947, authorizing Mercedes, and Antonio Cui to borrow money, with the security of a mortgage
over the entirety of the lots, in order to enable them to construct a house or building thereon —

provided, however, that the rents of said land shall not be impaired and will always received by
me.

clearly prove that the reserved usufruct in favor of the vendor, Mariano Cui, was limited to the rentals of the
land alone. Had it been designed to include also the rents of the buildings intended to be raised on the land,
an express provision would have been included to the effect, since in both documents (heretofore quoted) the
possibility of such construction was clearly envisaged and mentioned.

Appellants, however, argue that the terms of the deed constituting the usufruct are not determinative of the
extent of the right conferred; and that by law, the enjoyment of the rents of the building subsequently erected
passed to the usufructuary, by virtue of Article 571 of the Civil Code of the Philippines (Article 479 of the Spanish
Civil Code of 1889) prescribing that:

Art. 571. The usufructuary shall have the right to enjoy any increase which the thing in usufruct may
acquire through accession, the servitudes established in its favor, and, in general, all the benefits
inherent therein,

inasmuch as (in the appellants' view) the building constructed by appellees was an accession to the land.

This argument is not convincing. Under the articles of the Civil Code on industrial accession by modification on the
principal land (Articles 445 to 456 of the Civil Code) such accession is limited either to buildings erected on the land of
another, or buildings constructed by the owner of the land with materials owned by someone else.

Thus, Article 445, establishing the basic rule of industrial accession, prescribes that —

Whatever is built, planted or sown on the land of another, and the improvements or repairs made
thereon, belong to the owner of the land subject to the provisions of the following articles.

while Article 449 states:

He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown
without right to indemnity. (Emphasis supplied)

Articles 447 and 445, in turn, treat of accession produced by the landowner's building, planting and sowing "with the
materials of another" and when "the materials, plants or seeds belong to a third person other than the landowner or the
builder, planter or sower.

Nowhere in these articles on industrial accession is there any mention of the case of landowner building on his own land
with materials owned by himself (which is the case of appellees Mercedes and Antonio Cui). The reason for the omission
is readily apparent: recourse to the rules of accession are totally unnecessary and inappropriate where the ownership
of land and of the, materials used to build thereon are concentrated on one and the same person. Even if the law did
not provide for accession the land-owner would necessarily own the building, because he has paid for the materials and
labor used in constructing it. We deem it unnecessary to belabor this obvious point. .

There is nothing in the authorities (Manresa, Venezian, Santamaria, and Borrell cited by appellants that specifically
deals with constructions made by a party on his own land with his own materials, and at his own expense. The authorities
cited merely indicate the application in general of the rules of accession. But as already stated above, the Civil Code
itself limits the cases of industrial accession to those involving land and materials belonging to different owners. Anyway,
commentators' opinions are not binding where not in harmony with the law itself.

The author that specifically analyses the situation of the usufructuary vis-a-vis constructions made by the landowner
with his own materials is Scaevola (Codigo Civil, 2d Edition, pages 288 to 297) ; and his conclusion after elaborate
discussion is that, at the most —

(b) El nudo propietario no podra, sin el consentimiento del usufructuario, hacer construcciones,
plantaciones y siembras en el predio objecto del usufructo; y en el caso de que aquel lascosintiese, la
utilizacion sera comun en los frutos y productosde lo sembrado y plantado, y con respecto a las
construcciones,el usufructuario tendra derecho a la renta que de mutuo acuerdo se fije a las mismas;
en su defecto, por la autoridad judicial (Author cit., Emphasis supplied).

Scaevola's opinion is entirely in harmony with Article 595 of the Civil Code of the Philippines, prescribing that —

The owner may construct any works and make any improvements of which the immovable usufruct is
susceptible, or make new plantings thereon if it be rural, provided that such acts do not cause a
diminuition in the value of the usufruct or prejudice the right of the usufructuary.

Note that if the income from constructions made by the owner during the existence of the usufruct should be held to
accrue automatically to the usufructuary under Article 571, such improvements could not diminish the value of the
usufruct nor prejudice the right of the usufructuary; and the qualifications by Article 595 on the owner's right to build
would be redundant. The limitations set by Article 595 to the construction rights of the naked owner of the land are
evidently premised upon the fact that such constructions would necessarily reduce the area of the land under usufruct,
for which the latter should be indemnified. This is precisely what the court a quo has done in sentencing the appellee
owners of the building to pay to the usufructuary a monthly rent of P1,758.00 for the area occupied by their building,
after mature consideration of the rental values of lands in the neighborhood.

Additional considerations against the thesis sustained by appellants are (1) that the amount invested in the building
represents additional capital of the landowners not foresee" when the usufruct was created; and (2) that no land-owner
would be willing to build upon vacant lots under usufruct if the gain therefrom were to go to the usufructuary while the
depreciation of the value of the building (as distinguished from the necessary repairs) and the amortization of its cost
would burden exclusively the owner of the land. The unproductive situation of barren lots would thus be prolonged for
an indefinite time, to the detriment of society. In other words, the rule that appellants advocate would contradict the
general interest and be against public policy.

Appellants urge, in support of their stand, that the loan .for the construction of the building was obtained upon the
security of a mortgage not only upon the share of appellees but also upon the undivided interest of Don Mariano Cui in
the lots in question. That factor is irrelevant to the ownership of the building, because the money used for the building
was loaned exclusively to the appellees, and they were the ones primarily responsible for its repayment. Since the
proceeds of the loan was exclusively their property,1 the building constructed with the funds loaned is 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 effect; and his subsidiary role as guarantor does not entitle him to the ownership of the money
borrowed, for which the mortgage is mere security.

We agree with the trial court that there was no adequate proof that the vendor, Don Mariano Cui, ever renounced his
usufruct. The alleged waiver was purely verbal, and is supported solely by the testimony of Antonio Cui, one of the
alleged beneficiaries thereof. As a gratuitous renunciation of a real right over immovable property that as created by
public document, the least to be expected in the regular course of business is that the waiver should also appear in
writing. Moreover, as pointed out in the appealed decision (Record on Appeal, page 184, et seq.), in previous pleadings
sworn to by Antonio Cui himself, in Civil Case No. 599 and Special Proceeding 481-R of the Cebu Court of First Instance
(Exhibits "I", "J", and "20-A"), he and his sister Mercedes had contended that Don Mariano Cui had been receiving from
them P400.00 per month as the value of his usufruct, and never claimed that the real right had been renounced or
waived.lâwphî1.ñèt The testimony of Antonio Cui on the alleged waiver, given after the usufructuary had been declared
incompetent and could no longer contradict him, is obviously of negligible probative value.

Turning now to the second issue tendered by herein appellants, that the non-compliance with the provisions concerning
the usufruct constituted sufficient ground for the rescission (or resolution) of the sale under the tacit resolutory condition
established by Article 1191 of the Civil Code. What has been stated previously in discussing the import of Don Mariano's
usufruct shows that the alleged breach of contract by the appellees Antonio and Mercedes Cui could only consist in
their failure to pay to the usufructuary the rental value of the area occupied by the building constructed by them. But as
the rental value in question had not been ascertained or fixed either by the parties or the court, prior to the decision of
31 October 1961, now under appeal, nor had Don Mariano Cui, or anyone else in his behalf, made any previous demand
for its payment, the default, if any, can not be exclusively blamed upon the defendants-appellees. Hence, the breach is
not it "so substantial and fundamental as to defeat the object of the parties in making the agreement" 2 as to justify the
radical remedy of rescission. This Court, in Banahaw, Inc. vs. Dejarme 55 Phil. 338, ruled that —

...Under the third paragraph of article 11243 of the Civil Code, the court is given a discretionary power
to allow a period within which a person in default may be permitted to perform the stipulation upon which
the claim for resolution of the contract is based. The right to resolve or rescind a contract for non-
performance of one of its stipulations is, therefore, not absolute.

We have stated "the default, if any," for the reason that without previous ascertainment of the exact amount that the,
defendants-appellees were obligated to turn over to the usufructuary by way of reasonable rental value of the land
occupied by their building, said parties can not be considered as having been in default (mora) for failure to turn over
such monies to the usufructuary. "Ab illiquido non fit mora": this principle has been repeatedly declared by the
jurisprudence of Spanish Supreme Court (v. Manresa, Commentaries to the Spanish Civil Code [5th Ed.], Vol. 8, No. 1,
page 134) that is of high persuasive value in the absence of local adjudications on the point .

No puede estimarse que incurre en mora el obligado al pago de cantidad mientras esta no sea liquida,
y tenga aquel conocimiento por virtud de requirimiento o reclamacion judicial de lo que debe abonar
(Sent. TS of Spain, 13 July 1904) .

Seguin tiene declarado esta sala con repeticion, no se puede establecer que hay morosidad, ni
condenar por tal razon al abono de intereses cuando no se conoce la cantidad liquida reclamable"
(Sent. TS of Spain, 29 November 1912)

... es visto que no existiendo obligacion de entregar cantidad hasta tanto que se liquide no puede
estimarse segun jurisprudencia, que los recurridos ineurran en mora, por tanto que hayan de pagar
intereses legales de la cantidad que en su caso resulte (Sent, TS of Spain, 29 April 1914)

In the absence of default on the part of the defendants-vendees, Article 1592 of the Civil Code of the Philippines that is
invoked by appellants in, support of their all right to rescind the sale, is not applicable: for said article (which is a mere
variant of the general principle embodied in Article 1191, of the same Code) presupposes default of the purchasers in
the fulfilment of their obligations. As already noted, no such default or breach could occur before liquidation of the
usufructuary's credit; and the time for paying such unliquidated claim can not be said to have accrued until the decisions
under appeal was rendered, fixing the rental value of the land occupied by the building.

The filing of the initial complaint by Victoriano Reynes, then guardian of the late Don Mariano in 1951, seeking to recover
P126,344.91 plus interest, did not place appellees in default, for that complaint proceeded on the theory that the
usufructuary was entitled to all the rentals of the building constructed by the appellees on the lot under usufruct; and as
We have ruled, that theory was not legally tenable. And the 1957 complaint in intervention, seeking rescission of the
sale as alternative remedy, was only interposed after the death of the usufructuary in 1952, and the consequent
extinction of the usufruct, conformably to Article 603, paragraph (1), of the Civil Code.

It is also urged by the appellants that the usufruct was a condition precedent to the conveyance of ownership over the
land in question to herein appellees, and their failure to comply with their obligations under the usufruct prevented the
vesting of title to the property in said appellees. We need not consider this argument, since We have found that the
usufruct over the land did not entitle the usufructuary to either the gross or the net income of the building erected by the
vendees, but only to the rental value of the portion of the land occupied by the structure (in so far as the usufructuary
was prevented from utilizing said portion), and that rental value was not liquidated when the complaints were filed in the
court below, hence, there was no default in its payment. Actually, this theory of appellants fails to take into account that
Don Mariano could not retain ownership of the land and, at the same time, be the usufructuary thereof. His intention of
the usufructuary rights in itself imports that he was no longer its owner. For usufruct is essentially jus in re aliena; and
to be a usufructuary of one's own property is in law a contradiction in terms, and a conceptual absurdity.

The decision (Exhibit "30") as well as the resolution of this Court upon the motion to reconsider filed in the previous case
(100 Phil 914) refusing to adjudicate the usufructuary rights of Don Mariano in view of the pendency of the present
litigation (Exhibit "22") amply support the trial court's overruling of the defense of res judicata.

Summing up, We find and hold:

(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 him to the rents of the building later constructed thereon by defendants Mercedes and
Antonio Cui at their own expense.

(2) That said usufructuary was entitled only to the reasonable rental value of the land occupied by the building
aforementioned.
(3) That such rental value not having been liquidated 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 subject to rescission.

(4) That as found by the court below, the reasonable 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.

(5) That pursuant to Articles 2208 (No. 11), 2210 and 2213 of the Civil Code, 5 the trial court had discretion to equitably
award legal interest upon said sum of P100,088.80, as well as P5,000.00 attorney's fees, considering that defendants
Cui have enjoyed the said rental value of the land during all those years.

WHEREFORE, finding no reversible error in the appealed decision, the same is hereby affirmed. Costs against
appellant-intervenors, Jesus Ma. Cui, Jose Ma. Cui, Serafin Ma. Cui, Jorge Ma. Cui, Rosario Cui de Encarnacion,
Precilla C. Velez, and Lourdes C. Velez.

G.R. No. L-13361 December 29, 1959

ROSARIO GREY VDA. DE ALBAR and JOSE M. GREY, petitioner,

vs.
JOSEFA FABIE DE CARANGDANG, respondent.

Jose W. Diokno for petitioners.

Ambrosio Padilla, Ciriaco Lopez, Jr., and Santiago P. Blanco for respondent.

Doña Rosario Fabie y Grey was the owner of the lot in the City of Manila with a building and improvements thereon
erected at 950-956 Ongpin as evidenced by Original Certificate of Title No. 5030, and by a will left by her upon her death
which was duly probated she devised the naked ownership of the whole property to Rosario Grey Vda. de Albar, et al.
but its usufruct to Josefa Fabie for life.

The pertinent provision of the will reads as follows: "Lego a mi a ahijada menor de edad, Maria Josefa de la Paz Fabie,
en usufructo vitalicio las rentas de las fincas . . . en calle Ongpin, Numeros 950 al 956 del Distrito de Santa Cruz, Manila,
. . . y prohibio enjane, hipoteque, permuta o transfiera de algun modo mientras que ella sea menor de edad." Said
property was registered in the name of Rosario Grey Vda. De Albar, et al. as naked owners of the right of Josefa Fabie
as life usufructuary was expressly noted on the new title. Pursuant to the 9th clause of the claim of the will, an
encumbrance was likewise noted on the title prohibiting the usufructuary from selling, mortgaging or transferring her
right to usufruct during her minority.

During liberation, as a consequence of the fire that gutted the building in many portions of Manila, the building on the
Ongpin lot was burned, leaving only the walls and other improvements that were not destroyed by the fire.

One Au Pit, a Chinaman, offered to lease the property for a period of five years a monthly rental of P500.00, at the same
time agreeing to construct on the lot a new building worth P30,000 provided the naked owners as well as the usufructuary
sign the agreement of the lease. As the usufructuary maintains that she has the exclusive right to cede the property by
lease and to receive the full rental value by virtue of her right to usufruct while on the other hand the naked owners
maintain that the right of usufruct was extinguished when the building was destroyed, the right of the usufructory being
limited to the legal interest on the value of the lot and the materials, in order that the agreement of lease may be affected,
the parties agreed on a temporary compromise whereby the naked owners would receive P100.00, or 20% of the
monthly rental of P500.00 and the usufructuary the balance of 80% or P400.00 of said monthly rental. It was likewise
stipulated in the agreement that the title to the building to be constructed would accrue to the land upon it completion
as an integral part of the lot covered by the transfer certificate of title issued in the name of the naked owners but subject
to the right of usufruct of Josefa Fabie. The parties expressly reserved the right to litigate their respective claims after
the termination of the contract of lease to determine which of said claims was legally correct.

By reason of the destruction of the building on the Ongpin property, the United States War Damage Commission
approved the claim that was presented for the damage caused to the property the amount in the amount of P8,574.00
which was paid to and received by the naked owners. In the meantime, the usufructuary paid the real estate taxes due
on the property at Ongpin for the years 1945 to 1952 in the total amount of P1,989.27, as well as the real estate taxes
for the years 1953 and 1954 in the annual sum of P295.80.

On October 2, 1952, Rosario Grey Vda. de Albar, et al. commenced the present action to settle the dispute and
conflicting views entertained by the parties in line with their agreement and prayed that judgment be rendered declaring
that the usufruct in favor of Josefa Fabie is now only limited to receiving the legal interest on the value of the land, and
that her right to receive any rental under the contract entered into between the parties has already ceased.

On August 10, 1953, the trial court rendered judgment the dispositive part of which reads:

EN VIRTUD DE TODO LO CUAL, el Juzgaso promulga decision a favor de la demandada usufructuaria,

declarando;

(a) Que su usufructo vitalico continua sobre a la finca en Ongpin con derecho exclusivo de percibir durante su
vida la totalidad de sus rentas, sin que los demandantes tengan derecho de in miscuirse en la administracion
de dicha finca;

(b) Con derecho de percibir el 6% de la cantidad de P8,574.00 percibidos como indemnizacion de guerra desde
Enero 11, 1959;lawphi1.net

(c) Al reembolso de la suma de P1,989.27 pagados o abanados por la demandada como pagos del
amillaramiento desde la fecha de la Contestacion, Octubre 22, 1953;

(d) Mas la suma de P2,000.00 como daños y perjuicios en forma de honorarios de abogado y gastos de litigio.

(e) Con las costas a cargo de los demandantes.

On appeal by plaintiffs, the Court of Appeals modified the decision as follows:

Wherefore, we hereby affirm the decision appealed from in so far it holds that appellee's right of life usufruct
subsists and is in full force and effect upon the Ongpin lot and the building now existing thereon, and that she
is entitled to receive from
appellants the legal interest of 6% interest per annum of the amount of P3,272.00 from the time it was actually
received from the Philippine War Damage Commission for the whole period of the usufruct and appellants are
hereby required to give sufficient security for the payment of such interest, and we hereby reverse said decision,
declaring that reimbursement to appellee of the sum of P1,987.27 paid by her for real estate taxes is deferred
until the termination of the usufruct, and that she is not entitled to any amount for attorney's fees. Without
pronouncement regarding costs.

Plaintiffs interposed the present petition for review.

The main issue to be determined hinges on the interpretation of that portion of the will which devices to Josefa Fabie all
the rentals of the property situated in Ongpin and Sto. Cristo Streets, City of Manila. The pertinent provision of the will
reads: "Lego a mi ahijada menor de edad Maria Josefa de la Paz Fabie, en usufructo vitalico las rentas de las fincas
situadas en la calle Santo Cristo . . . y en la Calle Ongpin, Numeros 950 al 956 del Distrito de Santa Cruz Manila."
Petitioner contend that this provision of the will should be interpreted as constituting only a life usufruct on the rentals of
the buildings erected on the lands and that once these buildings are destroyed the usufruct is extinguished. Respondent,
on the other hand, contends that the provision should be interpreted as constituting a life usufruct both on the buildings
and the lands because the former cannot be separated from the latter.

In Lopez vs. Constantino, 74 Phil., 160, we said:

It may indeed seem at first blush that the rents out of which the pension was payable were earned by or paid
for the building only, independently of the lot on which it was erected; but further reflection will show that such
impression is wrong. When both land and building belong to the same owner, as in this case, the rents on the
building constitute an earning of the capital invested in the acquisition of both land and building. There can be
a land without a building, but there can be no building without land. The land, being an indispensable part of the
rented premises cannot be considered as having no rental value whatsoever. (Emphasis supplied)

In another part of the decision, this Court said: "Since appellant's participation in the rents of the leased premises by
way of life pension was part of the consideration of the sale, it cannot be deemed extinguished so long as she lives and
so long as the land exists, because that land may be rented to anyone who may desire to erect a building thereon."
(Emphasis supplied).

From the above, it is clear that when the deceased constituted the life usufruct on the rentals "fincas situadas" in Ongpin
and Sto. Cristo streets, she meant to impose the encumbrance both the building and the land on which it is erected for
indeed the building cannot exist without the land. And as this Court well said, "The land, being an indispensable part of
the rented premises cannot be considered as having no rental value whatsoever." Moreover, in the Spanish language,
the term "fincas" has a broad scope; it includes not only building but land as well. (Diccionario Ingles-Español, por
Martines Amador) Since only the building was destroyed and the usufruct is constituted not only on the building but on
the land as well, then the usufruct is not deemed extinguished by the destruction of the building for under the law usufruct
is extinguished only by the total loss of the thing subject of the encumbrance (Article 603, old Civil Code).

In our opinion, this case comes under Article 517 of the same Code which provides: "if the usufruct is constituted on
immovable property of which a building forms part, and the latter should be destroyed in any manner whatsoever, the
usufractuary shall have a right to make use of the land and materials." This is a temporary measure calculated to
maintain the usufruct alive until the very thing that has been destroyed be reconstructed or replaced. The reason is
obvious: since the usufruct has not been extinguished by the destruction of the building and the usufruct is for life as in
this case, it is but fair that the usufructuary continue to enjoy the use of the land and the materials that they may be
constructed on the land. To hold otherwise would be to affirm that the usufruct has been extinguished.

The question that now arises is: Who is called upon to undertake the new construction, and at whose cost? Of course,
this is addressed to the wisdom and discretion of the usufructuary who, to all intents and purposes is deemed as the
administrator of the property. This has been clarified in the case of Fabie vs. Gutierrez David, 75 Phil., 536, which was
litigated between the same parties and wherein the scope of the same provision of the will has been the subject of
interpretation. The following is what this Court said:

Construing said judgment in the light of the ninth clause of the will of the deceased Rosario Fabie Grey, which
was quoted in the decision and by which Josefa Fabie was made the usufructuary during her lifetime of the
income of the property in question, we find that the said usufructuary has the right to administer the property in
question. All the facts of administration — to collect the rents for herself, and to conserve the property by making
all necessary repair and praying all the taxes, special assessments, and insurance premiums thereon — where
by said judgment vested in the usufructuary. The pretension of the respondent Juan Grey that he is the
administrator of the property with the right to choose the tenants and to dictate the conditions of the lease is
contrary to both the letter and spirit of the said clause of the will the stipulation of the parties, and the judgment
of the court. He cannot manage or administer the property after all the acts of management or administration
have been vested by the court, with his consent, in the usufructuary.

In the instant case, however, a happy comprehensive was reached by the parties in view of the offer of one Chinaman
to lease the land for five years and to construct thereon a building worth P30,000.00 upon the condition that upon its
completion the building would become an integral part of the land in which it is erected. This means that its naked
ownership should belong to petitioners and its beneficial ownership to respondent. This is a happy medium which fits
into the purpose contemplated in Article 517 above referred to: that the usufruct should continue on the land and the
new improvement that may be constructed thereon.

We therefore hold that the Court of Appeals did not err in finding that appellee's right of usufruct subsists and is in full
force and effect upon the Ongpin lot and the building existing thereon, affirming the decision of the trial court.

Petitioners' contention that the Court of Appeals erred in ruling that the damages paid by the War Damage Commission
to said petitioners was intended to be an indemnity for the destruction of the building in question and in ordering them
to pay respondent 6% interest per annum on the amount of damage paid is also untenable, for it cannot be denied that
a war damage payment is intended to replace part of the capital invested in the building destroyed or to assuage
somewhat the material loss of its owner. It cannot be maintained that the war damage payments are intended to be a
mere gesture of appreciation of the People of the United States of America towards our people for its a well-known fact
that countless of our countrymen who suffered in the last war of whose kin-folks lost their lives did not receive any war
damage payment because they have no damaged property that could be indemnified. The ruling that 6% interest per
annum of such war damage payment should be paid to respondent from the time it was actually received to the end of
the life of the usufruct should, in my opinion, be modified in the sense that the obligation should only be valid up to the
date the new building was constructed by the Chinaman who leased the property upon the theory that the amount of
damage paid by the War Damage Commission which was intended to replace the old building has in turn been replaced
by the new. However, the majority as of the opinion that same should also be subject to usufruct for life because it has
not been used in the construction that the naked owners may turn over the money to the usufractuary so that she may
use it during her lifetime subject to its return to them after her death if they desire to be relived of this encumbrance.

We find, however, merit in the contention that the real estate taxes paid by respondent in her capacity as usufractuary
for several years previous to the present litigation should be paid by her, as she did, instead of by petitioners not only
because she bound herself to pay such taxes in a formal agreement approved by the court in Civil Case No. 1569 of
the Court of First Instance of Manila (Fabie vs. Gutierrez David, supra). In the case, which involved the same parties
and the same properties subject to usufruct, the parties submitted an amicable agreement which was approved by the
court wherein the usufructuary, herein respondent, bound herself to pay all the real estate taxes, special assessment
and insurance premiums, and make all the necessary repairs on each of the properties covered by the usufruct and in
accordance with said agreement, respondent paid all the taxes for the years 1945 to 1954. In said agreement, it was
also stipulated that the same "shall be in effect during the term of the usufruct of each of the parties." There is therefore
no valid reason why petitioners should now be ordered to reimburse respondent for all the real taxes she had paid on
the property. In this respect, the decision of the Court of Appeals should be modified.

Wherefore, with the modification that petitioners should not be made to reimburse the real estate taxes paid by the
respondent for the years abovementioned, the decision appealed from is affirmed in all others respects, without
pronouncement as to costs.

Labrador, Endencia, Barrera and Gutierrez David, JJ., concur.

Separate Opinions

MONTEMAYOR, J., concurring and dissenting:

I concur in the learned opinion of the majority, penned by Mr. Justice Bautista Angelo, with the exception of that portion
thereof on page 10, which holds that the payment to the usufructuary of the 6% interest per annum of the war damage
payment should end on the date of the construction of the new building by the Chinaman who leased the property, from
which ruling I dissent.

It will be noticed that both the trial court and the Court of Appeals were of the opinion that said payment of interest
should continue during the lifetime of the usufruct. I agree to said opinion. The reason is obvious. The war damage
payment is the equivalent of the building destroyed. Since the usufractuary had a right to the use or the fruits of the
building, she therefore had the right to the interest on the war damage payment during her lifetime. In my opinion, the
construction of the new building does not relieve the owners of the land who received the war damage payment of
containing the payment of interest. He said owners of the land used the war damage payment to construct the building,
then they would be free from paying interest because the rent of the new building would correspond to the interest on
the war damage payment. But the fact is the new building was not constructed by the owners of the land, but by the
Chinese lessee.

The majority opinion states that the usufractuary 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 the end of the usufruct, the owners of the land or their heirs shall have received not only equivalent or value of
the land 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 usufructuary, as the majority opinion well states has a right to the
use and the fruits not only of the improvements, such as buildings on the land, but the land itself. Consequently, anything
built on the land would be subject to the usufruct, and the fruits thereof, such as rents, would go to the usufructuary.
This naturally includes the interest on the war damage payment for the old building destroyed during the war, which
payment is the equivalent of said building. Had the owners of the land used the sum to add another story or extension
of the building constructed thereon by the Chinese lessee, there would surely be no question that any rent therefrom
would belong the usufractuary, because then it could be regarded as improvement on the land, which, as already said,
is the equivalent or a reproduction of said war damage payment of their own use did not relieve them of the obligation
of paying the interest on the same to the usufractuary, because otherwise, they would be having not only the naked
ownership of the equivalent of said building, but also its fruits.

The foregoing are some of the reasons for my dissent.

Paras, C.J., Bengzon and Concepcion, JJ., concur.

REYES, J.B.L., J., concurring:

I concur in the opinion of Justice Montemayor, specially because the usufractuary receives only part of the rent of the
new building.

G.R. No. L-123 December 12, 1945

JOSEFA FABIE, petitioner,

vs.
JOSE GUTIERREZ DAVID, Judge of First Instance of Manila, NGO BOO SOO and JUAN GREY, respondents.
Sancho Onocencio for petitioner.
Serverino B. Orlina for respondent Ngo Soo.
No appearance for other respondents.

OZAETA, J.:

The petitioner Josefa Fabie is the usufructuary of the income of certain houses located at 372-376 Santo Cristo,
Binondo, and 950-956 Ongpin, Santa Cruz, Manila, under the ninth clause of the will of the deceased Rosario Fabie y
Grey, which textually reads as follows:

NOVENO. — Lego a mi ahijada menor de edad, Maria Josefa de la Paz Fabie, en usufructo vitalicio las rentas
de las fincas situadas en la Calle Santo Cristo Numeros 372 al 376 del Disrito de Binondo, de esta Ciudad de
Manila, descrita en el Certificado Original de Titulo No. 3824; y en la Calle Ongpin, Numeros 950 al 956 del
Distrito de Santa Cruz, Manila descrita en el Certificado Original de Titulo No. 5030, expedidos por el
Registrador de Titulos de Manila, y prohibo enajene, hipoteque, permute o transfiera de algun modo mientras
que ella sea menor de edad. Nombro a Serafin Fabie Macario, mi primo por linea paterna tutor de la persona y
bienes de mi ahijada menor, Maria Josefa de la Paz Fabie.

The owner of Santo Cristo property abovementioned is the respondent Juan Grey, while those of the Ongpin property
are other person not concern herein. Previous to September 1944 litigation arose between Josefa Fabie as plaintiff and
Juan Grey as defendant and the owner of the Ongpin property as intervenors, involving the administration of the houses
mentioned in clause 9 of the will above quoted (civil case No. 1659 of the Court of First Instance of Manila). That suit
was decided by the court on September 2, 1944, upon a stipulation in writing submitted by the parties to and approved
by the court. The pertinent portions of said stipulation read as follows:

(4) Heretofore, the rent of said properties have been collected at times by the respective owners of the
properties, at other times by the usufructuary, and lastly by the defendant Juan Grey as agent under a written
agreement dated March 31, 1942, between the owners of both properties and the usufructuary.

(5) When the rents were collected by the owners, the net amounts thereof were duly paid to the usufructuary
after the expenses for real estate taxes, repairs and insurance premiums, including the documentary stamps,
on the properties and the expenses of collecting the rents had been deducted, and certain amount set aside as
a reserve for contingent liabilities. When the rents were collected by the usufructuary, she herself paid the
expenses aforesaid. When the rents are collected by the defendant Juan Grey under the agreement of March
31, 1942, the net amounts thereof were duly paid to the usufructuary, after deducting and setting aside the items
aforesaid, monthly, until the month of October 1943, when the usufructuary refused to continue with the
agreement of March 31, 1942.

xxx xxx xxx

II. The parties hereto jointly petition the Court to render judgment adopting the foregoing as finding of facts and
disposing that:

(8) Beginning with the month of September 1944, the usufructuary shall collect all the rents of the both the Sto.
Cristo and the Ongpin properties.

(9) The usufructuary shall, at her own cost and expense, pay all the real estate taxes, special assessments,
and insurance premiums, including the documentary stamps, and make all the necessary repairs on each of
the properties, promptly when due or, in the case of repairs, when the necessary, giving immediate, written
notice to the owner or owners of the property concerned after making such payment or repairs. In case of default
on the part of the usufructuary, the respective owners of the properties shall have the right to make the
necessary payment, including penalties and interest, if any, on the taxes and special assessments, and the
repairs and in that event the owner or owners shall entitled to collect all subsequent rents of the property
concerned until the amount paid by him or them and the expenses of collection are fully covered thereby, after
which the usufructuary shall again collect the rents in accordance herewith.

(10) The foregoing shall be in effect during the term of the usufruct and shall be binding on the successors and
assigns of each of the parties.

(11) Nothing herein shall be understood as affecting any right which the respective owners of the properties
have or may have as such and which is not specifically the subject of this stipulation.

In June 1945 Josefa Fabie commenced an action of unlawful detainer against the herein respondent Ngo Boo Soo (who
says that his correct name is Ngo Soo), alleging in her amended complaint that the defendant is occupying the premises
located at 372-376 Santo Cristo on a month-to month rental payable in advance not latter than the 5th of each month;
that she is the administratrix and usufructuary of said premises; "that the defendant offered to pay P300 monthly rent
payable in advance not later than the 5th of every month, beginning the month of April 1945, for the said of premises
including the one door which said defendant, without plaintiff's consent and contrary to their agreement, had subleased
to another Chinese, but plaintiff refused, based on the fact that the herein plaintiff very badly needs the said house to
live in, as her house was burned by the Japanese on the occasion of the entry of the American liberators in the City and
which was located then at No. 38 Flores, Dominga, Pasay; that defendant was duly notified on March 24 and April 14,
1945, to leave the said premises, but he refused"; and she prayed for judgment of eviction and for unpaid rentals.

The defendant answered alleging that he was and since 1908 had been a tenant of the premises in question, which he
was using and had always used principally as a store and secondarily for living quarters; that he was renting it from its
owner and administrator Juan Grey; "that plaintiff is merely the usufructuary of the income therefrom, and by agreement
between her and said owner, which is embodied in a final judgment of the Court of First Instance of Manila, her only
right as usufructuary of the income is to receive the whole of such income; that she has no right or authority to eject
tenants, such right being in the owner and administrator of the house, the aforesaid Juan Grey, who has heretofore
petitioned this Court for permission to intervene in this action; that plaintiff herein has never had possession of said
property; that defendant's lease contract with the owner of the house is for 5-year period, with renewal option at the end
of each period, and that his present lease due to expire on December 31, 1945 . . .; that on June 1, 1945, defendant
made a written offer to plaintiff to compromise and settle the question of the amount of rent to be paid by defendant . . .
but said plaintiff rejected the same for no valid reason whatever and instituted the present action; that the reason plaintiff
desires to eject defendant from the property is that she wishes to lease the same to other persons for a higher rent,
ignoring the fact that as usufructuary of the income of the property she has no right to lease the property; that the
defendant has subleased no part of the house to any person whomsoever.

Juan Grey intervened in the unlawful detainer suit, alleging in his complaint in intervention that he is the sole and
absolute owner of the premises in question; that the plaintiff Josefa Fabie is the usufructuary of the income of said
premises; by virtue of a contract between him and the intervenor which will expire on December 31, 1945, with the
option to renew it for another period of five years from and after said date; that under the agreement between the
intervenor and plaintiff Josefa Fabie in civil case No. 1659 of the Court of First Instance of Manila, which was approved
by the court and incorporated in its decision of September 2, 1944, the only right recognized in favor of Josefa Fabie as
usufructuary of the income of said premises is to receive the rents therefrom when due; and that as usufructuary she
has no right nor authority to administer the said premises nor to lease them nor to evict tenants, which right and authority
are vested in the intervenor as owner of the premises.

The municipal court (Judge Mariano Nable presiding) found that under paragraph 9 of the stipulation incorporated in the
decision of the Court First Instance of Manila in civil; case No. 1659, the plaintiff usufructuary is the administratrix of the
premises in question, and that the plaintiff had proved her cause. Judgment was accordingly rendered ordering the
defendant Ngo Soo to vacate the premises and to pay the rents at the rate of P137.50 a month beginning April 1, 1945.
The complaint in intervention was dismissed.

Upon appeal to the Court of First Instance of Manila the latter (thru Judge Arsenio P. Dizon) dismissed the case for the
following reason: "The main issue *** is not a mere question of possession but precisely who is entitled to administer
the property subject matter of this case and who should be the tenant, and the conditions of the lease. These issues
were beyond the jurisdiction of the municipal court. This being case, this Court, as appellate court, is likewise without
jurisdiction to take cognizance of the present case." A motion for reconsideration filed by the plaintiff was denied by
Judge Jose Gutierrez David, who sustained the opinion of Judge Dizon.lawphi1.net

The present original action was instituted in this Court by Josefa Fabie to annul the order of the dismissal and to require
to the Court of First Instance to try and decide the case on the merits. The petitioner further prays that the appeal of the
intervenor Juan Grey be declared out of time on the ground that he receive copy of the decision on August 3 but did not
file his notice of appeal until August 25, 1945.

1. The first question to determine is whether the action instituted by the petitioner Josefa Fabie in the municipal court is
a purely possessory action and as such within the jurisdiction of said court, or an action founded on property right and
therefore beyond the jurisdiction of the municipal court. In other words, is it an action of unlawful detainer within the
purview of section 1 of Rule 72, or an action involving the title to or the respective interests of the parties in the property
subject of the litigation?

Said section 1 of Rule 72 provides that "a landlord, vendor, vendee, or other person against whom the possession of
any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of
any contract, express or implied, or the legal representatives or assigns of any such landlord, vendor vendee, or other
person, may, at any time within one year after such unlawful deprivation of withholding of possession, bring an action in
the proper inferior court against the person or persons unlawfully withholding or depriving of possession, or any person
or persons claiming under them, for the restitution of such possession, together with the damages and costs."
It is admitted by the parties that the petitioner Josefa Fabie is the usufructuary of the income of the property in question
and that the respondent Juan Grey is the owner thereof. It is likewise admitted that by virtue of a final judgment entered
in civil case No. 1659 of the Court of First Instance of Manila between the usufructuary and the owner, the former has
the right to collect all the rents of said property for herself with the obligation on her part to pay all the real estate taxes,
special assessments, and insurance premiums, and make all necessary repairs thereon, and in case default on her part
the owner shall have the right to do all those things, in which event he shall be entitled to collect all subsequent rents of
the property concerned until the amount paid by him and the expenses of collection are fully satisfied, after which the
usufructuary shall again collect the rents. There is therefore no dispute as to the title to or the respective interests of the
parties in the property in question. The naked title to the property is to admittedly in the respondent Juan Grey, but the
right to all the rents thereof, with the obligation to pay the taxes and insurance premiums and make the necessary
repairs, is, also admittedly, vested in the usufructuary, the petitioner Josefa Fabie, during her lifetime. The only question
between the plaintiff and the intervenor is: Who has the right to manage or administer the property — to select the tenant
and to fix the amount of the rent? Whoever has that right has the right to the control and possession of the property in
question, regardless of the title thereto. Therefore, the action is purely possessory and not one in any way involving the
title to the property. Indeed, the averments and the prayer of the complaint filed in the municipal court so indicate, and
as a matter of fact the defendant Ngo Soo does not pretend to be the owner of the property, but on the contrary admits
to be a mere tenant thereof. We have repeatedly held that in determining whether an action of this kind is within the
original jurisdiction of the municipal court or of the Court of First Instance, the averments of the complaint and the
character of the relief sought are primarily to be consulted; that the defendant in such an action cannot defeat the
jurisdiction of the justice of the peace or municipal court by setting up title in himself; and that the factor which defeats
the jurisdiction of said court is the necessity to adjudicate the question of title. (Mediran vs. Villanueva, 37 Phil., 752,
759; Medel vs.Militante, 41 Phil., 526, 529; Sevilla vs. Tolentino, 51 Phil., 333; Supia and Batioco vs. Quintero and
Ayala, 59 Phil., 312; Lizo vs. Carandang, G.R. No. 47833, 2 Off. Gaz., 302; Aguilar vs. Cabrera and Flameño, G.R. No.
49129.)

The Court of First Instance was evidently confused and led to misconstrue the real issue by the complaint in intervention
of Juan Grey, who, allying himself with the defendant Ngo Soo, claimed that he is the administrator of the property with
the right to select the tenant and dictate the conditions of the lease, thereby implying that it was he and not the plaintiff
Josefa Fabie who had the right to bring the action and oust the tenant if necessary. For the guidance of that court and
to obviate such confusion in its disposal of the case on the merits, we deem it necessary and proper to construe the
judgment entered by the Court of First Instance of Manila in civil case No. 1659, entitled "Josefa Fabie and Jose
Carandang, plaintiffs, vs. Juan Grey, defendant, and Nieves G. Vda. de Grey, et al., intervenors-defendants" which
judgment was pleaded by the herein respondents Juan Grey and Ngo Soo in the municipal court. According the decision,
copy of which was submitted to this Court as Appendix F of the petition and as Annex 1 of the answer, there was an
agreement, dated March 31, 1942, between the usufructuary Josefa Fabie and the owner Juan Grey whereby the
latter as agent collected the rents of the property in question and delivered the same to the usufructuary after deducting
the expenses for taxes, repairs, insurance premiums and the expenses of collection; that in the month of October 1943
the usufructuary refused to continue with the said agreement of March 31, 1942, and thereafter the said case arose
between the parties, which by stipulation approved by the court was settled among them in the following manner:
Beginning with the month of September 1944 the usufructuary shall collect all the rents of the property in question; shall,
at her own cost and expense, pay all the real estate taxes, special assessments, and insurance premiums, including
the documentary stamps, and make all the necessary repairs on the property; and in case of default on her part the
owner shall the right to do any or all of those things, in which event he shall be entitled to collect all subsequent rents
until the amounts paid by him are fully satisfied, after which the usufructuary shall again collect the rents. It was further
stipulated by the parties and decreed by the court that "the foregoing shall be in effect during the term of the usufruct
and shall be binding on the successors and assigns of each of the parties."

Construing said judgment in the light of the ninth clause of the will of the deceased Rosario Fabie y Grey, which was
quoted in the decision and by which Josefa Fabie was made by the usufructuary during her lifetime of the income of the
property in question, we find that the said usufructuary has the right to administer the property in question. All the acts
of administration — to collect the rents for herself, and to conserve the property by making all necessary repairs and
paying all the taxes, special assessments, and insurance premiums thereon — were by said judgment vested in the
usufructuary. The pretension of the respondent Juan Grey that he is the administrator of the property with the right to
choose the tenants and to dictate the conditions of the lease is contrary to both the letter and the spirit of the said clause
of the will, the stipulation of the parties, and the judgment of the court. He cannot manage or administer the property
after all the acts of management and administration have been vested by the court, with his consent, in the usufructuary.
He admitted that before said judgment he had been collecting the rents as agent of the usufructuary under an agreement
with the latter. What legal justification or valid excuse could he have to claim the right to choose the tenant and fix the
amount of the rent when under the will, the stipulation of the parties, and the final judgment of the court it is not he but
the usufructuary who is entitled to said rents? As long as the property is properly conserved and insured he can have
no cause for complaint, and his right in that regard is fully protected by the terms of the stipulation and the judgment of
the court above mentioned. To permit him to arrogate to himself the privilege to choose the tenant, to dictate the
conditions of the lease, and to sue when the lessee fails to comply therewith, would be to place the usufructuary entirely
at his mercy. It would place her in the absurd situation of having a certain indisputable right without the power to protect,
enforce, and fully enjoy it.
One more detail needs clarification. In her complaint for desahucio Josefa Fabie alleges that she needs the premises in
question to live in, as her former residence was burned. Has she the right under the will and the judgment in question
to occupy said premises herself? We think that, as a corollary to her right to all the rent, to choose the tenant, and to fix
the amount of the rent, she necessarily has the right to choose herself as the tenant thereof, if she wishes to; and, as
she fulfills her obligation to pay the taxes and insure and conserve the property properly, the owner has no legitimate
cause to complain. As Judge Nable of the municipal court said in his decision, "the pretension that the plaintiff, being a
mere usufructuary of the rents, cannot occupy the property, is illogical if it be taken into account that that could not have
been the intention of the testatrix."

We find that upon the pleadings, the undisputed facts, and the law the action instituted in the municipal court by the
petitioner Josefa Fabie against the respondent Ngo Soo is one of unlawful detainer, within the original jurisdiction of
said court, and that therefore Judges Dizon and Gutierrez David of the Court of First Instance erred in holding otherwise
and in quashing the case upon appeal.

2. The next question to determine is the propriety of the remedy availed of by the petitioner in this Court. Judging from
the allegations and the prayer of the petition, it is in the nature of certiorari and mandamus, to annul the order of
dismissal and to require the Court of First Instance to try and decide the appeal on the merits. Under section 3 of Rule
67, when any tribunal unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting
from an office, and there is no other plain, speedy, and adequate remedy in the ordinary course of law, it may be
compelled by mandamus to do the act required to be done to protect the rights of the petitioner. If, as we find, the case
before the respondent judge is one of unlawful detainer, the law specifically requires him to hear and decide that case
on the merits, and his refusal to do so would constitute an unlawful neglect in the performance of that duty within section
3 of Rule 67. Taking into consideration that the law requires that an unlawful detainer case be promptly decided (sections
5 and 8, Rule 72),it is evident that an appeal from the order of dismissal would not be a speedy and adequate remedy;
and under the authority of Cecilio vs. Belmonte (48 Phil., 243, 255), and Aguilar vs. Cabrera and Flameño (G.R. No.
49129), we hold that mandamus lies in this case.

3. The contention of the petitioner that the appeal of the intervenor Juan Grey was filed out of time is not well founded.
Although said respondent received copy of the decision of the municipal court on August 3, 1945, according to the
petitioner (on August 6, 1945, according to the said respondent), it appears from the sworn answer of the respondent
Ngo Soo in this case that on August 8 he filed a motion for reconsideration, which was granted in part on August 18.
Thus, if the judgment was modified on August 18, the time for the intervenor Juan Grey to appeal therefrom did not run
until he was notified of said judgment as modified, and since he filed his notice of appeal on August 23, it would appear
that his appeal was filed on time. However, we observe in this connection that said appeal of the intervenor Juan Grey,
who chose not to answer the petition herein, would be academic in view of the conclusions we have reached above that
the rights between him as owner and Josefa Fabie as usufructuary of the property in question have been definitely
settled by final judgment in civil case No. 1659 of the Court of First Instance of Manila in the sense that the usufructuary
has the right to administer and possess the property in question, subject to certain specified obligations on her part.

The orders of dismissal of the respondent Court of First Instance, dated September 22 and October 31, 1945, in
the desahucio case (No. 71149) are set aside that court is directed to try and decide the said case on the merits; with
the costs hereof against the respondent Ngo Soo.

Moran, C.J., Paras, Jaranilla, Feria, De Joya, Pablo, Perfecto, Bengzon, and Briones, JJ., concur.

Separate Opinions

HILADO, J., concurring:

I concur on the sole ground that, in my opinion, the amended complaint, dated July 12, 1945, filed by plaintiff in the
Municipal Court of Manila, expressly alleges an agreement between her and defendant Ngo Boo Soo regarding the
leasing of the premises in question, and that said amended complaint contains further allegations which, together with
the allegations of said agreement, under a liberal construction (Rule 1, section 2, Rules of the Court), would constitute
a prima facie showing that the case is one of unlawful detainer. Of course, this is only said in view of the allegations of
the amended complaint, without prejudice to the evidence which the parties may adduce at the trial in the merits, in view
of which the court will judge whether or not, in point of fact, the case is one of unlawful detainer.

G.R. No. 152809 August 3, 2006

MERCEDES MORALIDAD, Petitioner,

vs.
SPS. DIOSDADO PERNES and ARLENE PERNES, Respondents.

DECISION
GARCIA, J.:

Under consideration is this petition for review on certiorari under Rule 45 of the Rules of Court to nullify and set aside
the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 61610, to wit:

1. Decision dated September 27, 2001, 1 affirming an 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 action for unlawful detainer
thereat commenced by the petitioner against the herein respondents; and

2. Resolution dated February 28, 2002, 2 denying petitioner’s motion for reconsideration.

At the heart of this controversy is a parcel of land located in Davao City and registered in the name of petitioner Mercedes
Moralidad under Transfer Certificate of Title (TCT) No. T-123125 of the Registry of Deeds of Davao City.

In her younger days, petitioner taught in Davao City, 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, she was offered to
teach at the Philadelphia Catholic Archdiocese, which she did for seven (7) years. Thereafter, she worked at the Mental
Health Department of said University for the next seventeen (17) years.

During those years, she would come home to the Philippines to spend her two-month summer vacation in her hometown
in Davao City. Being single, she would usually stay in Mandug, Davao City, in the house of her niece, respondent Arlene
Pernes, a daughter of her younger sister, Rosario.

Back in the U.S.A. sometime in 1986, she received news from Arlene that Mandug at the outskirts of Davao City was
infested by NPA rebels and many women and children were victims of crossfire between government troops and the
insurgents. Shocked and saddened about this development, she immediately sent money to Araceli, Arlene’s older
sister, with instructions to look for a lot in Davao City where Arlene and her family could transfer and settle down. This
was why she bought the parcel of land covered by TCT No. T-123125.

Petitioner acquired the lot property initially for the purpose of letting Arlene move from Mandug to Davao City proper but
later she 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 she executed on July 21, 1986. 3 The document reads:

I, MERCEDES VIÑA MORALIDAD, of legal age, single, having been born on the 29th day of January, 1923, now actually
residing at 8021 Lindbergh Boulevard, Philadelphia, Pennsylvania, U.S.A., wishes to convey my honest intention
regarding my properties situated at Palm Village Subdivision, Bajada, Davao City, 9501, … and hereby declare:

1. That it is my desire that Mr. and Mrs. Diosdado M. Pernes may build their house therein and stay as long as they like;

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 avoid bickering with one another;

3. That anyone of my kins may enjoy the privilege to stay therein and may avail the use thereof. Provided, however, that
the same is not inimical to the purpose thereof;

4. That anyone of my kins who cannot conform with the wishes of the undersigned may exercise the freedom to look for
his own;

5. That any proceeds or income derived from the aforementioned properties shall be allotted to my nearest kins who
have less in life in greater percentage and lesser percentage to those who are better of in standing.

xxx xxx xxx

Following her retirement in 1993, petitioner came back to the Philippines to stay with the respondents’ on the house
they build on the subject property. In the course of time, their relations turned sour because members of the Pernes
family were impervious to her suggestions and attempts to change certain practices concerning matters of health and
sanitation within their compound. For instance, Arlene’s eldest son, Myco Pernes, then a fourth year veterinary medicine
student, would answer petitioner back with clenched fist and at one time hurled profanities when she corrected him.
Later, Arlene herself followed suit. Petitioner brought the matter to the local barangay lupon where she lodged a
complaint for slander, harassment, threat and defamation against the Pernes Family. Deciding for petitioner, the lupon
apparently ordered the Pernes family to vacate petitioner’s property but not after they are reimbursed for the value of
the house they built thereon. Unfortunately, the parties could not agree on the amount, thus prolonging the impasse
between them.
Other ugly incidents interspersed with violent confrontations meanwhile transpired, with the petitioner narrating that, at
one occasion in July 1998, she sustained cuts and wounds when Arlene pulled her hair, hit her on the face, neck and
back, while her husband Diosdado held her, twisting her arms in the process.

Relations having deteriorated from worse to worst, petitioner, on July 29, 1998, lodged a formal complaint before the
Regional Office of the Ombudsman for Mindanao, charging the respondent spouses, who were both government
employees, with conduct unbecoming of public servants. This administrative case, however, did not prosper.

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 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 the respondents refused to heed.

In their defense, the respondents alleged having entered the property in question, building their house thereon and
maintaining the same as their residence with petitioner’s full knowledge and express consent. To prove their point, they
invited attention to her written declaration of July 21, 1986, supra, wherein she expressly signified her desire for the
spouses to build their house on her property and stay thereat for as long as they like.

The MTCC, resolving the ejectment suit in petitioner’s favor, declared that the respondent spouses, although builders
in good faith vis-à-vis the house they built on her property, cannot invoke their bona fides as a valid excuse for not
complying with the demand to vacate. To the MTCC, respondents’ continued possession of the premises turned unlawful
upon their receipt of the demand to vacate, such possession being merely at petitioner’s tolerance, and sans any rental.
Accordingly, in its decision dated November 17, 1999, 4 the MTCC rendered judgment for the petitioner, as plaintiff
therein, to wit:

WHEREFORE, judgment is hereby rendered in favor of herein plaintiff and against the defendants, as follows:

a) Directing the defendants, their agents and other persons acting on their behalf to vacate the premises and to yield
peaceful possession thereof to plaintiff;

b) Ordering defendants to pay P2,000.00 a month from the filing of this complaint until they vacate premises;

c) Sentencing defendants to pay the sum of P120,000.00 5 as attorney’s fees and to pay the cost of suit.

Defendants counterclaim are hereby dismissed except with respect to the claim for reimbursement of necessary and
useful expenses which should be litigated in an ordinary civil actions. (sic)

Dissatisfied, the respondent spouses appealed to the RTC of Davao City.

In the meantime, petitioner filed a Motion for Execution Pending Appeal. The motion was initially granted by the RTC in
its Order of February 29, 2000, but the Order was later withdrawn and vacated by its subsequent Order dated May 9,
2000 6 on the ground that immediate execution of the appealed decision was not the prudent course of action to take,
considering that the house the respondents constructed on the subject property might even be more valuable than the
land site.

Eventually, in a decision 7 dated September 30, 2000, the RTC reversed that of the MTCC, holding that respondents’
possession of the property in question was not, as ruled by the latter court, by mere tolerance of the petitioner but rather
by her express consent. It further ruled that Article 1678 of the Civil Code on reimbursement of improvements introduced
is inapplicable since said provision contemplates of a lessor-lessee arrangement, which was not the factual milieu
obtaining in the case. Instead, the RTC ruled that what governed the parties’ relationship are Articles 448 and 546 of
the Civil Code, explaining thus:

Since the defendants-appellees [respondents] are admittedly possessors of the property by permission from plaintiff
[petitioner], and builders in good faith, they have the right to retain possession of the property subject of this case until
they have been reimbursed the cost of the improvements they have introduced on the property.

Indeed, this is a substantive right given to the defendants by law, and this right is superior to the procedural right to [sic]
plaintiff to immediately ask for their removal by a writ of execution by virtue of a decision which as we have shown is
erroneous, and therefore invalid. (Words in brackets supplied),

and accordingly dismissed petitioner’s appeal, as follows:

WHEREFORE, in view of the foregoing, the Decision appealed from is REVERSED and declared invalid. Consequently,
the motion for execution pending appeal is likewise denied.

Counter-claims of moral and exemplary damages claimed by defendants are likewise dismissed. However, attorney’s
fees in the amount of fifteen thousand pesos is hereby awarded in favor of defendants-appellants, and against plaintiffs.

SO ORDERED. 8

Therefrom, petitioner went to the CA in CA-G.R. SP No. 61610.

On September 27, 2001, the CA, while conceding the applicability of Articles 448 and 546 of the Civil Code to the case,
ruled that it is still premature to apply the same considering that the issue of whether respondents’ right to possess a
portion of petitioner’s land had already expired or was already terminated was not yet resolved. To the CA, the unlawful
detainer suit presupposes the cessation of respondents’ right to possess. The CA further 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. On this premise, the CA concluded that the ejectment suit instituted by the petitioner was premature. The
appellate court thus affirmed the appealed RTC decision, disposing:

WHEREFORE, premises considered, the instant petition for review is hereby denied for lack of merit. Accordingly, the
petitioner’s complaint for Unlawful Detainer is DISMISSED.

SO ORDERED.

With the CA’s denial of her motion for reconsideration in its Resolution of February 28, 2002, petitioner is now before
this Court raising the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE UNLAWFUL DETAINER CASE FOR
BEING PREMATURE WHICH DECISION IS NOT IN ACCORDANCE WITH LAW AND JURISPRUDENCE.

II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN APPLYING ARTICLES 448 AND 546 AND THE
PROVISIONS OF THE CODE ON USUFRUCT INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE.

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, with the petitioner being the owner of the property upon whom the naked title thereto remained and the
respondents being two (2) among other unnamed usufructuaries who were simply referred to as petitioner’s kin. The
Court, however, cannot go along with the CA’s holding that the action for unlawful detainer must be dismissed on ground
of prematurity.

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.

Usufruct, in essence, is nothing else but simply allowing one to enjoy another’s property. 9 It is also defined as the right
to enjoy the property of another temporarily, including both the jus utendi and the jus fruendi, 10 with the owner retaining
the jus disponendi or the power to alienate the same. 11

It is undisputed that petitioner, in a document dated July 21, 1986, supra, made known her intention to give respondents
and her other kins the right to use and to enjoy the fruits of her property. There can also be no quibbling about the
respondents being given the right "to build their own house" on the property and to stay thereat "as long as they like."
Paragraph #5 of the same document earmarks "proceeds or income derived from the aforementioned properties" for
the petitioner’s "nearest kins who have less in life in greater percentage and lesser percentage to those who are better
of (sic) in standing." The established facts undoubtedly gave respondents not only the right to use the property but also
granted them, among the petitioner’s other kins, the right to enjoy the fruits thereof. We have no quarrel, therefore, with
the CA’s ruling that usufruct was constituted between petitioner and respondents. It is thus pointless to discuss why
there was no lease contract between the parties.

However, determinative of the outcome of the ejectment case is the resolution of the next issue, i.e., whether the existing
usufruct may be deemed to have been extinguished or terminated. If the question is resolved in the affirmative, then the
respondents’ right to possession, proceeding as it did from their right of usufruct, likewise ceased. In that case,
petitioner’s action for ejectment in the unlawful detainer case could proceed and should prosper.
The CA disposed of this issue in this wise:

xxx Section 1, Rule 70 of the 1997 Rules of Civil Procedure, as amended, provides xxx

xxx xxx xxx

From the foregoing provision, it becomes apparent that for an action for unlawful detainer to prosper, the plaintiff
[petitioner] needs to prove that defendants’ [respondents’] right to possess already expired and terminated. Now, has
respondents’ right to possess the subject portion of petitioner’s property expired or terminated? Let us therefore examine
respondents’ basis for occupying the same.

It is undisputed that petitioner expressly authorized respondents o occupy portion of her property on which their house
may be built. Thus – "it is my desire that Mr. and Mrs. Diosdado M. Pernes may build their house therein and stay as
long as they like." From this statement, it seems that petitioner had given the respondents the usufructuary rights over
the portion that may be occupied by the house that the latter would build, the duration of which being dependent on how
long respondents would like to occupy the property. While petitioner had already demanded from the respondents the
surrender of the premises, this Court is of the opinion that the usufructuary rights of respondents had not been terminated
by the said demand considering the clear statement of petitioner that she is allowing respondents to occupy portion of
her land as long as the latter want to. Considering that respondents still want to occupy the premises, petitioner clearly
cannot eject respondents.

We disagree with the CA’s conclusion of law on the matter. The term or period of the usufruct originally specified provides
only one of the bases for the right of a usufructuary to hold and retain possession of the thing given in usufruct. There
are other modes or instances whereby the usufruct shall be considered terminated or extinguished. For sure, the Civil
Code enumerates such other modes of extinguishment:

ART. 603. Usufruct is extinguished:

(1) By the death of the usufructuary, unless a contrary intention clearly appears;

(2) By expiration of the period for which it was constituted, or by the fulfillment of any resolutory condition provided in
the title creating the usufruct;

(3) By merger of the usufruct and ownership in the same person;

(4) By renunciation of the usufructuary;

(5) By the total loss of the thing in usufruct;

(6) By the termination of the right of the person constituting the usufruct;

(7) By prescription. (Emphasis supplied.)

The document executed by the petitioner dated July 21, 1986 constitutes the title creating, and sets forth the conditions
of, the usufruct. Paragraph #3 thereof states "[T]hat anyone of my kins may enjoy the privilege to stay therein and may
avail the use thereof. Provided, however, that the same is not inimical to the purpose thereof" (Emphasis supplied).
What may be inimical to the purpose constituting the usufruct may be gleaned from the preceding paragraph wherein
petitioner made it abundantly clear "that anybody of my kins who wishes to stay on the aforementioned property should
maintain an atmosphere of cooperation, live in harmony and must avoid bickering with one another." That the
maintenance of a peaceful and harmonious relations between and among kin constitutes an indispensable condition for
the continuance of the usufruct is clearly deduced from the succeeding Paragraph #4 where petitioner stated "[T]hat
anyone of my kins who cannot conform with the wishes of the undersigned may exercise the freedom to look for his
own." In fine, the occurrence of any of the following: the loss of the atmosphere of cooperation, the bickering or the
cessation of harmonious relationship between/among kin constitutes a resolutory condition which, by express wish of
the petitioner, extinguishes the usufruct.

From the pleadings submitted by the parties, it is indubitable that there were indeed facts and circumstances whereby
the subject usufruct may be deemed terminated or extinguished by the occurrence of the resolutory conditions provided
for in the title creating the usufruct, namely, the document adverted to which the petitioner executed on July 21, 1986.

As aptly pointed out by the petitioner in her Memorandum, respondents’ own evidence before the MTCC indicated that
the relations between the parties "have deteriorated to almost an irretrievable level." There is no doubt then that what
impelled petitioner to file complaints before the local barangay lupon, the Office of the Ombudsman for Mindanao, and
this instant complaint for unlawful detainer before the MTCC is that she could not live peacefully and harmoniously with
the Pernes family and vice versa.

Thus, the Court rules that the continuing animosity between the petitioner and the Pernes family and the violence and
humiliation she was made to endure, despite her advanced age and frail condition, are enough factual bases to consider
the usufruct as having been terminated.

To reiterate, 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. In case like this, the terms of the contract
and the pertinent provisions of law should govern (3 Manresa 215-216; se also Montinola vs. Bantug, 71 Phil.
449). (Emphasis ours.)

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. We quote Articles 579 and 580 of the Civil Code:

Art. 579. The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere
pleasure as he may deem proper, provided he does not alter its form or substance; but he shall have no right to be
indemnified therefor. He may, however, remove such improvements, should it be possible to do so without damage to
the property. (Emphasis supplied.)

Art. 580. The usufructuary may set off the improvements he may have made on the property against any damage to the
same.

Given the foregoing perspective, respondents will have to be ordered to vacate the premises without any right of
reimbursement. If the rule on reimbursement or indemnity were otherwise, then the usufructuary might, as an author
pointed out, improve the owner out of his property. The respondents may, however, remove or destroy the
improvements they may have introduced thereon without damaging the petitioner’s property.

Out of the generosity of her heart, the petitioner has allowed the respondent spouses to use and enjoy the fruits of her
property for quite a long period of time. They opted, however, to repay a noble gesture with unkindness. At the end of
the day, therefore, they really cannot begrudge their aunt for putting an end to their right of usufruct. The disposition
herein arrived is not only legal and called for by the law and facts of the case. It is also right.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the CA are REVERSED and SET
ASIDE. Accordingly, the decision of the MTCC is REINSTATED with MODIF xICATION that all of respondents’
counterclaims are dismissed, including their claims for reimbursement of useful and necessary expenses.