G.R. No.

152809 August 3, 2006

MERCEDES MORALIDAD vs SPS DIOSDADO PERNES and ARLENE PERNES

This is a petition for review on certiorari under Rule 45 to nullify and set aside the following
issuances of the CA, to wit:
1. Decision dated September 27, 2001, affirming an earlier decision of the RTC (RTC) of Davao
City which reversed that of the MTC 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, denying petitioners 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 TCT No T-123125 of the ROD 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, 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. The document reads:

I, MERCEDES VIA 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.

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. 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 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.
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 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, resolving the ejectment suit in petitioners favor, declared that 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. To the MTCC,
respondents continued possession of the premises turned unlawful upon their receipt of the
demand to vacate, such possession being merely at petitioners tolerance, and sans any rental.
Accordingly, in its decision dated November 17, 1999, 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 a month from the filing of this complaint until they vacate
premises;
c) Sentencing defendants to pay the sum of P120, 000 as attorneys 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.
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 petitioners 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, attorneys 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 petitioners 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 petitioners complaint for Unlawful Detainer is DISMISSED.
SO ORDERED.
With the CAs denial of her motion for reconsideration in its Resolution of February 28, 2002,
petitioner is now before this Court raising the following issues:
1. WHETHER OR NOT THE CA ERRED IN DISMISSING THE UNLAWFUL DETAINER CASE FOR
BEING PREMATURE WHICH DECISION IS NOT IN ACCORDANCE WITH LAW AND
JURISPRUDENCE.
2. WHETHER OR NOT THE CA ERRED IN APPLYING ARTICLES 448 AND 546 AND THE PROVISIONS
OF THE CODE ON USUFRUCT INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE.

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 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, with the owner retaining the jus disponendi or the power to alienate the same.
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 petitioners
"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 petitioners other kins, the right to enjoy the
fruits thereof. We have no quarrel, therefore, with the CAs 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, petitioners 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
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
petitioners 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. 12
We disagree with the CAs 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.

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 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." 13 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. (Montinola vs. Bantug, 71
Phil. 449)
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. 15 The
respondents may, however, remove or destroy the improvements they may have introduced
thereon without damaging the petitioners 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 MODIFICATION that all of
respondents counterclaims are dismissed, including their claims for reimbursement of useful and
necessary expenses.

[G.R No L-3691 November 21, 1951]

JACINTO DEL SAZ OROZCO y MORTERA and MARIA PAZ ALCANTARA, Plaintiffs-Appellants, versus
SALVADOR ARANETA, FRANCISCO DEL SAZ OROZCO Y LOPEZ, DOLORES DEL SAZ OROZCO Y LOPEZ,
and the minors FELISA, EUGENIO, ANTONIO, JOSE, MARIA Y CARLOS, all surnamed DEL SAZ
OROZCO Y LOPEZ whose natural guardian is DOA CONCEPCION LOPEZ VDA. DE DEL SAZ
OROZCO, Defendants-Appellees.

Eugenio del Saz Orozco died on February 7, 1922, leaving a will which he had executed on March 5,
1921, and was afterwards duly admitted to probate. The pertinent clause of that will provided that
certain properties should be given in life usufruct to his son Jacinto del Saz Orozco y Mortera, with
the obligation on his part to preserve said properties in favor of the other heirs who were declared
the naked owners thereof. Among these properties were 5,714 shares of stock of the Benguet
Consolidated Mining Company and 94 shares of stock of the Manila Electric Company, according to
the project of partition executed pursuant to said will and duly approved by the court.

On September 11, 1934, the Benguet Consolidated Mining Company declared and distributed stock
dividends out of its surplus profits, the plaintiff receiving his proportionate portion of 11,428 shares.
On November 17, 1939, said Mining Company again declared stock dividends out of its surplus
profits, of which the plaintiff received 17,142 shares, making a total of 28,570 shares.
The question at issue is whether the stock dividend is part of the capital which should be preserved
in favor of the owners or an income or fruits of the capital which should be given to and enjoyed by
the life usufructuary, the plaintiff herein, as his own exclusive property.

The same question was raised in the Matter of the Testate Estate of Emil Maurice Bachrach, G. R.
No. L-2659 the decision of which was promulgated on October 12, 1950. In that case, the question
raised was stated as follows:

"Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the
corpus of the estate, which pertains to the remainderman? That is the question raised in this
appeal."

Several thousand shares of stock in a corporation was, by will, given by the deceased to one of his
heirs in life usufruct, with the obligation to preserve paid shares in favor of the other heirs who were
declared the naked owners thereof. Later, the corporation declared stock dividends and the
usufructuary received, as his proportionate portion, over 28,000 additional shares of stock. "Is a
stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the
corpus of the estate, which pertains to the remainderman?" Held: Justice Ozaeta, with the
unanimous concurrence of the other members of this Court, ruled that a dividend, whether in the
form of cash or stock, is income and, consequently, should go to the usufructuary, taking into
consideration that a stock dividend as well as a cash dividend can be declared only out of profits of
the corporation, for if it were declared out of the capital it would be a serious violation of the law.

For the reasons sustaining the doctrine, we refer to that recent decision.

The appellees attempt to differentiate the present case from that case, contending that, while the
doctrine in that case effected a just and equitable distribution, the application of it in the present
case would cause an injustice, for, quoting Justice Holmes, "abstract propositions do not decide
concrete cases." We have examined the two cases carefully and we have not perceived any
difference which would justify a reversal or modification of the doctrine in the Bachrach case.

One of the differences pointed out is that by the declaration of stock dividends the voting power of
the original shares of stock is considerably diminished, and, if the stock dividends are not given to
the remainderman, the voting power of the latter would be greatly impaired. Bearing in mind that
the number of shares of stock of the Benguet Consolidated Mining Company is so large, the
diminution of the voting power of the original shares of stock in this case cannot possibly affect or
influence the control of the policies of the corporation which is vested in the owners of the great
block of shares. This would not be a sufficient reason for modifying the doctrine of the Bachrach
case. These remarks are made in answer to the argument of the appellees in this particular case, but
they do not imply that if the diminution of the voting power were considerable the doctrine should
be modified.

With regard to the sum of P3,428.40 which is alleged to have been received by the plaintiff from the
Benguet Consolidated Mining Company, as a result of the reduction of its capital in January, 1926, it
appears that it has not been proven that the plaintiff has received said sum; on the contrary, it was
denied by him as soon as he arrived in the Philippines from Spain. There is no ground, therefore, for
ordering the plaintiff to deliver such sum to the defendants.

In view of the foregoing, the judgment appealed from is reversed, and it is declared that the stock
dividends amounting to 28,570 shares, above mentioned, belongs to the plaintiff-appellant Jacinto
del Saz Orozco y Mortera exclusively and in absolute ownership. Without costs. It is so ordered.

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

BISLIG BAY LUMBER COMPANY. INC., Plaintiff-Appellee, vs. THE PROVINCIAL GOVERNMENT OF
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; chan roblesvirtualawlibrarybut this 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 Plaintiffthe amount
claimed in the complaint. This is an appeal from said decision.
The first error assigned refers to the jurisdiction of the lower court. It is contended that since the
present case involves an assessment of land tax the determination of which comes under the
exclusive jurisdiction of the Court of Tax Appeals under Republic Act No. 1125, the lower court erred
in assuming jurisdiction over the case.
It is true that under section 22 of said Act the only cases that are required to be certified and
remanded to the Court of Tax Appeals which upon its approval are pending determination before a
court of first instance are apparently confined to those involving disputed assessment of internal
revenue taxes or custom duties, and the present case admittedly refers to an assessment of land tax,
but it does not mean that because of that apparent omission or oversight the instant case should not
be remanded to the Court of Tax Appeals, for in interpreting the context of the section above
adverted to we should not ignore section 7 of the same act which defines the extent and scope of
the jurisdiction of said court. As we have held in a recent 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
through out the Philippines and to hear and decide them as soon as possible (Ollada vs. The Court
of Tax Appeals, 99 Phil., 604). Considering this interpretation of the law, it logically follows that the
lower court did not act properly in denying the motion to remand the instant case to the Court of
Tax Appeals.
Considering, however, that it would be more expeditious to decide this case now than to remand it
to the Court of Tax Appeals because, even if this course is taken, it may ultimately be appealed to
this court, we will now proceed to discuss the case on the merits.
The Tax in question has been assessed under section 2 of Commonwealth Act No. 470 which
provides:chanroblesvirtuallawlibrary
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.
Note that said section authorizes the levy of real tax not only on lands, buildings, or machinery that
may be erected thereon, but also on any other improvements, and considering the road constructed
by Appellee on the timber concession granted to it as an improvement, Appellantassessed the tax
now in dispute upon the authority of the above provision of the law.
It is the theory of Appellant that, inasmuch 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 Appelleebut 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 (Articles 440 and 445, new Civil Code; chan
roblesvirtualawlibraryTabotabo vs. Molero, 22 Phil., 418). 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.
We are not oblivious of the fact that the present assessment was made by Appellant on the strength
of an opinion rendered by the Secretary of Justice, but we find that the same is predicated on
authorities which are not in point, for they refer to improvements that belong to the lessee although
constructed on lands belonging to the government. 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 (Mercado vs.
Rizal, 67 Phil., 608; chan roblesvirtualawlibraryArticle 597, new Civil Code). Appellee is but a partial
usufructuary of the road in question.
G.R. No. 107132 October 8, 1999
MAXIMA HEMEDES vs
CA, DOMINIUM REALTY AND CONSTRUCTION CORPORATION, ENRIQUE D. HEMEDES and R & B
INSURANCE CORPORATION, respondents.
G.R. No. 108472 October 8, 1999
R & B INSURANCE CORPORATION, petitioner, vs CA, DOMINIUM REALTY AND CONSTRUCTION
CORPORATION, ENRIQUE D. HEMEDES and MAXIMA HEMEDES, respondents.

Assailed in these petitions for review on certiorari is the decision 1 of the eleventh division of the CA
in CA-G.R. CV No. 22010 promulgated on September 11, 1992 affirming in toto the decision of
Branch 24 of the RTC of Laguna in Civil Case No. B-1766 dated February 22, 1989, 2 and the
resolution dated December 29, 1992 denying petitioner R & B Insurance Corporation's (R & B
Insurance) motion for reconsideration. As the factual antecedents and issues are the same, we shall
decide the petitions jointly.
The instant controversy involves a question of ownership over an unregistered parcel of land,
identified as Lot No. 6, plan Psu-111331, with an area of 21,773 square meters, situated in Sala,
Cabuyao, Laguna. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes and
Enrique D. Hemedes. On March 22, 1947 Jose Hemedes executed a document entitled "Donation
Inter Vivos With Resolutory Conditions" 3 whereby he conveyed ownership over the subject land,
together with all its improvements, in favor of his third wife, Justa Kauapin, 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" 4 conveying to Maxima Hemedes
the subject property under the following terms
That the said parcel of land was donated unto me by the said Jose Hemedes, my deceased
husband, in a deed of "DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS" executed
by the donor in my favor, and duly accepted by me on March 22, 1947, before Notary Public
Luis Bella in Cabuyao, Laguna;
That the donation is subject to the resolutory conditions appearing in the said deed of
"DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS," as follows:
(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.
That, wherefore, in virtue of the deed of donation above mentioned and in the exercise of
my right and privilege under the terms of the first resolutory condition therein contained
and hereinabove reproduced, and for and in consideration of my love and affection, I do
hereby by these presents convey, transfer, and deed unto my designee, MAXIMA HEMEDES,
of legal age, married to RAUL RODRIGUEZ, Filipino and resident of No. 15 Acacia Road,
Quezon City, who is one of the children and heirs of my donor, JOSE HEMEDES, the
ownership of, and title to the property hereinabove described, and all rights and interests
therein by reversion under the first resolutory condition in the above deed of donation;
 Except the possession and enjoyment of the said property which shall remain vested in me
during my lifetime, or widowhood and which upon my death or remarriage shall also
automatically revert to, and be transferred to my designee, Maxima Hemedes.
Maxima Hemedes, through her counsel, filed an application for registration and confirmation of title
over the subject unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-941) 0-
198 5 was issued in the name of Maxima Hemedes married to Raul Rodriguez by the RODof Laguna
on June 8, 1962, with the annotation that "Justa Kausapin shall have the usufructuary rights over the
parcel of land herein described during her lifetime or widowhood."
It is claimed by R & B Insurance that on June 2, 1964, Maxima Hemedes and her husband Raul
Rodriguez constituted a real estate mortgage over the subject property in its favor to serve as
security for a loan which they obtained in the amount of P6,000.00. On February 22, 1968, R & B
Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan even
after it became due on August 2, 1964. The land was sold at a public auction on May 3, 1968 with R
& B Insurance as the highest bidder and a certificate of sale was issued by the sheriff in its favor.
Since Maxima Hemedes failed to redeem the property within the redemption period, R & B
Insurance executed an Affidavit of Consolidation dated March 29, 1974 and on May 21, 1975 the
Register of Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of Title
(TCT) No. 41985 in the name of R & B Insurance. The annotation of usufruct in favor of Justa
Kausapin was maintained in the new title. 6
Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin
executed a "Kasunduan" on May 27, 1971 whereby she transferred the same land to her stepson
Enrique D. Hemedes, pursuant to the resolutory condition in the deed of donation executed in her
favor by her late husband Jose Hemedes. Enrique D. Hemedes obtained two declarations of real
property in 1972, and again, in 1974, when the assessed value of the property was raised. Also, he
has been paying the realty taxes on the property from the time Justa Kausapin conveyed the
property to him in 1971 until 1979. In the cadastral survey of Cabuyao, Laguna conducted from
September 8, 1974 to October 10, 1974, the property was assigned Cadastral No. 2990, Cad. 455-D,
Cabuyao Cadastre, in the name of Enrique Hemedes. Enrique Hemedes is also the named owner of
the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna.
On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and Construction
Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit affirming the
conveyance of the subject property in favor of Enrique D. Hemedes as embodied in the "Kasunduan"
dated May 27, 1971, and at the same time denying the conveyance made to Maxima Hemedes.
On May 14, 1981, Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia
Brewery) who, even before the signing of the contract of lease, constructed two warehouses made
of steel and asbestos costing about P10,000,000.00 each. Upon learning of Asia Brewery's
constructions upon the subject property, R & B Insurance sent it a letter on March 16, 1981
informing the former of its ownership of the property as evidenced by TCT No. 41985 issued in its
favor and of its right to appropriate the constructions since Asia Brewery is a builder in bad faith. On
March 27, 1981, a conference was held between R & B Insurance and Asia Brewery but they failed to
arrive at an amicable settlement.1wphi1.nt
On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she
asserted that she is the rightful owner of the subject property by virtue of OCT No. (0-941) 0-198 and
that, as such, she has the right to appropriate Asia Brewery's constructions, to demand its
demolition, or to compel Asia Brewery to purchase the land. In another letter of the same date
addressed to R & B Insurance, Maxima Hemedes denied the execution of any real estate mortgage in
favor of the latter.
On August 27, 1981, Dominium and Enrique D. Hemedes filed a
7
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.
Specifically, the complaint alleged that Dominium was the absolute owner of the subject property by
virtue of the February 28, 1979 deed of sale executed by Enrique D. Hemedes, who in turn obtained
ownership of the land from Justa Kausapin, as evidenced by the "Kasunduan" dated May 27, 1971.
The plaintiffs asserted that Justa Kausapin never transferred the land to Maxima Hemedes and that
Enrique D. Hemedes had no knowledge of the registration proceedings initiated by Maxima
Hemedes.

After considering the merits of the case, the trial court rendered judgment on February 22, 1989 in
favor of plaintiffs Dominium and Enrique D. Hemedes, the dispositive portion of which states
WHEREFORE, judgment is hereby rendered:
(a) Declaring Transfer Certificate of Title No. 41985 of the Register of Deeds of Laguna null and void
and ineffective;
(b) Declaring Dominium Realty and Construction Corporation the absolute owner and possessor of
the parcel of land described in paragraph 3 of the complaint;
(c) Ordering the defendants and all persons acting for and/or under them to respect such ownership
and possession of Dominium Realty and Construction Corporation and to forever desist from
asserting adverse claims thereon nor disturbing such ownership and possession; and
(d) Directing the Register of Deeds of Laguna to cancel said Transfer Certificate of Title No. 41985 in
the name of R & B Insurance Corporation, and in lieu thereof, issue a new transfer certificate of title
in the name of Dominium Realty and Construction Corporation. No pronouncement as to costs and
attorney's fees.

Both R & B Insurance and Maxima Hemedes appealed from the trial court's decision. On September
11, 1992 the CA affirmed the assailed decision in toto and on December 29, 1992, it denied R & B
Insurance's motion for reconsideration. Thus, Maxima Hemedes and R & B Insurance filed their
respective petitions for review with this Court on November 3, 1992 and February 22, 1993,
respectively.
In G.R. No. 107132 9, petitioner Maxima Hemedes makes the following assignment of errors as
regards public respondent's ruling
 1. RESPONDENT CA GRAVELY ERRED IN APPLYING ARTICLE 1332 OF THE NEW CIVIL CODE IN
DECLARING AS SPURIOUS THE DEED OF CONVEYANCE OF UNREGISTERED REAL PROPERTY BY
REVERSION EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF PETITIONER MAXIMA HEMEDES.
2. RESPONDENT CA GRAVELY ERRED IN NOT FINDING AS VOID AND OF NO LEGAL EFFECT THE
"KASUNDUAN" DATED 27 MAY 1971 EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF
RESPONDENT ENRIQUE HEMEDES AND THE SALE OF THE SUBJECT PROPERTY BY
RESPONDENT ENRIQUE HEMEDES IN FAVOR OF RESPONDENT DOMINIUM REALTY AND
CONSTRUCTION CORPORATION.
3. RESPONDENT CA GRAVELY ERRED IN NOT FINDING RESPONDENTS ENRIQUE AND
DOMINIUM IN BAD FAITH
4. RESPONDENT CA GRAVELY ERRED IN DECLARING THAT ORIGINAL CERTIFICATE OF TITLE NO.
(0-941) 0-198 ISSUED IN THE NAME OF PETITIONER MAXIMA HEMEDES NULL AND VOID.
5. RESPONDENT CA ERRED IN NOT FINDING THAT NO LOAN WAS OBTAINED BY PETITIONER
MAXIMA HEMEDES FROM RESPONDENT R & B INSURANCE CORPORATION.
6. RESPONDENT CA ERRED IN NOT FINDING THAT NO REAL ESTATE MORTGAGE OVER THE
SUBJECT PROPERTY WAS EXECUTED BY PETITIONER MAXIMA HEMEDES IN FAVOR OF
RESPONDENT R & B INSURANCE CORPORATION.
7. RESPONDENT CA ERRED IN NOT FINDING THAT THE VALID TITLE COVERING THE SUBJECT
PROPERTY IS THE ORIGINAL CERTIFICATE OF TITLE NO. (0-941) 0-198 IN THE NAME OF
PETITIONER MAXIMA HEMEDES AND NOT THE TRANSFER CERTIFICATE OF TITLE (TCT) NO.
41985 IN THE NAME OF R & B INSURANCE CORPORATION. 10
Meanwhile, in G.R. No. 108472 11, petitioner R & B Insurance assigns almost the same errors, except
with regards to the real estate mortgage allegedly executed by Maxima Hemedes in its favor.
Specifically, R & B Insurance alleges that:
1. RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE 1332 OF THE CIVIL CODE.
2. RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE KASUNDUAN BY
AND BETWEEN JUSTA KAUSAPIN AND ENRIQUE NOTWITHSTANDING THE FACT THAT JUSTA
KAUSAPIN BY WAY OF A DEED OF CONVEYANCE OF UNREGISTERED REAL PROPERTY BY
REVERSION CEDED THE SUBJECT PROPERTY TO MAXIMA SOME ELEVEN (11) YEARS EARLIER.
3. RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE AFFIDAVIT OF
REPUDIATION OF JUSTA KAUSAPIN NOTWITHSTANDING THE FACT THAT SHE IS A BIAS (sic)
WITNESS AND EXECUTED THE SAME SOME TWENTY-ONE (21) YEARS AFTER THE EXECUTION
OF THE DEED OF CONVEYANCE IN FAVOR OF MAXIMA.
4. RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE COMPLAINT OF
ENRIQUE AND DOMINIUM HAS PRESCRIBED AND/OR THAT ENRIQUE AND DOMINIUM WERE
GUILTY OF LACHES.
5. RESPONDENT COURT SERIOUSLY ERRED IN FINDING
R & B AS A MORTGAGEE NOT IN GOOD FAITH.
6. RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE DAMAGES PRAYED FOR BY R
& B IN ITS COUNTERCLAIM AND CROSSCLAIM.
The primary issue to be resolved in these consolidated petitions is 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.
The Register of Deeds of Laguna issued OCT No. (0-941) 0-198 in favor of Maxima Hemedes on the
strength of the "Deed of Conveyance of Unregistered Real Property by Reversion" executed by Justa
Kausapin. Public respondent upheld the trial court's finding that such deed is sham and spurious and
has "no evidentiary value under the law upon which claimant Maxima Hemedes may anchor a valid
claim of ownership over the property." In ruling thus, it gave credence to the April 10, 1981 affidavit
executed by Justa Kausapin repudiating such deed of conveyance in favor of Maxima Hemedes and
affirming the authenticity of the "Kasunduan" in favor of Enrique D. Hemedes. Also, it considered as
pivotal the fact that the deed of conveyance in favor of Maxima Hemedes was in English and that it
was not explained to Justa Kausapin, although she could not read nor understand English; thus,
Maxima Hemedes failed to discharge her burden, pursuant to Article 1332 of the Civil Code, to show
that the terms thereof were fully explained to Justa Kausapin. Public respondent concluded by
holding that the registration of the property on the strength of the spurious deed of conveyance is
null and void and does not confer any right of ownership upon Maxima Hemedes. 13
Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence since she
is obviously a biased witness as it has been shown that she is dependent upon Enrique D. Hemedes
for her daily subsistence, and she was most probably influenced by Enrique D. Hemedes to execute
the "Kasunduan" in his favor. She also refutes the applicability of article 1332. It is her contention
that for such a provision to be applicable, there must be a party seeking to enforce a contract;
however, she is not enforcing the "Deed of Conveyance of Unregistered Real Property by Reversion"
as her basis in claiming ownership, but rather her claim is anchored upon OCT No. (0-941) 0-198
issued in her name, which document can stand independently from the deed of conveyance. Also,
there exist various circumstances which show that Justa Kausapin did in fact execute and understand
the deed of conveyance in favor of Maxima Hemedes. First, the "Donation Intervivos With
Resolutory Conditions" executed by Jose Hemedes in favor of Justa Kausapin was also in English, but
she never alleged that she did not understand such document. Secondly, Justa Kausapin failed to
prove that it was not her thumbmark on the deed of conveyance in favor of Maxima Hemedes and in
fact, both Enrique D. Hemedes and Dominium objected to the request of Maxima Hemedes' counsel
to obtain a specimen thumbmark of Justa Kausapin. 14
Public respondent's finding that the "Deed of Conveyance of Unregistered Real Property By
Reversion" executed by Justa Kausapin in favor of Maxima Hemedes is spurious is not supported by
the factual findings in this case. It is grounded upon the mere denial of the same by Justa Kausapin.
A party to a contract cannot just evade compliance with his contractual obligations by the simple
expedient of denying the execution of such contract. If, after a perfect and binding contract has been
executed between the parties, it occurs to one of them to allege some defect therein as a reason for
annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of
contracts cannot be left to the will of one of the contracting parties. 15
Although a comparison of Justa Kausapin's thumbmark with the thumbmark affixed upon the deed
of conveyance would have easily cleared any doubts as to whether or not the deed was forged, the
records do not show that such evidence was introduced by private respondents and the lower court
decisions do not make mention of any comparison having been made. 16 It is a legal presumption
that evidence willfully suppressed would be adverse if produced. 17 The failure of private
respondents to refute the due execution of the deed of conveyance by making a comparison with
Justa Kausapin's thumbmark necessarily leads one to conclude that she did in fact affix her
thumbmark upon the deed of donation in favor of her stepdaughter.
Moreover, public respondent's reliance upon 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. 18 Justa
Kausapin's own testimony attests to this.

Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for financial support.
The transcripts state as follows:
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. 21 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.
Public respondent should not have given credence to a witness that was obviously biased and partial
to the cause of private respondents. Although it is a well-established rule that the matter of
credibility lies within the province of the trial court, such rule does not apply when the witness'
credibility has been put in serious doubt, such as when there appears on the record some fact or
circumstance of weight and influence, which has been overlooked or the significance of which has
been
misinterpreted. 22
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. 23 This article contemplates a situation
wherein 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. 24 This is apparent from the ordering of
the provisions under Book IV, Title II, Chapter 2, section 1 of the Civil Code, from which article 1332
is taken. Article 1330 states that
A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud
is voidable.
This is immediately followed by provisions explaining what constitutes mistake, violence,
intimidation, undue influence, or fraud sufficient to vitiate consent. 25 In order that mistake may
invalidate consent, it should refer to the substance of the thing which is the object of the contract,
or to those conditions which have principally moved one or both parties to enter into the
contract. 26 Fraud, on the other hand, is present when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to. 27 Clearly, article 1332 assumes that the consent of the contracting party
imputing the mistake or fraud was given, although vitiated, and does not cover a situation where
there is a complete absence of consent.1wphi1.nt
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. 28 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.
It has been held by this Court that ". . . mere preponderance of evidence is not sufficient to
overthrow a certificate of a notary public to the effect that the grantor executed a certain document
and acknowledged the fact of its execution before him. To accomplish this result, the evidence must
be so clear, strong and convincing as to exclude all reasonable controversy as to the falsity of the
certificate, and when the evidence is conflicting, the certificate will be
29
upheld." In the present case, we hold that private respondents have failed to produce clear,
strong, and convincing evidence to overcome the positive value of the "Deed Conveyance of
Unregistered Real Property by Reversion" a notarized document. The mere denial of its execution
by the donor will not suffice for the purpose.
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
predecessor-in-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.
The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his being
designated as owner of the subject property in the cadastral survey of Cabuyao, Laguna and in the
records of the Ministry of Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of
title, which is an absolute and indefeasible evidence of ownership of the property in favor of the
person whose name appears therein. 31 Particularly, with regard to tax declarations and tax receipts,
this Court has held on several occasions that the same do not by themselves conclusively prove title
to land. 32
We come now to the question of whether or not R & B Insurance should be considered an innocent
purchaser of the land in question. At the outset, we note that both the trial court and appellate
court found that Maxima Hemedes did in fact execute a mortgage over the subject property in favor
of R & B Insurance. This finding shall not be disturbed because, as we stated earlier, it is a rule that
the factual findings of the trial court, especially when affirmed by the CA, are entitled to respect, and
should not be disturbed on appeal.
In holding that R & B Insurance is not a mortgagee in good faith, public respondent stated that the
fact that the certificate of title of the subject property indicates upon its face that the same is
subject to an encumbrance, i.e. usufructuary rights in favor of Justa Kausapin during her lifetime or
widowhood, should have prompted R & B Insurance to ". . . investigate further the circumstances
behind this encumbrance on the land in dispute," but which it failed to do. Also, public respondent
considered against R & B Insurance the fact that it made it appear in the mortgage contract that the
land was free from all liens, charges, taxes and encumbrances. 34
R & B Insurance alleges that, contrary to public respondent's ruling, the presence of an encumbrance
on the certificate of title is not reason for the purchaser or a prospective mortgagee to look beyond
the face of the certificate of title. The owner of a parcel of land may still sell the same even though
such land is subject to a usufruct; the buyer's title over the property will simply be restricted by the
rights of the usufructuary. Thus, R & B Insurance accepted the mortgage subject to the usufructuary
rights of Justa Kausapin. Furthermore, even assuming that R & B Insurance was legally obliged to go
beyond the title and search for any hidden defect or inchoate right which could defeat its right
thereto, it would not have discovered anything since the mortgage was entered into in 1964, while
the "Kasunduan" conveying the land to Enrique D. Hemedes was only entered into in 1971 and the
affidavit repudiating the deed of conveyance in favor of Maxima Hemedes was executed by Justa
Kausapin in 1981. 35
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. 38
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. 41
Clearly, only the jus utendi and jus fruendi over the property is transferred to the
42
usufructuary. The owner of the property maintains the jus disponendi or the power to alienate,
encumber, transform, and even destroy the same. 43This 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. 44
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. 45
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.
Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate
of title and investigate the title of its mortgagor, still, it would not have discovered any better rights
in favor of private respondents. Enrique D. Hemedes and Dominium base their claims to the
property upon the "Kasunduan" allegedly executed by Justa Kausapin in favor of Enrique Hemedes.
As we have already stated earlier, such contract is a nullity as its subject matter was inexistent. Also,
the land was mortgaged to R & B Insurance as early as 1964, while the "Kasunduan" was executed
only in 1971 and the affidavit of Justa Kausapin affirming the conveyance in favor of Enrique D.
Hemedes was executed in 1981. Thus, even if R & B Insurance investigated the title of Maxima
Hemedes, it would not have discovered any adverse claim to the land in derogation of its
mortgagor's title. We reiterate that at no point in time could private respondents establish any rights
or maintain any claim over the land.
It is a well-settled principle that where innocent third persons rely upon the correctness of a
certificate of title and acquire rights over the property, the court cannot just disregard such rights.
Otherwise, public confidence in the certificate of title, and ultimately, the Torrens system, would be
impaired for everyone dealing with registered property would still have to inquire at every instance
whether the title has been regularly or irregularly issued. 46Being 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.
The factual findings of the trial court, particularly when affirmed by the appellate court, carry great
weight and are entitled to respect on appeal, except under certain circumstances. 47 One such
circumstance that would compel the Court to review the factual findings of the lower courts is
where the lower courts manifestly overlooked certain relevant facts not disputed by the parties and
which, if properly considered, would justify a different conclusion. 48Also, it is axiomatic that the
drawing of the proper legal conclusions from such factual findings are within the peculiar province of
this Court. 49
As regards R & B Insurance's prayer that Dominium be ordered to demolish the warehouses or that
it be declared the owner thereof since the same were built in bad faith, we note that such
warehouses were constructed by Asia Brewery, not by Dominium. However, despite its being a
necessary party in the present case, the lower courts never acquired jurisdiction over Asia Brewery,
whether as a plaintiff or defendant, and their respective decisions did not pass upon the
constructions made upon the subject property. Courts acquire jurisdiction over a party plaintiff upon
the filing of the complaint, while jurisdiction over the person of a party defendant is acquired upon
the service of summons in the manner required by law or by his voluntary appearance. As a rule, if a
defendant has not been summoned, the court acquires no jurisdiction over his person, and any
personal judgment rendered against such defendant is null and void. 50 In the present case, since
Asia Brewery is a necessary party that was not joined in the action, any judgment rendered in this
case shall be without prejudice to its rights. 51
As to its claim for moral damages, we hold that R & B Insurance is not entitled to the same for it has
not alleged nor proven the factual basis for the same. Neither is it entitled to exemplary damages,
which may only be awarded if the claimant is entitled to moral, temperate, liquidated or
compensatory damages. 52 R & B Insurance's claim for attorney's fees must also fail. The award of
attorney's fees is the exception rather than the rule and counsel's fees are not to be awarded every
time a party wins a suit. Its award pursuant to article 2208 of the Civil Code demands factual, legal
and equitable justification and cannot be left to speculation and conjecture. 53 Under the
circumstances prevailing in the instant case, there is no factual or legal basis for an award of
attorney's fees.
WHEREFORE, the assailed decision of public respondent and its resolution dated February 22, 1989
are REVERSED. We uphold petitioner R & B Insurance's assertion of ownership over the property in
dispute, as evidenced by TCT No. 41985, subject to the usufructuary rights of Justa Kausapin, which
encumbrance has been properly annotated upon the said certificate of title. No pronouncement as
to costs.

G.R. No. 3314 January 3, 1907

ANSELMO CHINGEN,Plaintiff-Appellant, vs. TOMAS ARGUELLES AND WIFE, ET AL.,Defendant-
Appellees.

On the 25th of October, 1905, the plaintiff, Anselmo Chingen, by his attorney, Claro Reyes, filed a
complaint in the Court of First Instance of the city of Manila, praying for judgment against the four
defendants herein for one-half of the jewels therein mentioned and the rent of the property
referred to therein, to wit, 4,170 pesos, or a half of 8,340 pesos received by the defendants since the
date they took possession of the legacies left by the deceased Raymunda Reyes in her will - that is to
say, since the 29th of May 1900 - which said legacies consisted of a house numbered 8, 10, 12, and
14 Calle Claviera, district of Binondo, two combs set with diamonds, and pearls, respectively a gold
ring with three diamonds each, and a gold ring with one large and several diamonds, the defendants
having refused to pay half of the earnings derived from the property left by the testatrix and the
legacies referred to belonging to him as the surviving husband of the deceased, who died without
legitimate heirs, ascendants or descendants all efforts to collect the sum thus claimed having failed.,
The plaintiff further prayed that the defendants be required to pay the costs, and for such other and
further relief as the court might deem just and equitable.chanroblesvirtualawlibrary chanrobles
virtual law library
The defendant, by their attorney, Teodoro Gonzalez, after the demurrer of the complain had been
overruled, filed an answer wherein they prayed that the action be dismissed with the costs against
the plaintiff, admitting all the allegations of the complaint except such as were expressly or tacitly
denied in their special answer, wherein they alleged that the legacies referred to in this complaint
were unconditional legacies, specific and definite of property belonging to the testatrix, the value of
which legacies did not exceed one half of the estate of which she could freely dispose, and therefore
were not subject to the right of usufruct which ordinarily would belong to the plaintiff; that the
testatrix made a partition of her property which became irrevocable, it not having been contested
within the time prescribed by law by the widower plaintiff, the only one who could have maintained
an action for the rescission of such partition, the said plaintiff having alienated a considerable part of
the personal property assigned to him; and that the property bequeathed in these legacies was
delivered t the defendant legatees by the plaintiff, who was the executor of the
will.chanroblesvirtualawlibrary chanrobles virtual law library
The plaintiff filed a reply to the said answer, admitting all the facts alleged therein in paragraphs A,
B, and C, thereof, except in so far as it was asserted that the right of usufruct did not extend to the
property embraced in the legacies; that the value of the such property had not been included in the
property of the estate and for his reason it was impossible to determine with certainty the value of
one half of the entire estate; and that if the value of the said legacies was not included in the estate
the right of usufruct which the surviving husband and upon one half of the property left by the
testatrix would be jeopardized; and denying the consequences of paragraph C and the allegations
contained in paragraphs D and E.chanroblesvirtualawlibrary chanrobles virtual law library
After hearing the evidence introduced by both parties, the court entered judgment on the 6th of
March, last, in favor of the defendant and against the plaintiff, dismissing the said complaint with
the costs to the defendant, from which judgment the plaintiff excepted, and after his motion for a
new trial was overruled excepted thereto.

Article 837 of the Civil Code provides:

If the testator should have neither legitimate ascendants or descendants, the surviving spouse shall
be entitled to one half of the estate also in usufruct.
The object of the action brought by the plaintiff was to recover one half of the jewels mentioned in
his complaint and one half of the rent accruing from a certain property, which said property, as well
as the jewels in question, were delivered as part of their legacies to the legatees, Carmen Reyes, Jose
Reyes, and Pedro Reyes, under the will of the deceased Raymunda Reyes.

The plaintiff in his brief presented on appeal in this case seems to insists upon his original petition,
for he claims this object is to recover the remainder of the property which belonged to him in
usufruct under the law as the surviving spouse of the testatrix, citing to this end article 815 of the
Civil Code.

The main reliance of the plaintiff is that his deceased wife, the testatrix, did not assign to him in her
will the entire portion which belonged to him; that is to say, one half of the estate in usufruct.

In addition to this, the plaintiff should also have stated that he was one of the executors of the will in
question, the first among those designate in clause 17 of the will; and that he, the plaintiff, and the
minor Lamberto Reyna are the only heirs under the said will. This will account for the testatrix
silence as to the usufructory portion pertaining to the husband.

The testatrix left no legitimate descendants or ascendants. Her surviving husband was therefore
entitled to the usufruct of one half of the estate. Where the surviving husband is also an heir under
the will, as happens in the present case, the undivided portion assigned to him as such their in
accordance with the terms of the will shall be considered as an integral part of the one half of the
estate subject to the right of usufruct of such husband for the reason that the latter's right, even
though he may be also an heir under the will, is not superior, and he is not object of the law is to
equalize the condition of the heirs and of the surviving spouse who received nothing in addition to a
share of the estate property, not as surviving spouse, but as an heir, which share he has already
received and accepted.
It is not just that the plaintiff, Anselmo Chingen, after receiving the property to which he was
entitled be also testamentary heir of his deceased wife, should be also entitled to the usufruct so
received by him was not included.
The property of the estate of his deceased wife having been divided in two equal parts, the property
to which the plaintiff was entitled as an heir under the will should have been taken out of the one
half, subject to the usufruct of the surviving spouse. This done, the usufruct, of course, is
extinguished ipso facto by the merger of such right of usufruct and ownership in the same person, as
provided in paragraph 3 of article 513 of the Civil Code.

It is absurd and contrary to all justices that the plaintiff should received his share as an heir under
the will from one half of the estate and be further entitled to the usufrucrt of the other half to the
prejudice of his coheir and the various legatees under the will. There is no law or article of the code
which authorizes such an iniquitos privilege.
In any event the portion of the estate subject to the usufruct must be claimed from the heir or heirs
in due time, and in the manner and form prescribed by law.
It appears from the record that the property of the estate was liquidated, distributed, and
apportioned among the heirs and legatees under the will, the plaintiff, as the executor and heir of
his deceased wife, and attorney Nazario Constantino, guardian ad litem of the minor heir, Lamberto
Reyna, being the only ones who took part in the proceedings were duly approved by the court.
(Original bill of exceptions, pp. 15-23.)
It appears from the proceedings in question that there were assigned to the plaintiff, Anselmo
Chingen, the surviving husband of the deceased, as his share of the community property and his
usufruct, property to the value of 9,740.12 pesos and 13,000 pesos as testamentary heir.

According to the will, a copy of which appears on pages 7 to 13 of the record, there were twelve
legatees and some substitutes who were entitled to various classes of property described in detail in
the said will, and, if it is true as contended by the executor, now the plaintiff in the will of the
testatrix by delivering to the various legatees the property bequeathed to them by his deceased
wife, it may be said that the liquidation, partition, and distribution of the rest of the estate having
been made between the only two heirs, the plaintiff one of them, the estate is finally and definitely
settled, for the partition of an estate puts an end to the undivided condition of the same, and
confers upon each of the heirs the exclusive ownership of the property assigned to him. (Article
1068 of the Civil Code)
The plaintiff, as has been said before, claims half of the jewels bequeathed to the legatees, and one
half of the rents accruing from a certain house also bequeathed to the defendants, as his, the
plaintiffs, usufructory portion. He has failed, however, to state the total value of the estate and the
value of the one half of the property to which he claims to be entitled in usufruct. He has said
absolutely nothing as to the nature and value of the property assigned to him in the partition of the
estate, either as an heir or as a surviving spouse of the deceased.
The plaintiff does not seek to have the aforesaid partition set aside, nor can he ask such a thing, for
the partition of the estate was made exclusively by him and the guardian ad litem of this coheir.
However, the property of the estate having been disturbed, and the plaintiff having disposed of
some of the most valuable property awarded to him in said partition, as he himself admits (p. 14),
and the properties having been actually delivered to the respective legatees, a new liquidation or
settlement of the estate cannot be had, and the partition made under the exclusive direction of the
plaintiff as executor of the will of the deceased cannot be set aside, since the same is expressly
prohibited by the provisions of article 1078 of the Civil Code. Moreover, it has not been shown that
the property bequeathed to the defendant legatees was included in the one half of the husband. The
mere fact that the plaintiff delivered the said property to the legatees absolutely and unconditionally
shows conclusively that his right of usufruct is intact and has not been injured in any way.
Finally, it should be borne in mind that the legacy to which this action relates consists of a house and
certain jewels and is according to the will, an unconditional legacy without any fixed period, and that
the property thus bequeathed is specified in the said will and described as being of the exclusive
ownership of the testatrix, so that the legatees were entitled to the property thus bequeathed to
them from the death of the testatrix, and as owners of such property were also entitled to the fruits
and earnings and any increase thereof, as well as liable for any los or impairment thereof. (Arts. 881,
882, Civil Code.)
For the reasons hereinbefore set out and those contained in the judgment appealed from in so far as
they conform with this decision, we are of the opinion that judgment should be affirmed, and the
defendants are hereby absolved of the complaint of the plaintiff, Anselmo Chingen, with the costs
against the appellant. After the expiration of twenty days let judgment be entered in accordance
herewith and ten days thereafter the case be remanded to the Court of First Instance of execution.
So ordered.

G.R. No. L-51333 May 18, 1989

RAMONA R. LOCSIN,; TERESITA R. GUANZON,; CELINA R. SIBUG;; MA. LUISA R. PEREZ; EDITHA R.
YLANAN,; and ANA MARIE R. BENEDICTO, , petitioners,
vs.
HONORABLE JUDGE VICENTE P. VALENZUELA, Judge of the Court of First Instance of Negros
Occidental, Branch III and SPOUSES JOSEPH SCHON, and HELEN BENNETT SCHON, respondents.

There are before us for review the following: (1) the decision of the Court of First Instance of Negros
Occidental, Branch 3, in Civil Case No. 13823; and (2) the decision of the Court of Agrarian Relations,
11th Judicial District, in CAR Case No. 76. Both of these decisions dismissed the petitioners'
complaints for lack of jurisdiction.
Petitioners Ramona R. Locsin, Teresita R. Guanzon, Celina R. Sibug, Ma. Lusia R. Perez, Editha R.
Ylanan and Ana Marie R. Benedicto were co-owners of a large tract of agricultural land known as
"Hacienda Villa Regalado" located in Barrio Panubigan, Canlaon City, Negros Occidental. The tract of
land was covered by Transfer Certificate of Title No. T-494 and there more particularly described in
the following terms:
TRANSFER CERTIFICATE OF TITLE
NO. T-494
A parcel of land (Lot 2-G) of the subdivision plan Psd-28446, Sheet 2, being a portion of Lot 2
(remaining portion) described in plan II-6992, G.L.R.O. Record No. 133), situated in the
Barrio of Panubigan, Municipality of Canlaon Province of Negros Occidental, Bounded on the
N., by Lot 2-A of the subdivision plan; on the E., and S., by Binalbagan River; on the W., by
 Lot 2-E of the subdivision plan; on the NW., by Lots 2-F and 2-A of the subdivision plan.
...containing an area of THREE MILLION THIRTY-THREE THOUSAND AND FORTY EIGHT
(3,033,048) square meters, more or less. 1
A portion of this land, known as Lot No. 2-C-A-3 and consisting of an area of 60.07464 hectares, was
subject to the lifetime usufructuary rights of respondent Helen Schon:. The bulk of this lot was
cultivated by the following lessees-tenants who customarily delivered the rental to Helen Schon:
TENANTS

1. Carlos Panaligan 2.00 Ha.

2. Amado Marquez 1.50 Ha.

3. Herbert Pedros 1.50 Ha.

4. Antonio Feliciano, Jr. 2.00 Ha.

5. Hugo Aguilos 3.50 Ha.

6. Alberto Gubaton 8.90 Ha.

7. Hulo Aguilos 1.32 Ha.

8. Julia Vda. de Esquelito 2.25 Ha.

9. Carlos Panaligan 1.25 Ha.

10. Serafin Jandoquele 5.35 Ha.

11. Seferias Esquesida 2.00 Ha.

12. Carlos de la Cruz 4.70 Ha.

13 Eliseo Gelongos 3.00 Ha.

14. Espindion Jocson 5.55 Ha.

15. Salvador Munon 1.5884 Ha.

16. Ulfiano Alegria 1.85 Ha.

17. Ireneo Balera 8.30 Ha.

TOTAL 56.555 Ha. 2

On 22 October 1972, after the onset of the martial law administration of former President Marcos,
Presidential Decree No. 27 was promulgated, decreeing the "Emancipation of Tenants." The tract of
land owned in common by the petitioners, including the portion thereof subject to Helen Schon's
usufructuary rights, fell within the scope of "Operation Land Transfer." In consequence, staff
members of the Department of Agrarian Relations Identified the tenant-tillers of said land, and the
necessary parcellary map sketch was made and submitted to the Bureau of Lands Office in
Dumaguete City. 3 Petitioners through counsel sought the opinion of the DAR as to who (petitioners
or respondent Helen Schon) should be entitled to receive the rental payments which continued to be
made by the respondent tenants to Helen Schon. The DAR District Officer rendered an opinion on 30
May 1977 that the rental payments as of 22 October 1972 were properly considered as amortization
payments for the land and as such should pertain to the land- owners and not to the usufructuary. 4
1. Civil Case No. 13828, Court of First Instance of Negros Occidental
On 22 May 1978, petitioners filed against the spouses Joseph and Helen Schon Civil Case No. 13828
in the then Court of First Instance of Negros Occidental, for collection of rentals plus damages with
prayer for preliminary injunction. There petitioners claimed that since the land subject to Helen
Schon's usufructuary rights was among the parcels of land which colectively had been declared by
the DAR as a land reform area pursuant to Presidential Decree No. 27, the rental payments which
the respondent spouses had been colecting from the tenants really pertained and should be
delivered to petitioners, beginning from 21 October 1972, as constituting or forming part of the
amortization payments for the land to be made by the tenants. Petitioners sought in that case to
recover from the Schons all such previous rentals or the money value thereof, and prayed for
injunction to prevent the respondents from collecting any further rental payments from the tenants
of the land involved.
Upon the other hand, in their Answer filed on 12 July 1978, the respondents Schon contended that
under the provisions of Section 12 of Presidential Decree No. 946 dated 17 June 1976, and given the
facts involved in Civil Case No. 13823, the Court of First Instance was bereft of jurisdiction over the
subject matter of the case. That jurisdiction, the Schon spouses urged, was vested in the CAR
instead. Respondents further argued that, upon the assumption arguendo that the Court of First
Instance did have jurisdiction, Article 609 of the Civil Code must in any case be applied by that court
in resolving the case . 5
2. CAR Case No. 76, Court of Agrarian Relations
Approximately five (5) months after filing their complaint before the Negros Occidental Court of First
Instance, petitioners filed a second complaint on 13 October 1978, this time with the Court of
Agrarian Relations, 11th Judicial District, San Carlos City. In this complaint before the Agrarian Court,
petitioners impleaded as co-respondents of the spouses Schon the tenants who were cultivating the
land burdened with the usufruct of Helen Schon. Petitioners prayed that the respondent tenants be
required to pay to petitioners (rather than to the spouses Schon) all future rentals beginning with
the crop year of 1978 and every year thereafter, until full payment of the amortization payments
computed by the DAR. In their Answer, the respondents Schon once again asserted lack of
jurisdiction over the subject matter of the case, this time on the part of the Court of Agrarian
Relations. Respondents contended that the dispute between petitioners and respondents Schon
related to the continued existence or termination of the usufructuary rights of Helen Schon, which
issue did not constitute an agrarian dispute and therefore had to be litigated elsewhere, i.e., before
the regular courts of first instance.
The respondent tenants, for their part, agreed with the Schons that there was no tenancy
relationship existing in respect of the land cultivated by them, since such land had already been
brought within the ambit of "Operation Land Transfer", and prayed that the petitioners and the
usufructuary be required to litigate among themselves their respective rights before the proper
court.
3. Dismissal of Civil Case No. 13823 and CAR Case No. 76
On 15 February 1979, the Agrarian Court rendered a decision dismissing petitioners' complaint in
CAR Case No. 76. The Court of Agrarian Relations held that it had no jurisdiction to decide the case:
... it is crystal clear that the contending parties are actually Ramona R. Locsin, et al.,
and the naked owners of 101 hectares of subject agricultural land, on one hand, and
Helen Bennett-Schon, who is the usufructuary of the same land, on the other.
For all legal intents and purposes, Helen Bennett-Schon belongs to the category of a
landowner, since she is the recipient of any and all fruit derived from the land of
which the plaintiffs are the naked owners. The usufruct lasts for as long as Helen
Bennett-Schon lives. Therefore, this case actually is a dispute between two
landowners one, the naked owners, the other, the beneficial owner hose
controversy revolves on who of them should receive the rentals being paid by the
tenants or lessees on the land in question. Consequently, there is as between the two
contending parties, no agrarian dispute which this Court may take cognizance
of. Under the circumstances, it is the considered stand of this Court that it is not the
proper forum both with respect to the second amended complaint and with respect
to the petition for appointment of a receiver.
WHEREFORE, RESOLVING BOTH THE SECOND AMENDED COMPLAINT AND THE
PETITION FOR APPOINTMENT OF A RECEIVER, THE LATTER BEING ONLY A REPLAY OF
THE FORMER, BOTH ARE DISMISSED FOR LACK OF JURISDICTION (pp. 7-8 Decision) 6
Petitioners appealed the decision of the Agrarian Court to the CA, the appeal being there docketed
as C.A.-G.R. SP No. 09-440. In a Decision dated 27 November 1979, however, the CA ruled that since
the only issue presented in the appeal was whether or not the Court of Agrarian Relations had
jurisdiction to try and decide CAR Case No. 76, the appeal raised "a pure question of law" and
certified the case to the SC for the latter's disposition.
We turn to Civil Case No. 13823. On 16 March 1979, the then Court of First Instance of Negros
Occidental issued an order also dismissing the complaint of petitioners on the same ground of lack of
jurisdiction to hear and decide that case. The Court of First Instance held that it was the Court of
Agrarian Relations that had jurisdiction over the case, and rationalized this position in the following
manner:
In determining whether this Court has jurisdiction, necessarily, a determination should first be made
as to the nature of the lease rentals that were being paid to the defendants by the tenants-lessees.
There is no question that on May 30, 1977, the Provincial Chairman of Operation Land Transfer
rendered an opinion that the rentals as of October 21, 1972 was to be considered as amortization
payment to the land and as such should pertain to the land owners and not to the usufructuary, the
defendants herein (Annex 'B' of the Complaint). Section 12 of Presidential Decree No. 946
enumerates the case that falls under the original and exclusive jurisdiction of the Court of Agrarian
Relations, as follows:
(a) Cases involving the rights and obligation of persons in cultivation and use of agricultural land ...;
(b) Questions involving rights granted and obligations im posed by law, presidential decrees, orders,
instructions, rules and regulations issued and promulgations in relation to the agrarian reform
program ...;
(c) Cases involving the collection of amortization on payment for lands acquired under Presidential
Decree No. 27 as amended ...
It could be seen from the above that the jurisdiction given to the Court of Agrarian Relations is so
broad and sweeping as to cover the issue involved in the present case. ... the agricultural leasehold
relation is not limited to that of a purely landlord and tenant relationship. The agricultural leasehold
relationship is established also with respect to the person who furnished the landholding either as
owner, civil lessee, usufructuary or legal possessor and the person who cultivates the same. It might
as well be asked whether the opinion of the Provincial Chairman of Operation Land Transfer
previously adverted to and which is now one of the issues in this incident would involve the
determination of the rights granted and obligations imposed in relation to the agrarian reform
program. The search for an answer need not be deferred as reference to Par. (b) of Presidential
Decree No. 49 provides such answer-
xxxxxxxxx
Questions involving rights granted and obligations imposed by the law, presidential decrees, orders,
instructions, rules and regulations issued and promulgations in relation to the agrarian reform
program.
Clearly, the determination of the nature of the payment made by the tenants to the defendants
herein is a question which involved the right of the tenants in relation to the land reform program of
the government. 7
The above order of the Negros Occidental Court of First Instance was brought directly to us by
petitioners on a Petition for Review in G.R. No. 51333.
G.R. No. 51333 and G.R. No. 52289 were consolidated by a Resolution of this Court dated 16 June
1982.
The consolidated cases present the question of which court had jurisdiction to decide one and the
other case. Both the Court of First Instance and the agrarian Court were persuaded by the adroit and
disingenuous pleading of respondent Schon's counsel. Beyond the question of jurisdiction over the
subject matter, is, of course, the substantive question of twhether the peitioner as naked owners of
the land subjected to the beneficial owner's right of Helen Schon, became entitled to the payment's
made by the tenants or lessees of such land from and after the property was declared part of a land
reform area.
The issue of which court is vested with jurisdiction over Civil Case no. 13823 and CAR Case No. 76 is,
happily, no longer a live one. Jurisdiction over both cases is clearly vested in the appropiate RTC in
view of the provisions of Section 19(7) of Batas Pambansa Blg. 129 which was enacted by
the Batasang Pambansa on 10 August 1981 and fully implemented on 14 February 1983. 8
Section 19. Jurisdiction in Civil Cases. RTCs shall exercise exclusive original jurisdiction:
xxx xxx xxx
(7) In all civil actions and special proceedings falling within the exclusive origin al jurisdiction of
juvenile and domestic relations courts and of the courts of agrarian relations as now provided by
law;
The RTCs have full authority and jurisdiction to interpret and apply both the mass of statutes and
rules and regulations relating to land reform and the general civil law, including the law on usufruct.
Unlike a RTC sitting as a probate court, a region al trial court seized of an agrarian dispute and
interpreting and applying statutes and administrative rules and regulations concerning land reform
and the sliminations of agricultural tenancy relationships, continues to act as a court of general and
plenary jurisdiction. Section 44 of b.P. Blg. 129 abolished the Courts of Agrarian Relations and did
not re-create them.
We note that resolution of the underlying substantive issues here raised requires examination of
both land reform statutes and related rules and regulations (and as well the practice of the relevant
administrative agency or executive department) and the Civil Code provisions on usufruct.
Mindful of the length of timewhich has gone by since the first of the consolidated cases reched this
Court, and in the effort to render expeditious justice, we have considered whether we should now
confront and resolve the issue relating to the legal character of the payments made by the
respondents tenants-lessees since 21 October 1972 to respondent Helen Schon, as well as the issue
relating to the possible application of Article 609 of the Civil Code. Because, however, of the nature
and importance of the first issue, and considering that the pleadings and the records of theses two
(2) cases are bare of any substantial discussion by the parties on both issues, the Court feels it would
not be prudent to resolve those issues without further proceedings. We are convinced, however,
that those issues are primarily, if not wholly, issues of law rather than of fact and that hence there
appears no need to remand these cases to the RTC for further proceedings there. Instead, we shall
require the parties to file memoranda on the issues above indicated, and the direct the Solicitor
General to intervene in these cases and to file a memorandum addressing the same issues.
ACCORDINGLY, the Court Resolved to: (1) REQUIRE the petition and private respondents in G.R. Nos.
51333 and 52289 to file simultaneous memoranda addressing the substantive issues identified
above, within thirty (30) days from notice hereof, and to FURNISH the Solicitor General a copy of
their respective memoranda; and (2) to DIRECT the Solicitor General to file a motion for intervention
on behalf of the government and a memorandum on the same substantive questions within thirty
(30) days from receipt of petitioners' and private respondents' memoranda.