HEMEDES vs.
CA (Gueco) title, but all the contracts he may enter into as such usufructuary shall terminate
October 9, 1999 | Gonzaga-Reyes, J. | Usufructuary Rights
PETITIONER: Maxima Hemedes
RESPONDENTS: The Honorable Court of Appeals, Dominium Realty and
Construction Corporation, Enrique D. Hemedes, and R&B Insurance
Corporation
SUMMARY:
Jose was the owner of a parcel of land in Laguna. He donated the said land to his
3rd wife, Justa, subject to the resolutory condition that should she die or remarry,
the Laguna property shall revert to any of his (Jose) children or heirs. Pursuant to
this condition, Justa executed a deed conveying the Laguna Property to Maxima,
one of the children and heirs of Jose. The said deed transferred ownership over
the land to Maxima, but it provided that the possession and enjoyment of the
property shall remain with Justa during her lifetime or widowhood. An OCT was
then issued to Maxima with the annotation of Justa’s usufructuary right over the
property. Maxima thereafter mortgaged the Laguna property to R&B Insurance
to secure the loan that she had obtained from the latter. The mortgage was,
however, foreclosed and Maxima’s OCT over the property was cancelled. A
TCT was then issued in favor of R&B Insurance. Meanwhile, Justa executed a
Kasunduan with Enrique, her stepson, whereby she conveyed the same property
(Laguna property) in favor of Enrique. Since the conveyance, Enrique had been
paying the realty taxes of the Laguna property. He was also designated as the
owner of the said property in the cadastral survey of Laguna and also in the
records of the Ministry of Agrarian Reform. Subsequently, Enrique sold the
Laguna property to Dominium, who thereafter leased the property to Asia
Brewery. When R&B Insurance found out about this, it sent a letter to
Dominium stating that it is the owner of the Laguna Property. Dominium and
Enrique then initiated an action in court to have the same determine who the real
owner was. RTC ruled in favor of Dominium and Enrique. CA affirmed the
RTC’s decision in toto, and it stated that since the OCT of Maxima had an
encumbrance (the usufructuary right of Justa) annotated on it, R&B Insurance
had the obligation to investigate the circumstances behind the said encumbrance.
But since it failed to do so, it did not act in good faith. RELEVANT ISSUE:
WoN R&B Insurance is an innocent purchaser of the land. RULING: YES. The
annotation of usufructuary rights in favor of Justa does not impose upon R & B
Insurance the obligation to investigate the validity of the owner’s title. *Read
Doctrine* As such, the annotation of usufructuary rights in favor of Justa is not
sufficient cause to require R & B Insurance to investigate the title of Maxima.
DOCTRINE:
Usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and substance. The usufructuary is entitled to all the natural,
industrial and civil fruits of the property and may personally enjoy the thing in
usufruct, lease it to another, or alienate his right of usufruct, even by a gratuitous
upon the expiration of the usufruct. In a usufructuary right, only the use and
fruits over the property is transferred to the usufructuary. The ownership over the
land as well as the right to alienate, encumber, transform, and even destroy the
same, remains with the owner.
FACTS:
1. Jose Hemedes (“Jose”) owned a parcel of land in Laguna.
2. On March 22, 1947, Jose donated the said parcel of land to his 3 rd wife,
Justa Kausapin (“Justa”). The donation was subject to the following
resolutory condition:
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.
3. Pursuant to the first condition abovementioned, Justa executed on
September 27, 1960 a deed conveying the Laguna property to Maxima
Hemedes (“Maxima”), one of the children and heirs of Jose. The said deed
stated that the ownership, title, and rights over the property would be
transferred to Maxima. However, it provided that the possession and
enjoyment of the property will remain vested upon Justa during her lifetime
or widowhood.
4. By virtue of the deed executed, Maxima was issued an Original Certificate
Title (“OCT”). The said OCT had an annotation that Justa has usufructuary
rights over the land during her lifetime or widowhood.
5. In 1964, Maxima mortgaged the Laguna property in favor of R&B
Insurance to secure the loan she obtained from the latter. The mortgage was,
however, foreclosed by R&B Insurance because Maxima failed to pay. The
property was sold at public auction with R&B Insurance winning as the
highest bidder. Maxima failed to redeem the property so her OCT over the
Laguna property was cancelled, and a Transfer Certificate of Title (“TCT”)
was issued in favor of R&B Insurance. The said TCT still had the
annotation of usufruct in favor of Justa.
6. In 1971, however, despite the earlier conveyance by Justa to Maxima, Justa
still executed a “Kasunduan” conveying the Laguna property her stepson,
Enrique Hemedes (“Enrique”). To assert his ownership over the land, he:
a. Paid the realty taxes of the land, and
b. He was designated as owner of the property in the cadastral
survey of Cabuyao, Laguna and in the records of the Ministry
of Agrarian Reform office in Calamba, Laguna.
7. Enrique then sold the Laguna Property to Dominium Realty and
 Corporation (“Dominium”).
8. Dominium then leased the property to its sister corporation, Asia Brewery.
9. Asia Brewery constructed two warehouses on the land.
10. When R&B Insurance learned of the constructions made on its property, it
sent a letter informing Asia Brewery and Dominium of its ownership and
right to appropriate the constructions made on its property.
11. Dominium and Enrique then initiated an action in court to have the same
determine who the rightful owner was.
12. RTC ruled in favor of Dominium and Enrique.
13. R&B Insurance and Maxima appealed.
14. CA affirmed in toto the decision of the RTC; hence, this case.
ISSUES:
1. WoN Enrique and Dominium owns the Laguna Property—NO, it is R&B
Insurance who owns the land (this is by virtue of the transfer made to it by
Maxima).
2. WoN R&B Insurance should be considered an innocent purchaser of
the land—YES.  This is the relevant issue to our topic.
RULING: 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.
RATIO:
FIRST ISSUE:
1. Enrique and Dominium did not acquire any rights over the Laguna property.
For one, what Justa transferred to Enrique was the exact same property she
had earlier transferred to Maxima. Thus, the donation in favor of Enrique is
null and void since the object of the donation did not exist at the time of the
transfer.
2. Similarly, the sale of the property by Enrique to Dominium is also a nullity
for the latter cannot acquire more rights than its predecessor-in-interest.
Furthermore, Dominium cannot be considered an innocent purchaser for
value since Enrique did not present any certificate of title to it.
3. The declarations of real property by Enrique, 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. 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.
SECOND ISSUE (AND THE ONE RELEVANT TO OUR TOPIC):
*Reason why there is an issue of whether R&B is an innocent purchaser of the land:
The CA stated that since the OCT of Maxima had an encumbrance (the usufructuary
right of Justa) annotated on it, R&B Insurance had the obligation to investigate the
circumstances behind the said encumbrance. But since it failed to do so, it did not act
in good faith.
1. According to the SC, the annotation of usufructuary rights in favor of Justa
does not impose upon R & B Insurance the obligation to investigate the
validity of the owner’s title. Usufruct gives a right to enjoy the property
of another with the obligation of preserving its form and substance.
The usufructuary is entitled to all the natural, industrial and civil fruits
of the property 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.
2. In a usufructuary right, only the use and fruits over the property is
transferred to the usufructuary. The ownership over the land as well as
the right to alienate, encumber, transform, and even destroy the same,
remains with the owner.
3. As such, the annotation of usufructuary rights in favor of Justa is not
sufficient cause to require R & B Insurance to investigate the title of
Maxima. Maxima’s ownership over the property remained unimpaired
despite such encumbrance, and R&B Insurance had a right to rely on the
certificate of title presented by Maxima. R&B Insurance was not in bad
faith in accepting the property as a security for the loan that it extended to
Maxima.
4. Even assuming arguendo that R & B Insurance was obligated to look
beyond the certificate of title and investigate the title of Maxima, still, it
would not have discovered any better rights in favor of Enrique and
Dominium. Why? Enrique and Dominium base their claims to the property
upon the "Kasunduan" allegedly executed by Justa in favor of Enrique
Hemedes. However, as 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.
5. Thus, even if R & B Insurance investigated the title of Maxima, it would
not have discovered any adverse claim to the land in derogation of its
mortgagor's title.
VITUG, J., concurring:
He agrees with the decision of the ponencia and goes on to say that the rule on
double sales finds no relevance in an ordinary donation where the law requires the
donor to have ownership of the thing or the real right he donates at the time of its
perfection.

MELO, J., dissent:

He disagreed on the ruling of the majority regarding the testimony given by Justa
(wasn’t discussed above but basically Maxima argued that Justa’s affidavit should
not be given credence because Justa’s statements were allegedly biased since she
(Justa) is dependent upon Enrique for support. The SC agreed with Maxima and
discredited the testimony of Justa). Justice Melo argues that mere relationship of a
witness to the party should not be used as basis to discredit the witnesses’ testimony.
He also points out that Justa’s entitlement to support flowed from her usufructuary
rights contained in the "Donation Inter Vivos with Resolutory Conditions" executed
by her late husband, Jose. According to Justice Melo, in supporting his stepmother,
Enrique was, therefore, merely performing a legal or contractual duty in favor of
Justa Kausapin.