Property – Usufruct – Finals

Hermedes vs. CA, G.R. 107132, October 8, 1999

Facts:
The instant controversy involves a question of ownership over an unregistered parcel of land, situated in Sala,
Cabuyao, Laguna. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes and Enrique D.
Hemedes. Jose Hemedes executed a document entitled Donation Inter Vivos With Resolutory Condition 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 abovementioned, Justa Kausapin executed a Deed of Conveyance of Unregistered
Real Property by Reversion conveying to Maxima Hemedes the subject property except the possession and
enjoyment of the said property which shall remain vested in Justa Kausapin during her lifetime, or widowhood and
which upon her death or remarriage shall also automatically revert to, and be transferred to Maxima Hemedes.

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., R & B Insurance
extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan even after it became due. The
land was sold at a public auction 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. The annotation of usufruct in favor of Justa Kausapin was
maintained in the new title.

Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin executed 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. Enriques D. Hemedes sold the property to
Dominium Realty and Construction Corporation (Dominium). 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 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.

Dominium and Enrique D. Hemedes filed a complaint with the Court of First Instance of Binan, Laguna for the
annulment of TCT No. 41985 issued in favor of R & B Insurance and/or the reconveyance to Dominium of the
subject property. Specifically, the complaint alleged that Dominium was the absolute owner of the subject property
by virtue of the deed of sale executed by Enrique D. Hemedes, who in turn obtained ownership of the land from
Justa Kausapin, as evidenced by the Kasunduan. 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.

The trial court rendered judgment in favor of plaintiffs Dominium and Enrique D. Hemedes, The Court of Appeals
affirmed the assailed decision in toto.

Issue: WON R& B is entitles to the protection of a mortgagee in good faith

Held: 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 usufructuary. 42 The owner of the
property maintains the jus disponendi or the power to alienate, encumber, transform, and even destroy the
same. 43 This right is embodied in the Civil Code, which provides that the owner of property the usufruct of which is
held by another, may alienate it, although he cannot alter the property's form or substance, or do anything which
may be prejudicial to the usufructuary. 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. 46 Being an innocent mortgagee for value, R & B Insurance validly acquired ownership over the property,
subject only to the usufructuary rights of Justa Kausapin thereto, as this encumbrance was properly annotated upon
its certificate of title.

N.H.A. vs. CA, G.R. 148830, April 13, 2005

Facts:

On 24 October 1968, Proclamation No. 481 issued by then President Ferdinand Marcos set aside a 120-hectare
portion of land in Quezon City owned by the NHA4 as reserved property for the site of the National Government
Center ("NGC"). On 19 September 1977, President Marcos issued Proclamation No. 1670, which removed a seven-
hectare portion from the coverage of the NGC. Proclamation No. 1670 gave MSBF usufructuary rights over this
segregated portion, as follows:

Pursuant to the powers vested in me by the Constitution and the laws of the Philippines, I, FERDINAND E.
MARCOS, President of the Republic of the Philippines, do hereby exclude from the operation of Proclamation No.
481, dated October 24, 1968, which established the National Government Center Site, certain parcels of land
embraced therein and reserving the same for the Manila Seedling Bank Foundation, Inc., for use in its operation and
projects, subject to private rights if any there be, and to future survey, under the administration of the
Foundation.

This parcel of land, which shall embrace 7 hectares, shall be determined by the future survey based on the
technical descriptions found in Proclamation No. 481, and most particularly on the original survey of the area, dated
July 1910 to June 1911, and on the subdivision survey dated April 19-25, 1968. (Emphasis added)

MSBF occupied the area granted by Proclamation No. 1670. Over the years, MSBF’s occupancy exceeded the
seven-hectare area subject to its usufructuary rights. By 1987, MSBF occupied approximately 16 hectares. By then
the land occupied by MSBF was bounded by Epifanio de los Santos Avenue ("EDSA") to the west, Agham Road to
the east, Quezon Avenue to the south and a creek to the north.

On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders. BGC leased the
portion facing EDSA, which occupies 4,590 square meters of the 16-hectare area.

On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127 ("MO 127") which revoked
the reserved status of "the 50 hectares, more or less, remaining out of the 120 hectares of the NHA property
reserved as site of the National Government Center." MO 127 also authorized the NHA to commercialize the area
and to sell it to the public.
On 15 August 1988, acting on the power granted under MO 127, the NHA gave BGC ten days to vacate its occupied
area. Any structure left behind after the expiration of the ten-day period will be demolished by NHA.

BGC then filed a complaint for injunction on 21 April 1988 before the trial court. On 26 May 1988, BGC amended its
complaint to include MSBF as its co-plaintiff.

Issue: WHETHER THE PREMISES LEASED BY BGC FROM MSBF IS WITHIN THE SEVEN-HECTARE AREA
THAT PROCLAMATION NO. 1670 GRANTED TO MSBF BY WAY OF USUFRUCT.

Ruling:

The entire area bounded by Agham Road to the east, EDSA to the west, Quezon Avenue to the south and by a
creek to the north measures approximately 16 hectares. Proclamation No. 1670 gave MSBF a usufruct over only a
seven-hectare area. The BGC’s leased portion is located along EDSA.

A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient
subject to the legal provisions on usufruct.9 A usufructuary may lease the object held in usufruct.10 Thus, the NHA
may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in
usufruct by MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as the
usufruct exists.11 However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-
hectare area covered by MSBF’s usufructuary rights.

MSBF’s survey shows that BGC’s stall is within the seven-hectare area. On the other hand, NHA’s survey shows
otherwise. The entire controversy revolves on the question of whose land survey should prevail.

MSBF’s survey plots the location of the seven-hectare portion by starting its measurement from Quezon Avenue
going northward along EDSA up until the creek, which serves as the northern boundary of the land in question. Mr.
Ben Malto ("Malto"), surveyor for MSBF, based his survey method on the fact that MSBF’s main facilities are located
within this area.

On the other hand, NHA’s survey determines the seven-hectare portion by starting its measurement from Quezon
Avenue going towards Agham Road. Mr. Rogelio Inobaya ("Inobaya"), surveyor for NHA, based his survey method
on the fact that he saw MSBF’s gate fronting Agham Road.

BGC presented the testimony of Mr. Lucito M. Bertol ("Bertol"), General Manager of MSBF. Bertol presented a
map,12 which detailed the area presently occupied by MSBF. The map had a yellow-shaded portion, which was
supposed to indicate the seven-hectare area. It was clear from both the map and Bertol’s testimony that MSBF
knew that it had occupied an area in excess of the seven-hectare area granted by Proclamation No. 1670.13 Upon
cross-examination, Bertol admitted that he personally did not know the exact boundaries of the seven-hectare
area.14 Bertol also admitted that MSBF prepared the map without consulting NHA, the owner of the property.15

BGC also presented the testimony of Malto, a registered forester and the Assistant Vice-President of Planning,
Research and Marketing of MSBF. Malto testified that he conducted the land survey, which was used to construct
the map presented by Bertol.16 Bertol clarified that he authorized two surveys, one in 1984 when he first joined
MSBF, and the other in 1986.17 In both instances, Mr. Malto testified that he was asked to survey a total of 16
hectares, not just seven hectares. Malto testified that he conducted the second survey in 1986 on the instruction of
MSBF’s general manager. According to Malto, it was only in the second survey that he was told to determine the
seven-hectare portion. Malto further clarified that he based the technical descriptions of both surveys on a
previously existing survey of the property.18

The NHA presented the testimony of Inobaya, a geodetic engineer employed by the NHA. Inobaya testified that as
part of the NHA’s Survey Division, his duties included conducting surveys of properties administered by the
NHA.19 Inobaya conducted his survey in May 1988 to determine whether BGC was occupying an area outside the
seven-hectare area MSBF held in usufruct.20 Inobaya surveyed the area occupied by MSBF following the same
technical descriptions used by Malto. Inobaya also came to the same conclusion that the area occupied by MSBF,
as indicated by the boundaries in the technical descriptions, covered a total of 16 hectares. He further testified that
the seven-hectare portion in the map presented by BGC,21 which was constructed by Malto, does not tally with the
boundaries BGC and MSBF indicated in their complaint.

Article 565 of the Civil Code states:

ART. 565. The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct;
in default of such title, or in case it is deficient, the provisions contained in the two following Chapters shall be
observed.

In the present case, Proclamation No. 1670 is the title constituting the usufruct. Proclamation No. 1670 categorically
states that the seven-hectare area shall be determined "by future survey under the administration of the Foundation
subject to private rights if there be any." The appellate court and the trial court agree that MSBF has the latitude to
determine the location of its seven-hectare usufruct portion within the 16-hectare area. The appellate court and the
trial court disagree, however, whether MSBF seasonably exercised this right.

It is clear that MSBF conducted at least two surveys. Although both surveys covered a total of 16 hectares, the
second survey specifically indicated a seven-hectare area shaded in yellow. MSBF made the first survey in 1984
and the second in 1986, way before the present controversy started. MSBF conducted the two surveys before the
lease to BGC. The trial court ruled that MSBF did not act seasonably in exercising its right to conduct the survey.
Confronted with evidence that MSBF did in fact conduct two surveys, the trial court dismissed the two surveys as
self-serving. This is clearly an error on the part of the trial court. Proclamation No. 1670 authorized MSBF to
determine the location of the seven-hectare area. This authority, coupled with the fact that Proclamation No. 1670
did not state the location of the seven-hectare area, leaves no room for doubt that Proclamation No. 1670 left it to
MSBF to choose the location of the seven-hectare area under its usufruct.

More evidence supports MSBF’s stand on the location of the seven-hectare area. The main structures of MSBF are
found in the area indicated by MSBF’s survey. These structures are the main office, the three green houses, the
warehouse and the composting area. On the other hand, the NHA’s delineation of the seven-hectare area would
cover only the four hardening bays and the display area. It is easy to distinguish between these two groups of
structures. The first group covers buildings and facilities that MSBF needs for its operations. MSBF built these
structures before the present controversy started. The second group covers facilities less essential to MSBF’s
existence. This distinction is decisive as to which survey should prevail. It is clear that the MSBF intended to use the
yellow-shaded area primarily because it erected its main structures there.

Inobaya testified that his main consideration in using Agham Road as the starting point for his survey was the
presence of a gate there. The location of the gate is not a sufficient basis to determine the starting point. MSBF’s
right as a usufructuary as granted by Proclamation No. 1670 should rest on something more substantial than where
MSBF chose to place a gate.

To prefer the NHA’s survey to MSBF’s survey will strip MSBF of most of its main facilities. Only the main building of
MSBF will remain with MSBF since the main building is near the corner of EDSA and Quezon Avenue. The rest of
MSBF’s main facilities will be outside the seven-hectare area.

On the other hand, this Court cannot countenance MSBF’s act of exceeding the seven-hectare portion granted to it
by Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to
protect the owner’s interests. One such duty is found in Article 601 of the Civil Code which states:

ART. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have
knowledge, that may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for
damages, as if they had been caused through his own fault.

A 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.22 This controversy would not have arisen had MSBF
respected the limit of the beneficial use given to it. MSBF’s encroachment of its benefactor’s property gave birth to
the confusion that attended this case. To put this matter entirely to rest, it is not enough to remind the NHA to
respect MSBF’s choice of the location of its seven-hectare area. MSBF, for its part, must vacate the area that is not
part of its usufruct. MSBF’s rights begin and end within the seven-hectare portion of its usufruct. This Court agrees
with the trial court that MSBF has abused the privilege given it under Proclamation No. 1670. The direct corollary of
enforcing MSBF’s rights within the seven-hectare area is the negation of any of MSBF’s acts beyond it.

The seven-hectare portion of MSBF is no longer easily determinable considering the varied structures erected within
and surrounding the area. Both parties advance different reasons why their own surveys should be preferred. At this
point, the determination of the seven-hectare portion cannot be made to rely on a choice between the NHA’s and
MSBF’s survey. There is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all
doubts on the exact location of the seven-hectare area and thus avoid future controversies. This new survey should
consider existing structures of MSBF. It should as much as possible include all of the facilities of MSBF within the
seven-hectare portion without sacrificing contiguity.

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

ART. 605. Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty
years. If it has been constituted, and before the expiration of such period the town is abandoned, or the corporation
or association is dissolved, the usufruct shall be extinguished by reason thereof. (Emphasis added)

The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is
meant only as a lifetime grant. Unlike a natural person, a corporation or association’s lifetime may be extended
indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a
corporation or association covers public land. Proclamation No. 1670 was issued 19 September 1977, or 28 years
ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left.
MO 127 released approximately 50 hectares of the NHA property as reserved site for the National Government
Center. However, MO 127 does not affect MSBF’s seven-hectare area since under Proclamation No. 1670, MSBF’s
seven-hectare area was already "exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968,
which established the National Government Center Site."

Moralidad vs. Pernes, G.R. 152809, Aug 3, 2006

Facts:

Petitioner acquired the lot property initially for the purpose of letting Arlene move from Mandug to Davao City proper
but later she wanted the property to be also available to any of her kins wishing to live and settle in Davao City.
Petitioner made known this intention in a document she executed on July 21, 1986. 3 The document reads:

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

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

2. That anybody of my kins who wishes to stay on the aforementioned real property should maintain an atmosphere
of cooperation, live in harmony and must avoid bickering with one another;

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

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

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

xxx xxx xxx

Following her retirement in 1993, petitioner came back to the Philippines to stay with the respondents’ on the house
they build on the subject property. In the course of time, their relations turned sour.

petitioner filed with the MTCC of Davao City an unlawful detainer suit against the respondent spouses. The MTCC,
resolving the ejectment suit in petitioner’s favor.

Respondent spouses appealed to the RTC of Davao City. the RTC reversed that of the MTCC. Therefrom, petitioner
went to the CA. The appellate court thus affirmed the appealed RTC decision.

Ruling:
The Court rules for the petitioner.

The Court is inclined to agree with the CA that what was constituted between the parties herein is one of usufruct
over a piece of land, with the petitioner being the owner of the property upon whom the naked title thereto remained
and the respondents being two (2) among other unnamed usufructuaries who were simply referred to as petitioner’s
kin. The Court, however, cannot go along with the CA’s holding that the action for unlawful detainer must be
dismissed on ground of prematurity.

Usufruct is defined under Article 562 of the Civil Code in the following wise:

ART. 562. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and
substance, unless the title constituting it or the law otherwise provides.

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

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

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

The CA disposed of this issue in this wise:

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

xxx xxx xxx

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

It is undisputed that petitioner expressly authorized respondents o occupy portion of her property on which their
house may be built. Thus – "it is my desire that Mr. and Mrs. Diosdado M. Pernes may build their house therein and
stay as long as they like." From this statement, it seems that petitioner had given the respondents the usufructuary
rights over the portion that may be occupied by the house that the latter would build, the duration of which being
dependent on how long respondents would like to occupy the property. While petitioner had already demanded from
the respondents the surrender of the premises, this Court is of the opinion that the usufructuary rights of
respondents had not been terminated by the said demand considering the clear statement of petitioner that she is
allowing respondents to occupy portion of her land as long as the latter want to. Considering that respondents still
want to occupy the premises, petitioner clearly cannot eject respondents. 12

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

ART. 603. Usufruct is extinguished:

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

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

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

(4) By renunciation of the usufructuary;

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

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

(7) By prescription. (Emphasis supplied.)

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

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

As aptly pointed out by the petitioner in her Memorandum, respondents’ own evidence before the MTCC indicated
that the relations between the parties "have deteriorated to almost an irretrievable level." 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 (3 Manresa 215-216; se also Montinola vs. Bantug, 71
Phil. 449). 14 (Emphasis ours.)

By express provision of law, respondents, as usufructuary, do not have the right to reimbursement for the
improvements they may have introduced on the property. We quote Articles 579 and 580 of the Civil Code:

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

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

Given the foregoing perspective, respondents will have to be ordered to vacate the premises without any right of
reimbursement. If the rule on reimbursement or indemnity were otherwise, then the usufructuary might, as an author
pointed out, improve the owner out of his property. 15 The respondents may, however, remove or destroy the
improvements they may have introduced thereon without damaging the petitioner’s property.

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

Heirs of Joaquin Limense vs. Rita Vda. De Ramos, G.R. 152319, October 28, 2009

Facts:

Dalmacio Lozada subdivided his property into five (5) lots, namely: Lot Nos. 12-A, 12-B, 12-C, 12-D and 12-E.
Through a Deed of Donation dated March 9, 1932,4 he donated the subdivided lots to his daughters, namely: Isabel,
Salud, Catalina, and Felicidad, all surnamed Lozada. The Deed of Donation was registered with the office of the
Register of Deeds of Manila on March 15, 1932.

Under the said Deed of Donation, the lots were adjudicated to Dalmacio's daughters in the following manner:

a. Lot No. 12-A in favor of Isabel Lozada, married to Isaac Limense;

b. Lot No. 12-B in favor of Catalina Lozada, married to Sotero Natividad;

c. Lot No. 12-C in favor of Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac
Limense; and Salud Lozada, married to Francisco Ramos, in equal parts;

d. Lot No. 12-D in favor of Salud Lozada, married to Francisco Ramos; and

e. Lot No. 12-E in favor of Isabel Lozada, married to Isaac Limense, and Felicidad Lozada, married to
Galicano Centeno.

By virtue of the Deed of Donation executed by Dalmacio Lozada, OCT No. 7036, which was registered in his name,
was cancelled and, in lieu thereof, Transfer Certificates of Title (TCTs) bearing Nos. 40041, 40042, 40043, 40044,
and 40045 were issued in favor of the donees, except TCT No. 40044, which remained in his name. These new
TCTs were annotated at the back of OCT No. 7036.5

TCT No. 40043, which covered Lot No. 12-C, was issued in the name of its co-owners Catalina Lozada, married to
Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos. It
covered an area of 68.60 square meters, more or less, was bounded on the northeast by Lot No. 12-A, on the
southwest by Calle Beata, and on the northwest by Lot No. 12-D of the subdivision plan. In 1932, respondents'
predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C.

On May 16, 1969, TCT No. 968866 was issued in the name of Joaquin Limense covering the very same area of Lot
No. 12-C.

On October 1, 1981, Joaquin Limense secured a building permit for the construction of a hollow block fence on the
boundary line between his aforesaid property and the adjacent parcel of land located at 2759 Beata Street,
Pandacan, Manila, designated as Lot No. 12-D, which was being occupied by respondents. The fence, however,
could not be constructed because a substantial portion of respondents' residential building in Lot No. 12-D
encroached upon portions of Joaquin Limense's property in Lot No. 12-C.

Joaquin Limense demanded the removal of the encroached area; however, respondent ignored both oral and
written demands. The parties failed to amicably settle the differences between them despite referral to the barangay.
Thus, on March 9, 1983, Joaquin Limense, duly represented by his Attorney-in-Fact, Teofista L. Reyes, instituted a
Complaint7 against respondents before the Regional Trial Court (RTC) of Manila, Branch 15, for removal of
obstruction and damages.

Joaquin Limense prayed that the RTC issue an order directing respondents, jointly and severally, to remove the
portion which illegally encroached upon his property on Lot No. 12-C and, likewise, prayed for the payment of
damages, attorney’s fees and costs of suit.

Respondents, on the other hand, averred in their Answer8 that they were the surviving heirs of Francisco
Ramos,9 who, during his lifetime, was married to Salud Lozada, one of the daughters of Dalmacio Lozada, the
original owner of Lot No. 12. After subdividing the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his
daughters Catalina, married to Sotero Natividad; Isabel, married to Isaac Limense; and Salud, married to Francisco
Ramos. Being the surviving heirs of Francisco Ramos, respondents later became co-owners of Lot No. 12-C. Lot
No. 12-C has served as right of way or common alley of all the heirs of Dalmacio Lozada since 1932 up to the
present. As a common alley, it could not be closed or fenced by Joaquin Limense without causing damage and
prejudice to respondents.

After trial on the merits, the RTC rendered a Decision10 dated September 21, 1990 dismissing the complaint of
Joaquin Limense. It ruled that an apparent easement of right of way existed in favor of respondents.

Aggrieved by said decision, Joaquin Limense filed a notice of appeal. The records of the case were transmitted to
the Court of Appeals (CA). The CA, Seventh Division, in CA-G.R. CV No. 33589, in its Decision13 dated December
20, 2001 dismissed the appeal and affirmed in toto the decision of the RTC.

Ruling:

Apparently, respondents are questioning the legality of TCT No. 96886, an issue that this Court cannot pass upon in
the present case. It is a rule that the validity of a torrens title cannot be assailed collaterally.15 Section 48 of
Presidential Decree (PD) No. 1529 provides that:

[a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a
direct proceeding in accordance with law.

Due to the foregoing, Joaquin Limense, as the registered owner of Lot 12-C, and his successors-in-interest, may
enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means
without detriment to servitudes constituted thereon.21

However, although the owner of the property has the right to enclose or fence his property, he must respect
servitudes constituted thereon. The question now is whether respondents are entitled to an easement of right of
way.

Petitioners contend that respondents are not entitled to an easement of right of way over Lot No. 12-C, because
their Lot No. 12-D is not duly annotated at the back of TCT No. 96886 which would entitle them to enjoy the
easement, unlike Lot Nos. 12-A-1, 12-A-2, 12-A-3, 12-A-4, 12-A-5, and 12-A-6. Respondents, on the other hand,
allege that they are entitled to an easement of right of way over Lot No. 12-C, which has been continuously used as
an alley by the heirs of Dalmacio Lozada, the residents in the area and the public in general from 1932 up to the
present. Since petitioners are fully aware of the long existence of the said alley or easement of right of way, they are
bound to respect the same.
As defined, an easement is a real right on another's property, corporeal and immovable, whereby the owner of the
latter must refrain from doing or allowing somebody else to do or something to be done on his property, for the
benefit of another person or tenement.22

Easements may be continuous or discontinuous, apparent or non-apparent.

Continuous easements are those the use of which is or may be incessant, without the intervention of any act of
man. Discontinuous easements are those which are used at intervals and depend upon the acts of man. Apparent
easements are those which are made known and are continually kept in view by external signs that reveal the use
and enjoyment of the same. Non-apparent easements are those which show no external indication of their
existence.23

In the present case, the easement of right of way is discontinuous and apparent. It is discontinuous, as the use
depends upon the acts of respondents and other persons passing through the property. Being an alley that shows a
permanent path going to and from Beata Street, the same is apparent.

Being a discontinuous and apparent easement, the same can be acquired only by virtue of a title.24

In the case at bar, TCT No. 96886, issued in the name of Joaquin Limense, does not contain any annotation that Lot
No. 12-D was given an easement of right of way over Lot No. 12-C. However, Joaquin Limense and his successors-
in-interests are fully aware that Lot No. 12-C has been continuously used and utilized as an alley by respondents
and residents in the area for a long period of time.

Joaquin Limense's Attorney-in-Fact, Teofista L. Reyes, testified that respondents and several other residents in the
area have been using the alley to reach Beata Street since 1932.

In Mendoza v. Rosel,26 this Court held that:

Petitioners claim that inasmuch as their transfer certificates of title do not mention any lien or encumbrance on their
lots, they are purchasers in good faith and for value, and as such have a right to demand from respondents some
payment for the use of the alley. However, the Court of Appeals found, as a fact, that when respondents acquired
the two lots which form the alley, they knew that said lots could serve no other purpose than as an alley. The
existence of the easement of right of way was therefore known to petitioners who must respect the same, in
spite of the fact that their transfer certificates of title do not mention any burden or easement. It is an
established principle that actual notice or knowledge is as binding as registration.

Every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of
all encumbrances except those noted on said certificate. It has been held, however, that "where the party has
knowledge of a prior existing interest that was unregistered at the time he acquired a right to the same land, his
knowledge of that prior unregistered interest has the effect of registration as to him."27

In the case at bar, Lot No. 12-C has been used as an alley ever since it was donated by Dalmacio Lozada to his
heirs. It is undisputed that prior to and after the registration of TCT No. 96886, Lot No. 12-C has served as a right of
way in favor of respondents and the public in general. We quote from the RTC's decision:

x x x It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was
established by the original owner of Lot 12 and that in dividing his property the alley established by him continued to
be used actively and passively as such. Even when the division of the property occurred, the non-existence of the
easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear
before the issuance of said titles.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could
serve no other purpose than as an alley. That is why even after he acquired it in 1969 the lot continued to be used
by defendants and occupants of the other adjoining lots as an alley. x x x28

Thus, petitioners are bound by the easement of right of way over Lot No. 12-C, even though no registration of the
servitude has been made on TCT No. 96886.

However, respondents’ right to have access to the property of petitioners does not include the right to continually
encroach upon the latter’s property. It is not disputed that portions of respondents' house on Lot No. 12-D encroach
upon Lot No. 12-C. Geodetic Engineer Jose Agres, Jr. testified on the encroachment of respondents' house on Lot
No. 12-C, which he surveyed.29 In order to settle the rights of the parties relative to the encroachment, We should
determine whether respondents were builders in good faith.

Good faith is an intangible and abstract quality with no technical meaning or statutory definition; and it
encompasses, among other things, an honest belief, the absence of malice and the absence of a design to defraud
or to seek an unconscionable advantage. An individual’s personal good faith is a concept of his own mind and,
therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry. The essence of good faith
lies in an honest belief in the validity of one’s right, ignorance of a superior claim, and absence of intention to
overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his
title or mode of acquisition any flaw which invalidates it.30

Good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of
proof.31 It is a matter of record that respondents' predecessor-in-interest constructed their residential building on Lot
No. 12-D, adjacent to Lot No. 12-C, in 1932.32 Respondents' predecessor-in-interest owned the 1/3 portion of Lot
No. 12-C at the time the property was donated to them by Dalmacio Lozada in 1932. The Deed of Donation
executed by the late Dalmacio Lozada, dated March 9, 1932, specifically provides that:

I hereby grant, cede and donate in favor of Catalina Lozada married to Sotero Natividad, Isabel Lozada married to
Isaac Simense and Salud Lozada married to Francisco Ramos, all Filipinos, of legal age, the parcel of land known
as Lot No. 12-C, in equal parts.33

The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and 17 meters in length; the stairs;
and the concrete structures are all within the 1/3 share alloted to them by their donor Dalmacio Lozada and, hence,
there was absence of a showing that respondents acted in bad faith when they built portions of their house on Lot
No. 12-C.

Using the above parameters, we are convinced that respondents' predecessors-in-interest acted in good faith when
they built portions of their house on Lot 12-C. Respondents being builders in good faith, we shall now discuss the
respective rights of the parties relative to the portions encroaching upon respondents' house.

Articles 448 and 546 of the New Civil Code provide:

Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right
to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and, in
case of disagreement, the court shall fix the terms thereof.

Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain
the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person
who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof.

In Spouses Del Campo v. Abesia,34 this provision was applied to one whose house, despite having been built at the
time he was still co-owner, overlapped with the land of another. In that case, this Court ruled:

The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or
sows on the land owned in common for then he did not build, plant or sow upon the land that exclusively belongs to
another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation
is governed by the rules of co-ownership.

However, when, as in this case, the ownership is terminated by the partition and it appears that the house of
defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the
defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. x x x35

In other words, when the co-ownership is terminated by a partition, and it appears that the house of an erstwhile co-
owner has encroached upon a portion pertaining to another co-owner, but the encroachment was in good faith, then
the provisions of Article 448 should apply to determine the respective rights of the parties. In this case, the co-
ownership was terminated due to the transfer of the title of the whole property in favor of Joaquin Limense.

Under the foregoing provision, petitioners have the right to appropriate said portion of the house of respondents
upon payment of indemnity to respondents, as provided for in Article 546 of the Civil Code. Otherwise, petitioners
may oblige respondents to pay the price of the land occupied by their house. However, if the price asked for is
considerably much more than the value of the portion of the house of respondents built thereon, then the latter
cannot be obliged to buy the land. Respondents shall then pay the reasonable rent to petitioners upon such terms
and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course,
respondents may demolish or remove the said portion of their house, at their own expense, if they so decide.36

The choice belongs to the owner of the land, a rule that accords with the principle of accession that the accessory
follows the principal and not the other way around.37 Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to
instead remove it from the land.38
The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can
compel the landowner to make a choice between two options: (1) to appropriate the building by paying the indemnity
required by law, or (2) to sell the land to the builder.39

The raison d’etre for this provision has been enunciated, thus:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In
view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving
the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the
builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is
the owner of the land who is authorized to exercise the option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of the accessory thing.40]

In accordance with Depra v. Dumlao,41 this case must be remanded to the trial court to determine matters necessary
for the proper application of Article 448 in relation to Article 546.