G.R. No.

152809 August 3, 2006

MERCEDESMORALIDAD,
vs.
SPS. DIOSDADO PERNES and ARLENE PERNES,
Under consideration is this petition for review on
certiorari under Rule 45 of the Rules of Court to nullify
and set aside the following issuances of the Court of
Appeals (CA) in CA-G.R. SP No. 61610, to wit:
1. Decision dated September 27, 2001, 1 affirming an
earlier decision of the Regional Trial Court (RTC) of
Davao City which reversed that of the Municipal Trial
Court in Cities (MTCC), Davao City, Branch 1, in an
action for unlawful detainer thereat commenced by the
petitioner against the herein respondents; and
2. Resolution dated February 28, 2002,
petitioners motion for reconsideration.

denying

At the heart of this controversy is a parcel of land

located in Davao City and registered in the name of
petitioner
Mercedes
Moralidad
under
Transfer
Certificate of Title (TCT) No. T-123125 of the Registry of
Deeds of Davao City.
In her younger days, petitioner taught in Davao City,
Quezon City and Manila. While teaching in Manila, she
had the good fortune of furthering her studies at the
University of Pennsylvania, U.S.A. While schooling, she
was offered to teach at the Philadelphia Catholic
Archdiocese, which she did for seven (7) years.
Thereafter, she worked at the Mental Health
Department of said University for the next seventeen
(17) years.
During those years, she would come home to the
Philippines to spend her two-month summer vacation
in her hometown in Davao City. Being single, she would
usually stay in Mandug, Davao City, in the house of her
niece, respondent Arlene Pernes, a daughter of her
younger sister, Rosario.
Back in the U.S.A. sometime in 1986, she received
news from Arlene that Mandug at the outskirts of
Davao City was infested by NPA rebels and many
women and children were victims of crossfire between
government troops and the insurgents. Shocked and
saddened about this development, she immediately
sent money to Araceli, 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.
3
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.
xxx xxx xxx
Following her retirement in 1993, petitioner came back
to the Philippines to stay with the respondents on the
house they build on the subject property. In the course
of time, their relations turned sour because members
of the Pernes family were impervious to her
suggestions and attempts to change certain practices
concerning matters of health and sanitation within
their compound. For instance, Arlenes eldest son,
Myco Pernes, then a fourth year veterinary medicine
student, would answer petitioner back with clenched
fist and at one time hurled profanities when she
corrected him. Later, Arlene herself followed suit.
Petitioner brought the matter to the local barangay
lupon where she lodged a complaint for slander,
harassment, threat and defamation against the Pernes
Family. Deciding for petitioner, the lupon apparently
ordered the Pernes family to vacate 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.

b) Ordering defendants to pay P2,000.00 a month from

the filing of this complaint until they vacate premises;

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.

c) Sentencing defendants to pay the sum of

P120,000.00 5 as attorneys fees and to pay the cost of
suit.

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, 4
the MTCC rendered judgment for the petitioner, as
plaintiff therein, to wit:
WHEREFORE, judgment is hereby rendered in favor of
herein plaintiff and against the defendants, as follows:
a) Directing the defendants, their agents and other
persons acting on their behalf to vacate the premises
and to yield peaceful possession thereof to plaintiff;

Defendants counterclaim are hereby dismissed except

with respect to the claim for reimbursement of
necessary and useful expenses which should be
litigated in an ordinary civil actions. (sic)
Dissatisfied, the respondent spouses appealed to the
RTC of Davao City.
In the meantime, petitioner filed a Motion for Execution
Pending Appeal. The motion was initially granted by
the RTC in its Order of February 29, 2000, but the Order
was later withdrawn and vacated by its subsequent
Order dated May 9, 2000 6 on the ground that
immediate execution of the appealed decision was not
the prudent course of action to take, considering that
the house the respondents constructed on the subject
property might even be more valuable than the land
site.
Eventually, in a decision 7 dated September 30, 2000,
the RTC reversed that of the MTCC, holding that
respondents possession of the property in question
was not, as ruled by the latter court, by mere tolerance
of the petitioner but rather by her express consent. It
further ruled that Article 1678 of the Civil Code on
reimbursement of improvements introduced is
inapplicable since said provision contemplates of a
lessor-lessee arrangement, which was not the factual
milieu obtaining in the case. Instead, the RTC ruled that
what governed the parties relationship are Articles 448
and 546 of the Civil Code, explaining thus:
Since the defendants-appellees [respondents] are
admittedly possessors of the property by permission
from plaintiff [petitioner], and builders in good faith,
they have the right to retain possession of the property
subject of this case until they have been reimbursed
the cost of the improvements they have introduced on
the property.
Indeed, this is a substantive right given to the
defendants by law, and this right is superior to the
procedural right to [sic] plaintiff to immediately ask for
their removal by a writ of execution by virtue of a
decision which as we have shown is erroneous, and
therefore invalid. (Words in brackets supplied),
and accordingly dismissed 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.

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:
I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN
DISMISSING THE UNLAWFUL DETAINER CASE FOR
BEING PREMATURE WHICH DECISION IS NOT IN
ACCORDANCE WITH LAW AND JURISPRUDENCE.
II. WHETHER OR NOT THE COURT OF APPEALS ERRED
IN APPLYING ARTICLES 448 AND 546 AND THE
PROVISIONS OF THE CODE ON USUFRUCT INSTEAD OF
ARTICLE 1678 OF THE CIVIL CODE.
The Court rules for the petitioner.
The Court is inclined to agree with the CA that what
was constituted between the parties herein is one of
usufruct over a piece of land, with the petitioner being

the owner of the property upon whom the naked title

thereto remained and the respondents being two (2)
among other unnamed usufructuaries who were simply
referred to as petitioners kin. The Court, however,
cannot go along with the CAs holding that the action
for unlawful detainer must be dismissed on ground of
prematurity.
Usufruct is defined under Article 562 of the Civil Code
in the following wise:
ART. 562. Usufruct gives a right to enjoy the property of
another with the obligation of preserving its form and
substance, unless the title constituting it or the law
otherwise provides.
Usufruct, in essence, is nothing else but simply
allowing one to enjoy anothers property. 9 It is also
defined as the right to enjoy the property of another
temporarily, including both the jus utendi and the jus
fruendi, 10 with the owner retaining the jus disponendi
or the power to alienate the same. 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
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

xxx xxx xxx

(7) By prescription. (Emphasis supplied.)

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.

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.

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;

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:

No pronouncement as to costs.

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.)

In the matter of the testate estate of Emil

Maurice Bachrach, deceased. MARY McDONALD
BACHRACH,
petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositorsappellants.

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.

SO ORDERED.
G.R. No. L-2659

October 12, 1950

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 the appeal.
The deceased E. M. Bachrach, who left no forced
heir except his widow Mary McDonald Bachrach, in his
last will and testament made various legacies in cash
and willed the remainder of his estate as follows:
Sixth: It is my will and do herewith bequeath
and devise to my beloved wife Mary McDonald
Bachrach for life all the fruits and usufruct of
the remainder of all my estate after payment of
the legacies, bequests, and gifts provided for
above; and she may enjoy said usufruct and
use or spend such fruits as she may in any
manner wish.
The will further provided that upon the death of
Mary McDonald Bachrach, one-half of the all his estate
"shall be divided share and share alike by and between
my legal heirs, to the exclusion of my brothers."
The estate of E. M. Bachrach, as owner of
108,000 shares of stock of the Atok-Big Wedge Mining
Co., Inc., received from the latter 54,000 shares
representing 50 per cent stock dividend on the said
108,000 shares. On June 10, 1948, Mary McDonald
Bachrach, as usufructuary or life tenant of the estate,
petitioned the lower court to authorize the Peoples
Bank and Trust Company as administrator of the estate
of E. M. Bachrach, to her the said 54,000 share of stock
dividend by endorsing and delivering to her the
corresponding certificate of stock, claiming that said
dividend, although paid out in the form of stock, is fruit
or income and therefore belonged to her as
usufructuary or life tenant. Sophie Siefert and Elisa
Elianoff, legal heirs of the deceased, opposed said
petition on the ground that the stock dividend in
question was not income but formed part of the capital
and therefore belonged not to the usufructuary but to
the remainderman. And they have appealed from the
order granting the petition and overruling their
objection.

While appellants admits that a cash dividend is

an income, they contend that a stock dividend is not,
but merely represents an addition to the invested
capital. The so-called Massachusetts rule, which
prevails in certain jurisdictions in the United States,
supports appellants' contention . It regards cash
dividends, however large, as income, and stock
dividends, however made, as capital. (Minot vs. Paine,
99 Mass., 101; 96 Am. Dec., 705.) It holds that a stock
dividend is not in any true sense any true sense any
dividend at all since it involves no division or severance
from the corporate assets of the dividend; that it does
not distribute property but simply dilutes the shares as
they existed before; and that it takes nothing from the
property of the corporation, and nothing to the
interests of the shareholders.
On the other hand, so called Pennsylvania rule,
which prevails in various other jurisdictions in the
United States, supports appellee's contention. This rule
declares that all earnings of the corporation made prior
to the death of the testator stockholder belong to the
corpus of the estate, and that all earnings, when
declared as dividends in whatever form, made during
the lifetime of the usufructuary or life tenant. (Earp's
Appeal, 28 Pa., 368.)
. . . It is clear that testator intent the
remaindermen should have only the corpus of
the estate he left in trust, and that all dividends
should go the life tenants. It is true that profits
realized are not dividends until declared by the
proper officials of the corporation, but
distribution of profits, however made, in
dividends, and the form of the distribution is
immaterial. (In re Thompson's Estate, 262 Pa.,
278; 105 Atl. 273, 274.)
In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780),
the Court of Appeals of Kentucky, speaking thru its
Chief Justice, said:
. . . Where a dividend, although declared
in stock, is based upon the earnings of the
company, it is in reality, whether called by one
name or another, the income of the capital
invested in it. It is but a mode of distributing
the profit. If it be not income, what is it? If it is,
then it is rightfully and equitably the property
of the life tenant. If it be really profit, then he
should have it, whether paid in stock or money.
A stock dividend proper is the issue of new
shares paid for by the transfer of a sum equal
to their par value from the profits and loss
account to that representing capital stock; and
really a corporation has no right to a dividend,
either in cash or stock, except from its
earnings; and a singular state of case it
seems to us, an unreasonable one is

presented if the company, although it rests

with it whether it will declare a dividend, can
bind the courts as to the proper ownership of it,
and by the mode of payment substitute its will
for that of that of the testator, and favor the
life tenants or the remainder-men, as it may
desire. It cannot, in reason, be considered that
the testator contemplated such a result. The
law regards substance, and not form, and such
a rule might result not only in a violation of the
testator's intention, but it would give the power
to the corporation to beggar the life tenants,
who, in this case, are the wife and children of
the testator, for the benefit of the remaindermen, who may perhaps be unknown to the
testator, being unborn when the will was
executed. We are unwilling to adopt a rule
which to us seems so arbitrary, and devoid of
reason and justice. If the dividend be in fact a
profit, although declared in stock, it should be
held to be income. It has been so held in
Pennsylvania and many other states, and we
think it the correct rule. Earp's Appeal, 28 Pa.
St. 368; Cook, Stocks & S. sec. 554. . . .
We think the Pennsylvania rule is more in accord
with our statutory laws than the Massachusetts rule.
Under section 16 of our Corporation Law, no
corporation may make or declare any dividend except
from the surplus profits arising from its business. Any
dividend, therefore, whether cash or stock, represents
surplus profits. Article 471 of the Civil Code provides
that the usufructuary shall be entitled to receive all the
natural, industrial, and civil fruits of the property in
usufruct. And articles 474 and 475 provide as follows:
ART. 474. Civil fruits are deemed to
accrue day by day, and belong to the
usufructuary in proportion to the time the
usufruct may last.
ART. 475. When a usufruct is created on
the right to receive an income or periodical
revenue, either in money or fruits, or the
interest on bonds or securities payable to
bearer, each matured payment shall be
considered as the proceeds or fruits such right.
When it consists of the enjoyment of the
benefits arising from an interest in an industrial
or commercial enterprise, the profits of which
are not distributed at fixed periods, such profits
shall have the same consideration.lawphil.net
In either case they shall be distributed as
civil fruits, and shall be applied in accordance
with the rules prescribed by the next preceding
article.

The 108,000 shares of stock are part of the

property in usufruct. The 54,000 shares of stock
dividend are civil fruits of the original investment. They
represent profits, and the delivery of the certificate of
stock covering said dividend is equivalent to the
payment of said profits. Said shares may be sold
independently of the original shares, just as the
offspring of a domestic animal may be sold
independently of its mother.

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

The order appealed from, being in accordance

with the above-quoted provisions of the Civil Code, his
hereby affirmed, with costs against the appellants.

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

RAMONA R. LOCSIN, accompanied by her
husband RENATO L. LOCSIN; TERESITA R.
GUANZON, accompanied by her husband ROMEO
G. GUANZON; CELINA R. SIBUG; accompanied by
her husband CARLOS V. SIBUG; MA. LUISA R.
PEREZ, accompanied by her husband JOSE V.
PEREZ; EDITHA R. YLANAN, accompanied by her
husband CARLOS W. YLANAN; and ANA MARIE R.
BENEDICTO, accompanied by her husband JOSE
LUIS
U.
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.
Mirano, Mirano & Associates for petitioners in both
cases.

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.

Jose V. Valmayor & Samuel SM. Lezama for private

respondents in G.R. No. 51333. Bonifacio R. Cruz for
private respondents in G.R. No. 52289.
RESOLUTION
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

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.

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

TOTAL

56.555 Ha.

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

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 Court of Appeals, the appeal being there
docketed as C.A.-G.R. SP No. 09-440. In a Decision
dated 27 November 1979, however, the Court of
Appeals 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 Supreme Court 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 answerxxxxxxxxx
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

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.

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.

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.

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 Regional Trial Court 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. Regional Trial
Courts 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;xxx xxx xxx
The Regional Trial Courts 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 regional trial court sitting as a
probate court, a region al trial court seized of an
agrarian dispute and interpreting and applying statutes

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
Regional Trial Court 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.