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G.R. No.

152809 August 3, 2006


The petitioner, Mercedes Moralidad in her younger day taught in Davao City, Quezon City and Manila. She
had the good fortune of furthering her studies at the University of Pennsylvania, U.S.A and later on 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.
Being single, during her vacation in the Philippines, she usually stays at the house of her niece, respondent
Arlene Pernes at Mandug, Davao City.
Sometime in 1986, the place of Arlene in Davao was attacked by the rebels. Mercedes, shocked and
saddened about this development 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.
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 which contains among others her intention of making the said property available to her kins as well
as its fruits in the condition that they should maintain an atmosphere of cooperation, live in harmony and
avoid bickering one another.
When petitioner retired in 1993, she lived with the family with Arlene, however, their relation became
sour because members of the Pernes family were impervious to her suggestions and attempts to change
certain practices concerning health and sanitation within their compound.
Deciding for petitioner, the lupon apparently ordered the Pernes family to vacate petitioners 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. Administrative were charge
against the spouses but it did not prosper.
August 3, 1998, petitioner filed with MTCC an unlawful detainer suit against 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 petitioners 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 ruled in petitioners favor.
MTCC Decision:
The respondent spouses, although builders in good faith vis--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. The
respondents continued possession of the premises turned unlawful upon their receipt of the demand to
vacate, such possession being merely at petitioners tolerance, absence any rental.

Spouses appealed to the RTC of Davao which ruled in favor of the spouses.
RTCs Decision:

Respondents possession of the property in question was not 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.

CA concede the applicability of Articles 448 and 546 of the civil Code to the case but ruled that it is still
premature to apply the same considering that the issue of whether respondents right to possess a
portion of petitioners land had already expired or was already terminated was not yet resolved. 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.

ISSUE: W/N the established relationship between the parties is one of usufruct and W/N the demand made by the
petitioner terminated the respondents right to possess.
HELD: The SC ruled in favor of 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
petitioners kin.
The Court, however, cannot go along with the CAs 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 anothers 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.
As to whether or not the demand terminated the respondents right to possess.
It is undisputed that petitioner expressly authorized respondents to 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.

However, the stipulation in the contract is only of the ways of terminating the 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.
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." 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.
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.
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. 15 The respondents may, however, remove or destroy
the improvements they may have introduced thereon without damaging the petitioners property.

G.R. No. 107132 October 8, 1999

G.R. No. 108472 October 8, 1999

Jose Hemedes, father of Maxima Hemedes and Enrique D. Hemedes was the owner of an unregistered
parcel of land, identified as Lot No. 6, plan Psu-111331, w/ area of 21,773 square meters, situated in Sala,
Cabuyao, Laguna.
On March 22, 1947 Jose Hemedes executed a document entitled "Donation Inter Vivos With Resolutory
Conditions" whereby he conveyed ownership over the subject land, together with all its improvements,
in favor of his third wife, Justa Kausapin, subject to the following resolutory conditions:
(a) Upon the death or remarriage of the DONEE, the title to the property donated shall revert to any
of the children, or their heirs, of the DONOR expressly designated by the DONEE in a public
document conveying the property to the latter; or
(b) In absence of such an express designation made by the DONEE before her death or remarriage
contained in a public instrument as above provided, the title to the property shall automatically
revert to the legal heirs of the DONOR in common.

Pursuant to the first condition above mentioned, Justa Kausapin executed on September 27, 1960 a
"Deed of Conveyance of Unregistered Real Property by Reversion" conveying to Maxima Hemedes the
subject property under the terms that ownership is thus transferred to her but the enjoyment and
possession will remain to Justa during her lifetime or widowhood until her death.
Maxima, thereafter was able to obtain an OCT of the parcel of land with the annotation at the back of the
title which states that "Justa Kausapin shall have the usufructuary rights over the parcel of land herein
described during her lifetime or widowhood."
Maxima executed a real mortgage with the R and B Insurance for security of their P6,000 loan. They failed
to pay the said loan, prompting the foreclosure of the property. R and B Insurance was the highest bidder,
and since Maxima failed to redeem the property. R and B was able to consolidate title in its name.
Meanwhile, it turned out that Justa executed another Kasunduan, this time in favor of Enrique
conveying the same land by virtue of the document executed by Jose.
After the conveyance, Enrique performed acts of ownership by paying realty taxes and registration in the
Ministry of Agrarian Reform Office.
He later sold the land in favor of Dominium Realty and denied having conveyed the said land to Maxima.
Dominium later leased the property to Asia Brewery, its sister company who immediately built
warehouses on the said land.
Upon learning such, Maxima, R and B and Justa all wrote a letter to Asia Brewery each asserting their
ownership over the land. Maxima even denied having mortgaged the property to R and B Insurance.

Dominium and Enrique D. Hemedes filed a complaint with the Court of First Instance of Binan, Laguna for
the annulment of TCT No. 41985 issued in favor of R & B Insurance and/or the reconveyance to Dominium
of the subject property.
The complaint alleged that Dominium was the absolute owner and that Justa never conveyed the said
land to Maxima and had no knowledge of the registration proceedings initiated by Maxima.
The RTC ruled in favor of Dominium and Enrique. CA affirmed in toto the decision of the RTC.

ISSUE: Which of the two conveyances by Justa Kausapin, the first in favor of Maxima Hemedes and the second in
favor of Enrique D. Hemedes, effectively transferred ownership over the subject land and W/N a real property
maybe mortgaged despite the encumbrance effected by usufruct annotated to it.
HELD: The court ruled in favor of Maxima and upheld the validity of mortgaged in favor of R and B Insurance.
Justa and Enrique argues that Art. 1332 should be applied because the said document was executed in English,
while Justa cannot read and write and therefore could not have validly understood the contents of the said
Maxima, on the other hand, aver that Justa is biased since she is entirely dependent to Enrique for her
sustainability and therefore her giving of statement is done only in favor of Enrique.
She also claims that Art. 1332 cannot be made applicable since her claim of ownership is not anchored on the
Deed of Conveyance but rather on the OCT.
The Court finds for Maxima because Justa and Enrique only made a mere denial to repudiate the said contract,
between a notarized public document and a mere denial, it is the former which should be given more credence.
Also, her insistent refusal to give her thumb mark for comparison taints a doubt as to their claim.
Furthermore, Justa Kausapin's repudiation of the deed of conveyance is misplaced for there are strong indications
that she is a biased witness. The trial court found that Justa Kausapin was dependent upon Enrique D. Hemedes for
financial assistance.
A witness is said to be biased when his relation to the cause or to the parties is such that he has an incentive to
exaggerate or give false color to his statements, or to suppress or to pervert the truth, or to state what is false. At
the time the present case was filed in the trial court in 1981, Justa Kausapin was already 80 years old, suffering
from worsening physical infirmities and completely dependent upon her stepson Enrique D. Hemedes for support.
It is apparent that Enrique D. Hemedes could easily have influenced his aging stepmother to donate the subject
property to him.
Finally, public respondent was in error when it sustained the trial court's decision to nullify the "Deed of
Conveyance of Unregistered Real Property by Reversion" for failure of Maxima Hemedes to comply with article
1332 of the Civil Code, which states:
When one of the parties is unable to read, or if the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have
been fully explained to the former.
Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his illiteracy,
ignorance, mental weakness or other handicap. This article contemplates a situation where in a contract has been
entered into, but the consent of one of the parties is vitiated by mistake or fraud committed by the other
contracting party.

In this case, Justa Kausapin disclaims any knowledge of the "Deed of Conveyance of Unregistered Real Property by
Reversion" in favor of Maxima Hemedes. In fact, she asserts that it was only during the hearing conducted on
December 7, 1981 before the trial court that she first caught a glimpse of the deed of conveyance and thus, she
could not have possibly affixed her thumbmark thereto.
It is private respondents' own allegations which render article 1332 inapplicable for it is useless to determine
whether or not Justa Kausapin was induced to execute said deed of conveyance by means of fraud employed by
Maxima Hemedes, who allegedly took advantage of the fact that the former could not understand English, when
Justa Kausapin denies even having seen the document before the present case was initiated in 1981.
In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly rule that Enrique D.
Hemedes and his transferee, Dominium, did not acquire any rights over the subject property. Justa Kausapin
sought to transfer to her stepson exactly what she had earlier transferred to Maxima Hemedes the ownership of
the subject property pursuant to the first condition stipulated in the deed of donation executed by her husband.
Thus, the donation in favor of Enrique D. Hemedes is null and void for the purported object thereof did not exist at
the time of the transfer, having already been transferred to his sister. 30 Similarly, the sale of the subject property
by Enrique D. Hemedes to Dominium is also a nullity for the latter cannot acquire more rights than its predecessorin-interest and is definitely not an innocent purchaser for value since Enrique D. Hemedes did not present any
certificate of title upon which it relied.
We come now to the question of whether or not R & B Insurance should be considered an innocent purchaser of
the land in question.
We sustain petitioner R & B Insurance's claim that it is entitled to the protection of a mortgagee in good faith.
It is a well-established principle that every person dealing with registered land may safely rely on the correctness
of the certificate of title issued and the law will in no way oblige him to go behind the certificate to determine the
condition of the property. 36 An innocent purchaser for value 37 is one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair price for the same
at the time of such purchase or before he has notice of the claim of another person.
The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes' OCT dose not impose
upon R & B Insurance the obligation to investigate the validity of its mortgagor's title. Usufruct gives a right to
enjoy the property of another with the obligation of preserving its form and substance. 39 The usufructuary is
entitled to all the natural, industrial and civil fruits of the property 40 and may personally enjoy the thing in
usufruct, lease it to another, or alienate his right of usufruct, even by a gratuitous title, but all the contracts he may
enter into as such usufructuary shall terminate upon the expiration of the usufruct.
Clearly, only the jus utendi and jus fruendi over the property is transferred to the usufructuary. The owner of the
property maintains the jus disponendi or the power to alienate, encumber, transform, and even destroy the same.
43 This right is embodied in the Civil Code, which provides that the owner of property the usufruct of which is held
by another, may alienate it, although he cannot alter the property's form or substance, or do anything which may
be prejudicial to the usufructuary.
There is no doubt that the owner may validly mortgage the property in favor of a third person and the law
provides that, in such a case, the usufructuary shall not be obliged to pay the debt of the mortgagor, and should
the immovable be attached or sold judicially for the payment of the debt, the owner shall be liable to the
usufructuary for whatever the latter may lose by reason thereof.
Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is not sufficient cause to
require R & B Insurance to investigate Maxima Hemedes' title, contrary to public respondent's ruling, for the
reason that Maxima Hemedes' ownership over the property remained unimpaired despite such encumbrance. R &
B Insurance had a right to rely on the certificate of title and was not in bad faith in accepting the property as a
security for the loan it extended to Maxima Hemedes.

Being an innocent mortgagee for value, R & B Insurance validly acquired ownership over the property, subject only
to the usufructuary rights of Justa Kausapin thereto, as this encumbrance was properly annotated upon its
certificate of title.

G.R. No. L-1592 September 20, 1949

In the estate of E.M. Bachrach, deceased. MARY MCDONALD BACHRACH, petitioner-appellee, vs. SOPHIE M.

In testate proceedings, civil case No. 51955 of the Court of First Instance of Manila, the will of E. M.
Bachrach, who died on September 28, 1937, provided for the distribution of the considerable property
which he had left. The provisions of the will which are important in this case are contained in the sixth and
eighth paragraphs which read 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 such usufruct and use or spend
such fruits as she may in any manner wish.
Eighth: It is my wish that upon the death of my beloved wife, Mary McDonald Bachrach, all my estate,
personal, real and otherwise, and all the fruits and usufruct thereof which during her life pertained to
her, shall be divided as follows:
One-half thereof shall be given to such charitable hospitals in the Philippines as she may
designate; in case she fails to designate, then said sum shall be given to the Chief Executive
of these Islands who shall distribute it, share and share alike to all charitable hospitals in the
Philippines excluding those belonging to the governments of the Philippines or of the United
One-half thereof shall be divided, share and share alike by and between my legal heirs, to
the exclusion of my brothers.

The widow Mary McDonald Bachrach as administratrix and executrix had been administering the property
left by her deceased husband and enjoying the usufruct thereof.
The other heirs Sophie M. Seifert, Ginda M. Skundina, Elisa Elianoff and Annie Bachrach Levine on
September 14, 1940, filed a petition, agreed to by usufructuary Mary McDonald Bachrach, and the
Solicitor General representing the Government of the Philippines, asking that the administratrix "be
authorized to pay your petitioners from and after July 1, 1940, and until they receive their share of the
estate left by the deceased E.M. Bachrach upon the death of his widow, a monthly allowance of P500,
P250, P250, and P250, respectively, and the additional sum of P3,000 to the heir Sophie M. Seifert, who is
in poor health, the said allowances to be deducted from your petitioners' share of the estate of the
deceased E.M. Bachrach upon the death of the widow."
CFI granted the petition.
From July 1, 1940 to December 31, 1941, the administratrix made the payments as ordered, having paid
the total amount of P40,250. Payments during the Japanese occupation which would have amounted to
P32,500, was suspended.
Then payments were resumed from August, 1945 to January, 1947. Thereafter, the executrix declined to
make further payments.
The heirs petitioned the lower court for a writ of execution, ordering the administratrix to pay the
allowances for February, 1947 and those in arrears for the period comprising from January 1, 1942 to July
31, 1945.
This petition was denied and the heirs filed a petition for mandamus in the Supreme Court under G. R. No.
L-1379. 1 The petition for mandamus was granted by this Court and the lower court was ordered to
proceed in the execution of its order of October 2, 1940 and to issue the proper writ.

In the meantime, the administratrix Mary McDonald Bachrach, filed in the same case No. 51955 in the
Court of First Instance of Manila a petition on February 19, 1947, recommending the liquidation of the
assets of the estate of her deceased husband destined for charity because due to the havoc and miseries
brought about by the last war, the charitable institutions to be benefited badly needed the property
bequeathed to them under the will.
In another petition by the same administratrix Mary McDonald filed on February 18, 1947, she alleged
that under the order of the court of October 2, 1940, she had already paid to the heirs P40,250; that
besides that amount the heirs were demanding the amount of P32,500 representing the allowances that
had accrued during the Japanese occupation while the estate was financially and economically prostrate;
that the allowances paid to said heirs were taken from the fruits and income of the estate which belong
exclusively to her as a usufructuary, that is to say, that the allowances paid to the heirs were advances
from her personal funds; and that unless the heirs gave sufficient security for the protection of the
administratrix, the of the property corresponding to the heirs which consists mainly of shares of stock,
when sold later, may not be sufficient to reimburse her estate after her death for the allowances made or
given to the heirs from her personal funds.
On the basis of said allegations, the administratrix prayed the court that she be relieved from the
obligation to pay the heirs the monthly allowances ordered by the court in its order of October 2, 1940,
and in the alternative, in the event that the court ordered her to continue the payments of said
allowances, that she be authorized to sell as much of the assets of the destined for the instituted heirs
as may be necessary to enable her to continue the payment of said allowances.

ISSUE: W/N Mary Bachrach may validly liquidate the of the assets of the heirs to answer for their allowance.
HELD: The answer is in the negative.
Our first impression was that the appellants had no valid reason for objecting to the sale of the of the estate
adjudicated to them because in that way they would receive their shares earlier; furthermore, that the
administratrix was warranted in asking for the sale of said of the property adjudicated to the heirs or as much
thereof as was sufficient to reimburse for the allowances being paid by her to the heirs from her personal funds or
from the fruit of the said which, as a usufructuary, be longed to her.
Upon a closer scrutiny of the record however, not only of this case (G. R. No. L-1592) but also of G. R. No. L-1379 of
which we take judicial notice, for which reason, said last case was cited and referred to for purposes of background
so as to give a clear understanding of the facts in this case, we find that the allowance being paid to the heirs are
really not paid from the personal funds of the administratrix but from the cash corresponding to the of the
estate adjudicated to the heirs, which cash, is deposited in the bank.
According to the decision of the Supreme Court in the mandamuscase (G. R. No. L-1379) promulgated on
December 19, 1947, the administratrix had in her possession the sum of P351,116.91 which has already been
adjudicated to and belongs, although pro indiviso, to the heirs of the deceased E. M. Bachrach and that
furthermore, the monthly allowances being paid to the heirs or due them should be paid from this sum and not
from the personal funds of the administratrix Mary McDonald Bachrach.
Furthermore, the very order of the lower court of October 2, 1940, authorizing the administratrix to pay to the
heirs the monthly allowances already mentioned, stipulated in its fourth paragraph that said allowances should be
taken from the properties to be turned over to the heirs of the deceased E. M. Bachrach and shall be deducted
from the share of said heirs upon the death of the widow..
In the opinion of this Court, the cash in the possession of the administratrix corresponding to the of the estate
adjudicated to the heirs is sufficient for the monthly allowances being paid to the heirs and that there is no
necessity for the sale of the of the estate corresponding to them.

The main objection to the heirs to the sale of of the estate adjudicated to them, which besides the cash
already mentioned, consist mostly of shares of stock, is that said shares if sold now may not command a good price
and that furthermore said heirs prefer to keep said shares intact as long as there is no real necessity for their sale.
Of course, once said cash in the hands of the administratrix, corresponding to the heirs is exhausted because of the
payment of the allowances made to the heirs, some other arrangements might be necessary.
The administratrix would then have a right and reason to refuse the payment of said allowances from her said
personal funds or from the fruits of the estate, which as a usufructuary, belong to her during her lifetime. But, until
that point is reached, we see no valid reason for ordering the sale of the of the estate belonging to the heirs over
their objection.

G.R. No. 45534 JOSEFA RIZAL MERCADO, ET AL., plaintiffs-appellants, vs. ALFREDO HIDALGO RIZAL, defendantappellee

The properties left by the deceased Paciano Rizal y Mercado belonged, in usufruct, to nine heirs and, in
naked ownership, to seven others. The plaintiffs are two of the nine usufructuaries and the defendant is
one of the naked owners.
In 1932, 1933 and 1934, the amount of P6,503.80 was paid for the tax of these lands. Of this amount the
naked owners made the plaintiffs pay P1,445.29, or P722.64 each, representing one-ninth of the taxes
paid during the aforesaid years.
As the plaintiffs were not agreeable to this payment, because they were mere usufructuaries and they
contend that the duty devolves upon the naked owners, this amount was deducted from the products
corresponding to them and applied to the payment of land tax.
The plaintiff alleged that, the naked owners being the ones under a duty to pay the tax for the lands, they
should recover the amount which was deducted from their share on the fruits and applied, against their
will, to the payment of the tax. The naked owners, with the exception of ordered.
The defendant, agreed and paid to each of the plaintiffs sum of P206.47, which is one-seventh of the
P1,445.29 deducted from the products of the land corresponding to the plaintiffs.
The present action was brought to compel the defendant to pay also to the plaintiffs the amount of
A demurrer was interposed to the complaint for failure to allege facts sufficient to constitute a cause of
action. The court sustained the demurrer on the ground that the action is premature under article 505 of
the Civil Code providing:
Any taxes which may be imposed directly upon the capital, during the usufruct, shall be chargeable to
the owner.
If paid the latter, the usufructuary shall pay him the proper interest on any sums he may have
disbursed by reason thereof; if the usufructuary should advance the amounts of such taxes he shall
recover them upon the expiration of the usufruct.
This ruling of the trial court is erroneous.

ISSUE: W/N it is rightful that the taxes be paid by the usufructuary.

HELD: Negative.

Pursuant to the aforequoted provision, the tax directly burdens the capital, that is, the real value of the
property and should be paid by the owner (Ong Lengco vs. Monroy, G.R. No. 19411, July 18, 1923). It is
contended, however, that under the second paragraph of the aforequoted article, if the usufructuary
should pay the tax, he would be entitled to reimbursement for the amount thereof only upon the
expiration of the usufruct, and the usufruct being still afoot, it is premature for the plaintiffs, as
usufructuaries who advanced the payment of the tax, to bring the action for the recovery of what they
paid. There is, however, no basis for this reasoning.
The plaintiffs did not pay the tax. They objected to this payment. They did not consent to the deduction
thereof from their share in the products, and much less to the application thereof to this payment which
they believe they are not bound to make. In fact they did not make the payment; the naked owners were
the ones who made it without their consent and with money belonging to them as their share of the fruits
coming to them in their capacity as usufructuaries.
The plaintiffs, in claiming the amount of P206.47, do not rely on paragraph 2 of article 505 of the Civil
Code above quoted, for having paid the tax on the lands, but on the first paragraph thereof because it is
their contention that, as usufructuaries, they are not the ones called upon to make this payment.

[G.R. No. L-9023. November 13, 1956.]

SURIGAO, Defendant-Appellant.

Bislig Bay Lumber Co., Inc. is a timber concessionaire of a portion of public forest located in the provinces
of Agusan and Surigao. With a view to developing and exploiting its concession, the company constructed
at its expense a road from the barrio Mangagoy into the area of the concession in Surigao, with a length
of approximately 5.3 kilometers, a portion of which, or about 580 linear meters, is on a private property
of the company.
The expenses incurred by the company in the construction of said road amounted to P113,370, upon
which the provincial assessor of Surigao assessed a tax in the amount of P669.33.
Of this amount, the sum of P595.92 corresponds to the road constructed within the area of the
concession. This was paid under protest. Later, the company filed an action for its refund in the Court of
First Instance of Manila alleging that the road is not subject to tax.
Defendant filed a motion to dismiss on two grounds (1) that the venue is improperly laid, and (2) that the
complaint states no cause of action. The motion was denied.
Thereafter, Defendant filed its answer invoking the same defenses it set up in its motions to dismiss. In
the meantime, Congress approved Republic Act No. 1125 creating the Court of Tax Appeals, whereupon
Plaintiff moved that the case be forwarded to the latter court as required by said Act.
This motion however, was denied and, after due trial, the court rendered decision ordering Defendant to
refund to Plaintiff the amount claimed in the complaint. This is an appeal from said decision.

ISSUE: W/N Bislig should pay the taxes levied upon the road that they constructed.
It is the theory of Appellant that, in as much as the road was constructed by Appellee for its own use and benefit it
is subject to real tax even if it was constructed on a public land. On the other hand, it is the theory of Appellee that
said road is exempt from real tax because (1) the road belongs to the national government by right of accession,
(2) the road cannot be removed or separated from the land on which it is constructed and so it is part and parcel of
the public land, and (3), according to the evidence, the road was built not only for the use and benefit of Appellee
but also of the public in general.
We are inclined to uphold the theory of Appellee. In the first place, it cannot be disputed that the ownership of the
road that was constructed by Appellee belongs to the government by right accession not only because it is
inherently incorporated or attached to the timber land leased to Appellee but also because upon the expiration of
the concession, said road would ultimately pass to the national government
In the second place, while the road was constructed by Appellee primarily for its use and benefit, the privilege is
not exclusive, for, under the lease contract entered into by the Appellee and the government and by public in by
the general. Thus, under said lease contract, Appellee cannot prevent the use of portions, of the concession for
homesteading purposes (clause 12). It is also in duty bound to allow the free use of forest products within the
concession for the personal use of individuals residing in or within the vicinity of the land (clause 13).
The government has reserved the right to set aside communal forest for the use of the inhabitants of the region,
and to set forest reserves for public uses (clause 14). It can also grant licenses covering any portion of the territory
for the cutting and extraction of timber to be used in public works, for mining purposes, or for the construction of
railway lines (clause 15). And, if it so desires, it can provide for logging railroad, cable ways timber chute os slide,
telephone lines, pumping stations log landings, and other rights of way for the use of forest licensees,
concessionaires, permittees, or other lessees (clause 26).

In other words, the government has practically reserved the rights to use the road to promote its varied activities.
Since, as above shown, the road in question cannot be considered as an improvement which belongs to Appellee,
although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning
of section 2 of Commonwealth Act No. 470.
It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not
by a usufructuary Appellee is but a partial usufructuary of the road in question.
As to the Jurisdiction
It should have been the newly created Court of Tax Appeals that should have the jurisdiction of the case. Section
22 of Republic Act No. 1125 should be interpreted in such a manner as to make it harmonize with section 7 of the
same Act and that the primordial purpose behind the approval of said Act by Congress is to give to the Court of Tax
Appeals exclusive appellate jurisdiction over all tax, customs, and real estate assessment cases throughout the
Philippines and to hear and decide them as soon as possible. But nevertheless, the Court already took up the case,
since it may eventually land to their jurisdiction once appeal from the decision of the said court is made.

PLACIDO L. LUMBAY, in his capacity as Provincial Assessor of Zamboanga del Sur, Petitioners, v. SAMAR MINING

Samar is a domestic corporation engaged in the mining industry. As the mining claims and the mill of
Samar are located inland and at a great distance from the loading point or pier site, it decided to
construct a gravel road as a convenient means of hauling its ores from the mine site at Buug to the pier
area at Pamintayan, Zamboanga del Sur;
that as an initial step in the construction of a 42-kilometer road which would traverse public lands Samar,
in 1958 and 1959, filed with the Bureau of Lands and the Bureau of Forestry miscellaneous lease
applications for a road right of way on lands under the jurisdiction of said bureaus where the proposed
road would traverse;
that having been given temporary permit to occupy and use the lands applied for by it, said respondent
constructed a road thereon, known as the Samico road; that although the gravel road was finished in
1959, and had since then been used by the respondent in hauling its iron from its mine site to the pier
area, and that its lease applications were approved on October 7, 1965, the execution of the
corresponding lease contracts were held in abeyance even up to the time this case was brought to the
Court of Tax Appeals.
On June 5, 1964, Samar received a letter from the Provincial Assessor of Zamboanga del Sur assessing the
13.8 kilometer road 2 constructed by it for real estate tax purposes in the total sum of P1,117,900.00.
On July 14, 1964, Samar appealed to the Board of Assessment Appeals of Zamboanga del Sur, (hereinafter
referred to as Board, for short), contesting the validity of the assessment upon the ground that the road
having been constructed entirely on a public land cannot be considered an improvement subject to tax
within the meaning of section 2 of Commonwealth Act 470, and invoking further the decision of this Court
in the case of Bislig Bay Lumber Company, Inc. v. The Provincial Government of Surigao, G.R. No. L-9023,
promulgated on November 13, 1956.
The Board denied the said petition and even its subsequent motion for reconsideration and moved for the
immediate enforceability of the decision.
Samar elevated the case to the Court of Tax Appeals. On June 28, 1967, the Court of Tax Appeals ruled
that it had jurisdiction to entertain the appeal and then reversed the resolution of the Board.
The Court of Tax Appeals ruled that since the road is constructed on public lands such that it is an integral
part of the land and not an independent improvement thereon, and that upon the termination of the
lease the road as an improvement will automatically be owned by the national government, Samar should
be exempt from paying the real estate tax assessed against it.

ISSUE: W/N respondent Samar should pay realty tax on the assessed value of the road it constructed on alienable
or disposable public lands that are leased to it by the government.

HELD: Samar is exempted from payment.

Petitioners maintain that the road is an improvement and, therefore, taxable under Section 2 of the Assessment
Law (Commonwealth Act No. 470.
"Sec. 2. Incidence of real property tax. Except in chartered cities, there shall be levied, assessed, and
collected, an annual, ad valorem tax on real property including land, buildings, machinery, and other
improvements not hereinafter specifically exempted."
There is no question that the road constructed by respondent Samar on the public lands leased to it by the
government is an improvement. But as to whether the same is taxable under the aforequoted provision of the
Assessment Law, this question has already been answered in the negative by this Court.

It is contended by petitioners that the ruling in the Bislig case is not applicable in the present case because if the
concessionaire in the Bislig case was exempt from paying the realty tax it was because the road in that case was
constructed on a timberland or on an indisposable public land, while in the instant case what is being taxed is 13.8
kilometer portion of the road traversing alienable public lands.
This contention has no merit. The pronouncement in the Bislig case contains no hint whatsoever that the road was
not subject to tax because it was constructed on inalienable public lands. What is emphasized in the lease is that
the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed
and the improvement is the property of the government by right of accession. Under Section 3(a) of the
Assessment Law (Com. Act 470), all properties owned by the government, without any distinction, are exempt
from taxation.