G.R. No.

152809 August 3, 2006

MORALIDAD, Petitioner,
vs.
SPS.
DIOSDADO
PERNES
PERNES, Respondents.

and

ARLENE

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.

WHEREFORE, judgment is hereby rendered in favor of

herein plaintiff and against the defendants, as
follows:

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.

b) Ordering defendants to pay P2,000.00 a month

from the filing of this complaint until they vacate
premises;

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:

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;

c) Sentencing defendants to pay the sum

of P120,000.00 5 as attorneys fees and to pay the
cost of suit.
Defendants counterclaim are hereby dismissed
except with respect to the claim for reimbursement
of necessary and useful expenses which should be
litigated in an ordinary civil actions. (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:

(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;

xxx Section 1, Rule 70 of the 1997 Rules of Civil

Procedure, as amended, provides xxx

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

xxx xxx xxx

(6) By the termination of the right of the person

constituting the usufruct;

From the foregoing provision, it becomes apparent

that for an action for unlawful detainer to prosper,
the plaintiff [petitioner] needs to prove that
defendants [respondents] right to possess already
expired and terminated. Now, has respondents right
to possess the subject portion of petitioners property
expired or terminated? Let us therefore examine
respondents basis for occupying the same.
It is undisputed that petitioner expressly authorized
respondents o occupy portion of her property on
which their house may be built. Thus "it is my
desire that Mr. and Mrs. Diosdado M. Pernes may
build their house therein and stay as long as they
like." From this statement, it seems that petitioner
had given the respondents the usufructuary rights
over the portion that may be occupied by the house
that the latter would build, the duration of which
being dependent on how long respondents would like
to occupy the property. While petitioner had already
demanded from the respondents the surrender of the
premises, this Court is of the opinion that the
usufructuary rights of respondents had not been
terminated by the said demand considering the clear
statement of petitioner that she is allowing
respondents to occupy portion of her land as long as
the latter want to. Considering that respondents still
want to occupy the premises, petitioner clearly
cannot eject respondents. 12
We disagree with the CAs conclusion of law on the
matter. The term or period of the usufruct originally
specified provides only one of the bases for the right
of a usufructuary to hold and retain possession of the
thing given in usufruct. There are other modes or
instances whereby the usufruct shall be considered
terminated or extinguished. For sure, the Civil Code
enumerates such other modes of extinguishment:
ART. 603. Usufruct is extinguished:

(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 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. 3314 January 3, 1907
ANSELMO CHINGEN,Plaintiff-Appellant, vs. TOMAS
ARGUELLES AND WIFE, ET AL.,DefendantAppellees.
On the 25th of October, 1905, the plaintiff, Anselmo
Chingen, by his attorney, Claro Reyes, filed a
complaint in the Court of First Instance of the city of
Manila, praying for judgment against the four
defendants herein for one-half of the jewels therein
mentioned and the rent of the property referred to
therein, to wit, 4,170 pesos, or a half of 8,340 pesos
received by the defendants since the date they took
possession of the legacies left by the deceased
Raymunda Reyes in her will - that is to say, since the
29th of May 1900 - which said legacies consisted of a
house numbered 8, 10, 12, and 14 Calle Claviera,
district of Binondo, two combs set with diamonds,
and pearls, respectively a gold ring with three
diamonds each, and a gold ring with one large and
several diamonds, the defendants having refused to
pay half of the earnings derived from the property
left by the testatrix and the legacies referred to
belonging to him as the surviving husband of the
deceased, who died without legitimate heirs,
ascendants or descendants all efforts to collect the
sum thus claimed having failed., The plaintiff further
prayed that the defendants be required to pay the

costs, and for such other and further relief as the

court might deem just and equitable.
The defendant, by their attorney, Teodoro Gonzalez,
after the demurrer of the complain had been
overruled, filed an answer wherein they prayed that
the action be dismissed with the costs against the
plaintiff, admitting all the allegations of the
complaint except such as were expressly or tacitly
denied in their special answer, wherein they alleged
that the legacies referred to in this complaint were
unconditional legacies, specific and definite of
property belonging to the testatrix, the value of
which legacies did not exceed one half of the estate
of which she could freely dispose, and therefore were
not subject to the right of usufruct which ordinarily
would belong to the plaintiff; that the testatrix made
a partition of her property which became irrevocable,
it not having been contested within the time
prescribed by law by the widower plaintiff, the only
one who could have maintained an action for the
rescission of such partition, the said plaintiff having
alienated a considerable part of the personal
property assigned to him; and that the property
bequeathed in these legacies was delivered t the
defendant legatees by the plaintiff, who was the
executor of the will. law library
The plaintiff filed a reply to the said answer,
admitting all the facts alleged therein in paragraphs
A, B, and C, thereof, except in so far as it was
asserted that the right of usufruct did not extend to
the property embraced in the legacies; that the value
of the such property had not been included in the
property of the estate and for his reason it was
impossible to determine with certainty the value of
one half of the entire estate; and that if the value of
the said legacies was not included in the estate the
right of usufruct which the surviving husband and
upon one half of the property left by the testatrix
would be jeopardized; and denying the consequences
of paragraph C and the allegations contained in
paragraphs D and E. law library
After hearing the evidence introduced by both
parties, the court entered judgment on the 6th of
March, last, in favor of the defendant and against the
plaintiff, dismissing the said complaint with the costs
to the defendant, from which judgment the plaintiff
excepted, and after his motion for a new trial was
overruled excepted thereto. Article 837 of the Civil
Code provides:
If the testator should have neither legitimate
ascendants or descendants, the surviving spouse
shall be entitled to one half of the estate also in
usufruct.

The object of the action brought by the plaintiff was

to recover one half of the jewels mentioned in his
complaint and one half of the rent accruing from a
certain property, which said property, as well as the
jewels in question, were delivered as part of their
legacies to the legatees, Carmen Reyes, Jose Reyes,
and Pedro Reyes, under the will of the deceased
Raymunda Reyes.
The plaintiff in his brief presented on appeal in this
case seems to insists upon his original petition, for
he claims this object is to recover the remainder of
the property which belonged to him in usufruct under
the law as the surviving spouse of the testatrix, citing
to this end article 815 of the Civil Code. The main
reliance of the plaintiff is that his deceased wife, the
testatrix, did not assign to him in her will the entire
portion which belonged to him; that is to say, one
half of the estate in usufruct.
In addition to this, the plaintiff should also have
stated that he was one of the executors of the will in
question, the first among those designate in clause
17 of the will; and that he, the plaintiff, and the
minor Lamberto Reyna are the only heirs under the
said will. This will account for the testatrix silence as
to the usufructory portion pertaining to the husband.
The testatrix left no legitimate descendants or
ascendants. Her surviving husband was therefore
entitled to the usufruct of one half of the estate.
Where the surviving husband is also an heir under
the will, as happens in the present case, the
undivided portion assigned to him as such their in
accordance with the terms of the will shall be
considered as an integral part of the one half of the
estate subject to the right of usufruct of such
husband for the reason that the latter's right, even
though he may be also an heir under the will, is not
superior, and he is not object of the law is to equalize
the condition of the heirs and of the surviving spouse
who received nothing in addition to a share of the
estate property, not as surviving spouse, but as an
heir, which share he has already received and
accepted.
It is not just that the plaintiff, Anselmo Chingen, after
receiving the property to which he was entitled be
also testamentary heir of his deceased wife, should
be also entitled to the usufruct so received by him
was not included.
The property of the estate of his deceased wife
having been divided in two equal parts, the property
to which the plaintiff was entitled as an heir under
the will should have been taken out of the one half,
subject to the usufruct of the surviving spouse. This
done, the usufruct, of course, is extinguished ipso

facto by the merger of such right of usufruct and

ownership in the same person, as provided in
paragraph 3 of article 513 of the Civil Code.

the property assigned to him in the partition of the

estate, either as an heir or as a surviving spouse of
the deceased. law library

It is absurd and contrary to all justices that the

plaintiff should received his share as an heir under
the will from one half of the estate and be further
entitled to the usufrucrt of the other half to the
prejudice of his coheir and the various legatees
under the will. There is no law or article of the code
which authorizes such an iniquitos privilege

The plaintiff does not seek to have the aforesaid

partition set aside, nor can he ask such a thing, for
the partition of the estate was made exclusively by
him and the guardian ad litem of this coheir.
However, the property of the estate having been
disturbed, and the plaintiff having disposed of some
of the most valuable property awarded to him in said
partition, as he himself admits (p. 14), and the
properties having been actually delivered to the
respective legatees, a new liquidation or settlement
of the estate can not be had, and the partition made
under the exclusive direction of the plaintiff as
executor of the will of the deceased can not be set
aside, since the same is expressly prohibited by the
provisions of article 1078 of the Civil Code. Moreover,
it has not been shown that the property bequeathed
to the defendant legatees was included in the one
half of the husband. The mere fact that the plaintiff
delivered the said property to the legatees absolutely
and unconditionally shows conclusively that his right
of usufruct is intact and has not been injured in any
way.

In any event the portion of the estate subject to the

usufruct must be claimed from the heir or heirs in
due time, and in the manner and form prescribed by
law. law library
It appears from the record that the property of the
estate was liquidated, distributed, and apportioned
among the heirs and legatees under the will, the
plaintiff, as the executor and heir of his deceased
wife, and attorney Nazario Constantino, guardian ad
litem of the minor heir, Lamberto Reyna, being the
only ones who took part in the proceedings were duly
approved by the court. (Original bill of exceptions,
pp. 15-23.)
It appears from the proceedings in question that
there were assigned to the plaintiff, Anselmo
Chingen, the surviving husband of the deceased, as
his share of the community property and his
usufruct, property to the value of 9,740.12 pesos and
13,000 pesos as testamentary heir. virtual law library
According to the will, a copy of which appears on
pages 7 to 13 of the record, there were twelve
legatees and some substitutes who were entitled to
various classes of property described in detail in the
said will, and, if it is true as contended by the
executor, now the plaintiff in the will of the testatrix
by delivering to the various legatees the property
bequeathed to them by his deceased wife, it may be
said that the liquidation, partition, and distribution of
the rest of the estate having been made between the
only two heirs, the plaintiff one of them, the estate is
finally and definitely settled, for the partition of an
estate puts an end to the undivided condition of the
same, and confers upon each of the heirs the
exclusive ownership of the property assigned to him.
(Article 1068 of the Civil Code. ) The plaintiff, as has
been said before, claims half of the jewels
bequeathed to the legatees, and one half of the rents
accruing from a certain house also bequeathed to the
defendants, as his, the plaintiffs, usufructory portion.
He has failed, however, to state the total value of the
estate and the value of the one half of the property
to which he claims to be entitled in usufruct. He has
said absolutely nothing as to the nature and value of

Finally, it should be borne in mind that the legacy to

which this action relates consists of a house and
certain jewels and is according to the will, an
unconditional legacy without any fixed period, and
that the property thus bequeathed is specified in the
said will and described as being of the exclusive
ownership of the testatrix, so that the legatees were
entitled to the property thus bequeathed to them
from the death of the testatrix, and as owners of
such property were also entitled to the fruits and
earnings and any increase thereof, as well as liable
for any los or impairment thereof. (Arts. 881, 882,
Civil Code.)
For the reasons hereinbefore set out and those
contained in the judgment appealed from in so far as
they conform with this decision, we are of the opinion
that judgment should be affirmed, and the
defendants are hereby absolved of the complaint of
the plaintiff, Anselmo Chingen, with the costs against
the appellant. After the expiration of twenty days let
judgment be entered in accordance herewith and ten
days thereafter the case be remanded to the Court of
First Instance of execution. So ordered.c
[G.R. No. L-9023. November 13, 1956.]
BISLIG BAY LUMBER COMPANY. INC., PlaintifAppellee, vs. THE PROVINCIAL GOVERNMENT
OF SURIGAO, Defendant-Appellant.

Bislig Bay Lumber Co., Inc. is a timber concessionaire

of a portion of public forest located in the provinces
of Agusan and Surigao. With a view to developing
and exploiting its concession, the company
constructed at its expense a road from the barrio
Mangagoy into the area of the concession in Surigao,
with a length of approximately 5.3 kilometers, a
portion of which, or about 580 linear meters, is on a
private property of the company. The expenses
incurred by the company in the construction of said
road amounted to P113,370, upon which the
provincial assessor of Surigao assessed a tax in the
amount of P669.33.
Of this amount, the sum of P595.92 corresponds to
the road constructed within the area of the
concession. This was paid under protest. Later, the
company filed an action for its refund in the Court of
First Instance of Manila alleging that the road is not
subject to tax. Defendant filed a motion to dismiss on
two grounds (1) that the venue is improperly laid,
and (2) that the complaint states no cause of action;
this motion was denied. Thereafter, Defendant filed
its answer invoking the same defenses it set up in its
motions to dismiss. In the meantime, Congress
approved Republic Act No. 1125 creating the Court of
Tax Appeals, whereupon Plaintiff moved that the case
be forwarded to the latter court as required by said
Act. This motion however, was denied and, after due
trial,
the
court
rendered
decision
ordering Defendant to refund to Plaintiffthe amount
claimed in the complaint. This is an appeal from said
decision.
The first error assigned refers to the jurisdiction of
the lower court. It is contended that since the
present case involves an assessment of land tax the
determination of which comes under the exclusive
jurisdiction of the Court of Tax Appeals under
Republic Act No. 1125, the lower court erred in
assuming jurisdiction over the case.
It is true that under section 22 of said Act the only
cases that are required to be certified and remanded
to the Court of Tax Appeals which upon its approval
are pending determination before a court of first
instance are apparently confined to those involving
disputed assessment of internal revenue taxes or
custom duties, and the present case admittedly
refers to an assessment of land tax, but it does not
mean that because of that apparent omission or
oversight the instant case should not be remanded to
the Court of Tax Appeals, for in interpreting the
context of the section above adverted to we should
not ignore section 7 of the same act which defines
the extent and scope of the jurisdiction of said court.
As we have held in a recent case, section 22 of
Republic Act No. 1125 should be interpreted in such a
manner as to make it harmonize with section 7 of the
same Act and that the primordial purpose behind the
approval of said Act by Congress is to give to the
Court of Tax Appeals exclusive appellate jurisdiction
over all tax, customs, and real estate assessment
cases through out the Philippines and to hear and
decide them as soon as possible (Ollada vs. The
Court of Tax Appeals, 99 Phil., 604). Considering this
interpretation of the law, it logically follows that the
lower court did not act properly in denying the

motion to remand the instant case to the Court of Tax

Appeals.
Considering, however, that it would be more
expeditious to decide this case now than to remand it
to the Court of Tax Appeals because, even if this
course is taken, it may ultimately be appealed to this
court, we will now proceed to discuss the case on the
merits.
The Tax in question has been assessed under section
2 of Commonwealth Act No. 470 which provides:
SEC. 2. Incidence of real property tax. Except in
chartered cities, there shall be levied, assessed, and
collected, an annual ad- valorem tax on real
property, including land, buildings, machinery, and
other improvements not hereinafter specifically
exempted.
Note that said section authorizes the levy of real tax
not only on lands, buildings, or machinery that may
be erected thereon, but also on any other
improvements, and considering the road constructed
by Appellee on the timber concession granted to it as
an improvement, Appellantassessed the tax now in
dispute upon the authority of the above provision of
the law.
It is the theory of Appellant that, inasmuch as the
road was constructed by Appellee for its own use and
benefit it is subject to real tax even if it was
constructed on a public land. On the other hand, it is
the theory of Appellee that said road is exempt from
real tax because (1) the road belongs to the national
government by right of accession, (2) the road
cannot be removed or separated from the land on
which it is constructed and so it is part and parcel of
the public land, and (3), according to the evidence,
the road was built not only for the use and benefit
of Appelleebut also of the public in general.
We are inclined to uphold the theory of Appellee. In
the first place, it cannot be disputed that the
ownership of the road that was constructed
by Appellee belongs to the government by right
accession not only because it is inherently
incorporated or attached to the timber land leased
toAppellee but also because upon the expiration of
the concession, said road would ultimately pass to
the national government (Articles 440 and 445, new
Civil Code; chan roblesvirtualawlibraryTabotabo vs.
Molero, 22 Phil., 418). In the second place, while the
road was constructed by Appellee primarily for its
use and benefit, the privilege is not exclusive, for,
under the lease contract entered into by
theAppellee and the government and by public in by
the
general.
Thus,
under
said
lease
contract,Appellee cannot prevent the use of portions,
of the concession for homesteading purposes (clause
12). It is also in duty bound to allow the free use of
forest products within the concession for the personal
use of individuals residing in or within the vicinity of
the land (clause 13). The government has reserved
the right to set aside communal forest for the use of
the inhabitants of the region, and to set forest
reserves for public uses (clause 14). It can also grant
licenses covering any portion of the territory for the
cutting and extraction of timber to be used in public
works, for mining purposes, or for the construction of
railway lines (clause 15). And, if it so desires, it can

provide for logging railroad, cable ways timber chute

os slide, telephone lines, pumping stations log
landings, and other rights of way for the use of forest
licensees, concessionaires, permittees, or other
lessees (clause 26). In other words, the government
has practically reserved the rights to use the road to
promote its varied activities. Since, as above shown,
the road in question cannot be considered as an
improvement which belongs to Appellee, although in
part is for its benefit, it is clear that the same cannot
be the subject of assessment within the meaning of
section 2 of Commonwealth Act No. 470.
We are not oblivious of the fact that the present
assessment was made by Appellant on the strength
of an opinion rendered by the Secretary of Justice,
but we find that the same is predicated on
authorities which are not in point, for they refer to
improvements that belong to the lessee although
constructed on lands belonging to the government. It
is well settled that a real tax, being a burden upon
the capital, should be paid by the owner of the land
and not by a usufructuary (Mercado vs. Rizal, 67
Phil., 608;
yArticle 597, new Civil Code). Appellee is but a
partial usufructuary of the road in question.
Wherefore, the decision appealed from is affirmed,
without costs.
G.R. No. L-3691

November 21, 1951

JACINTO DEL SAZ OROZCO y MORTERA and

MARIA
PAZ
ALCANTARA, plaintiffs-appellants,
vs.
SALVADOR ARANETA, FRANCISCO DEL SAZ
OROZCO Y LOPEZ, DOLORES DEL SAZ OROZCO
Y LOPEZ, and the minors FELISA, EUGENIO,
ANTONIO, JOSE, MARIA Y CARLOS, all surnamed
DEL SAZ OROZCO Y LOPEZ whose natural
guardian is DOA CONCEPCION LOPEZ VDA. DE
DEL SAZ OROZCO, defendants-appellees.
Eugenio del Saz Orozco died on February 7, 1922,
leaving a will which he had executed on March 5,
1921, and was afterwards duly admitted to probate.
The pertinent clause of that will provided that certain
properties should be given in life usufruct to his son
Jacinto del Saz Orozco y Mortera, with the obligation
on his part to preserve said properties in favor of the
other heirs who were declared the naked owners
thereof. Among these properties were 5,714 shares
of stock of the Benguet Consolidated Mining
Company, according to the project of partition
executed pursuant to said will and duly approved by
the court.
On September 11, 1934, the Benguet Consolidated
Mining Company declared and distributed stock
dividends out of its surplus profits, the plaintiff
receiving his proportionate portion of 11,428 shares.
On November 17, 1939, said Mining Company again
declared stock dividends out of its surplus profits, of

which the plaintiff received 17,142 shares, making a

total of 28,570 shares.
The question at this issue is whether the stock
dividend is part of the capital which should be
preserved in favor of the owners or an income of
fruits of the capital which should be given to and
enjoyed by the life usufructuary, the plaintiff herein,
as his own exclusive property.
The same question was raised in the Matter of the
Testate Estate of Emil Maurice Bachrach, * G.R. No. L2659 the decision of which was promulgated on
October 12, 1950. In that case, the question raised
was stated as follows:
Is a stock dividend fruit or income, which
belongs to the usufructuary, or is it capital
or part of the corpus of the estate, which
pertains to the remainderman. That is the
question raised in this appeal.
In said case, Emil Maurice Bachrach was the owner of
108,000 shares of stock of the Atok Big Wedge
Mining Co., Inc. He received 54,000 shares,
representing 50 per cent stock dividend on said
original shares. On June 10, 1948, Mary MacDonald
Bachrach as life tenant or usufructuary of the estate
filed a motion asking the Court of First Instance to
authorize the Peoples Bank and Trust Company, as
administrator of the estate of Emil Maurice Bachrach,
to transfer to her the said 54,000 shares of stock
dividend by indorsing and delivering to her the
corresponding certificates of stock, claiming that said
dividend, although paid out in the form of stock, was
fruit or income and, therefore, belonged to her as
usufructuary. The other heirs of Bachrach opposed
the motion on the ground that the stock dividend was
part of the capital or corpus of the estate and
belonged to the remainderman. The court granted
the motion and the other heirs appealed.
Justice Ozaeta, with the unanimous concurrence of
the other members of this Court, ruled that a
dividend, whether in the form of cash or stock, is
income and, consequently, should go to the
usufructuary, taking into consideration that a stock
dividend as well as a cash dividend can be declared
only out of profits of the corporation, for it were
declared out of the capital it would be a serious
violation of the law.
For the reason sustaining the doctrine, we refer to
that recent decision.
The appellees attempt to differentiate the present
case from that case, contending that, while the
doctrine in that case effected a just and equitable

distribution, the application of it in the present case

would cause an injustice, for, quoting Justice Holmes,
"abstract propositions do not decide concrete cases."
We have examined the two cases carefully and we
have not perceived any difference which would
justify a reversal or modification of the doctrine in
the Bachrach case.
One of the differences pointed out is that by the
declaration of stock dividends the voting power of
the original shares of stock is considerably
diminished, and, if the stock dividends are not given
to the remaindermen, the voting power of the latter
would be greatly impaired. Bearing in mind that the
number of shares of stock of the Benguet
Consolidated Mining company is so large, the
diminution of the voting power of the original shares
of stock in this case cannot possibly affect or
influence the control of the policies of the corporation
which is vested in the owners of the great block of
shares. This would not be a sufficient reason for
modifying the doctrine of the Bachrach case. These
remarks are made in answer to the argument of the
appellees in this particular case, but they do not
imply that if the diminution of the voting power were
considerable the doctrine should be modified.
With regard to the sum of P3,428.40 which is alleged
to have been received by the plaintiff from the
Benguet Consolidated Mining Company, as a result of
the reduction of its capital in January, 1926, it
appears that it has not been proven that the plaintiff
has received said sum; on the contrary, it was denied
by him as soon as he arrived in the Philippines from
Spain. There is no ground, therefore, for ordering the
plaintiff to deliver such sum to the defendants.
In view of the foregoing, the judgment appealed from
is reversed, and it is declared that the stock
dividends amounting to 28,570 shares, above
mentioned, belongs to the plaintiff-appellant Jacinto
del Saz Orozco y Mortera exclusively and in absolute
ownership. Without costs. It is so ordered.
Republic
of
the
Philippines
SUPREME
COURT
Manila
THIRD DIVISION
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.
G.R. No. 52289 May 19, 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.
CARLOS
PANALIGAN,
AMADO
MARQUEZ,
HERBERT PEDROS, ANTONIO FELICIANO, JR.,
HUGO AGUILOS, ALBERTO GUBATON, JULIA
VDA. DE ESQUELITO, SERAFIN JANDOQUELE,
SEFERIAS ESQUESIDA, CARLOS DELA CRUZ,
ELISEO
GELONGOS,
ESPINDION
JOCSON,
SALVADOR MUNUN, ULFIANO ALEGRIA, and
IRENEO BALERA, and Spouses JOSEPH SCHON,
and HELEN BENNETTE SCHON,respondents.
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.
There are before us for review the following: (1) the
decision of the Court of First Instance of Negros
Occidental, Branch 3, in Civil Case No. 13823; and (2)
the decision of the Court of Agrarian Relations, 11th
Judicial District, in CAR Case No. 76. Both of these
decisions dismissed the petitioners' complaints for
lack of jurisdiction.
Petitioners Ramona R. Locsin, Teresita R. Guanzon,
Celina R. Sibug, Ma. Lusia R. Perez, Editha R. Ylanan
and Ana Marie R. Benedicto were co-owners of a
large tract of agricultural land known as "Hacienda
Villa Regalado" located in Barrio Panubigan, Canlaon
City, Negros Occidental. The tract of land was
covered by Transfer Certificate of Title No. T-494 and
there more particularly described in the following
terms:
TRANSFER CERTIFICATE OF TITLE
NO. T-494

A parcel of land (Lot 2-G) of the subdivision plan Psd28446, 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
1. Carlos Panaligan

2.00 Ha.

2. Amado Marquez

1.50 Ha.

3. Herbert Pedros

1.50 Ha.

4. Antonio Feliciano, Jr.

2.00 Ha.

5. Hugo Aguilos

3.50 Ha.

6. Alberto Gubaton

8.90 Ha.

7. Hulo Aguilos

1.32 Ha.

8. Julia Vda. de Esquelito

2.25 Ha.

9. Carlos Panaligan

1.25 Ha.

10. Serafin Jandoquele

5.35 Ha.

11. Seferias Esquesida

2.00 Ha.

12. Carlos de la Cruz

4.70 Ha.

13 Eliseo Gelongos

3.00 Ha.

14. Espindion Jocson

5.55 Ha.

15. Salvador Munon

1.5884
Ha.

16. Ulfiano Alegria

1.85 Ha.

17. Ireneo Balera

8.30 Ha.

TOTAL

56.555 H
a. 2

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 THIRTYTHREE THOUSAND AND FORTY EIGHT (3,033,048)
square meters, more or less. 1
A portion of this land, known as Lot No. 2-C-A-3 and
consisting of an area of 60.07464 hectares, was
subject to the lifetime usufructuary rights of
respondent Helen Schon:. The bulk of this lot was
cultivated by the following lessees-tenants who
customarily delivered the rental to Helen Schon:
TENANTS
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 landowners and not to the usufructuary. 4
1. Civil Case No. 13828, Court of First Instance of
Negros Occidental
On 22 May 1978, petitioners filed against the
spouses Joseph and Helen Schon Civil Case No.
13828 in the then Court of First Instance of Negros
Occidental, for collection of rentals plus damages
with prayer for preliminary injunction. There
petitioners claimed that since the land subject to
Helen Schon's usufructuary rights was among the
parcels of land which colectively had been declared
by the DAR as a land reform area pursuant to
Presidential Decree No. 27, the rental payments
which the respondent spouses had been colecting
from the tenants really pertained and should be
delivered to petitioners, beginning from 21 October
1972, as constituting or forming part of the
amortization payments for the land to be made by
the tenants. Petitioners sought in that case to
recover from the Schons all such previous rentals or
the money value thereof, and prayed for injunction to
prevent the respondents from collecting any further
rental payments from the tenants of the land
involved.
Upon the other hand, in their Answer filed on 12 July
1978, the respondents Schon contended that under
the provisions of Section 12 of Presidential Decree
No. 946 dated 17 June 1976, and given the facts
involved in Civil Case No. 13823, the Court of First
Instance was bereft of jurisdiction over the subject
matter of the case. That jurisdiction, the Schon
spouses urged, was vested in the CAR instead.
Respondents further argued that, upon the
assumption arguendo that the Court of First Instance
did have jurisdiction, Article 609 of the Civil Code
must in any case be applied by that court in resolving
the case . 5
2. CAR Case No. 76, Court of Agrarian Relations
Approximately five (5) months after filing their
complaint before the Negros Occidental Court of First
Instance, petitioners filed a second complaint on 13
October 1978, this time with the Court of Agrarian
Relations, 11th Judicial District, San Carlos City. In
this complaint before the Agrarian Court, petitioners
impleaded as co-respondents of the spouses Schon
the tenants who were cultivating the land burdened
with the usufruct of Helen Schon. Petitioners prayed
that the respondent tenants be required to pay to
petitioners (rather than to the spouses Schon) all
future rentals beginning with the crop year of 1978
and every year thereafter, until full payment of the
amortization payments computed by the DAR. In
their Answer, the respondents Schon once again
asserted lack of jurisdiction over the subject matter
of the case, this time on the part of the Court of

Agrarian Relations. Respondents contended that the

dispute between petitioners and respondents Schon
related to the continued existence or termination of
the usufructuary rights of Helen Schon, which issue
did not constitute an agrarian dispute and therefore
had to be litigated elsewhere, i.e., before the regular
courts of first instance.
The respondent tenants, for their part, agreed with
the Schons that there was no tenancy relationship
existing in respect of the land cultivated by them,
since such land had already been brought within the
ambit of "Operation Land Transfer", and prayed that
the petitioners and the usufructuary be required to
litigate among themselves their respective rights
before the proper court.
3. Dismissal of Civil Case No. 13823 and CAR Case
No. 76
On 15 February 1979, the Agrarian Court rendered a
decision dismissing petitioners' complaint in CAR
Case No. 76. The Court of Agrarian Relations held
that it had no jurisdiction to decide the case:
... it is crystal clear that the contending parties are
actually Ramona R. Locsin, et al., and the naked
owners of 101 hectares of subject agricultural land,
on one hand, and Helen Bennett-Schon, who is the
usufructuary of the same land, on the other.
For all legal intents and purposes, Helen BennettSchon 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
The above order of the Negros Occidental Court of
First Instance was brought directly to us by
petitioners on a Petition for Review in G.R. No. 51333.
G.R. No. 51333 and G.R. No. 52289 were
consolidated by a Resolution of this Court dated 16
June 1982.
The consolidated cases present the question of which
court had jurisdiction to decide one and the other
case. Both the Court of First Instance and the
agrarian Court were persuaded by the adroit and
disingenuous pleading of respondent Schon's
counsel. Beyond the question of jurisdiction over the
subject matter, is, of course, the substantive
question of twhether the peitioner as naked owners
of the land subjected to the beneficial owner's right
of Helen Schon, became entitled to the payment's
made by the tenants or lessees of such land from

and after the property was declared part of a land

reform area.
The issue of which court is vested with jurisdiction
over Civil Case no. 13823 and CAR Case No. 76 is,
happily, no longer a live one. Jurisdiction over both
cases is clearly vested in the appropiate 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
(Emphasis supplied)
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 and administrative rules and regulations
concerning land reform and the sliminations of
agricultural tenancy relationships, continues to act as
a court of general and plenary jurisdiction. Section 44
of b.P. Blg. 129 abolished the Courts of Agrarian
Relations and did not re-create them.
We note that resolution of the underlying substantive
issues here raised requires examination of both land
reform statutes and related rules and regulations
(and as well the practice of the relevant
administrative agency or executive department) and
the Civil Code provisions on usufruct.
Mindful of the length of timewhich has gone by since
the first of the consolidated cases reched this Court,
and in the effort to render expeditious justice, we
have considered whether we should now confront
and resolve the issue relating to the legal character
of the payments made by the respondents tenantslessees 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.
SO ORDERED.
THIRD DIVISION
[G.R. No. 107132. October 8, 1999]
MAXIMA
HEMEDES, petitioner,
vs. THE
HONORABLE COURT OF APPEALS, DOMINIUM
REALTY AND CONSTRUCTION CORPORATION,
ENRIQUE D. HEMEDES, and R & B INSURANCE
CORPORATION, respondents.
[G.R. No. 108472. October 8, 1999]
R
&
B
INSURANCE
CORPORATION, petitioner, vs. THE HONORABLE
COURT OF APPEALS DOMINIUM REALTY AND
CONSTRUCTION CORPORATION, ENRIQUE D.
HEMEDES and MAXIMA HEMEDES, respondents.
DECISION
GONZAGA_REYES, J.:
Assailed in these petitions for review on certiorari is
the decision[1] of the eleventh division of the Court of
Appeals in CA-G.R. CV No. 22010 promulgated on
September 11, 1992 affirming in toto the decision of
Branch 24 of the Regional Trial Court of Laguna in
Civil Case No. B-1766 dated February 22, 1989, [2] and
the resolution dated December 29, 1992 denying
petitioner R & B Insurance Corporations (R & B
Insurance) motion for reconsideration.As the factual
antecedents and issues are the same, we shall
decide the petitions jointly.
The instant controversy involves a question of
ownership over an unregistered parcel of land,
identified as Lot No. 6, plan Psu-111331, with an area
of 21,773 square meters, situated in Sala, Cabuyao,
Laguna. It was originally owned by the late Jose
Hemedes, father of Maxima Hemedes and Enrique D.
Hemedes. On March 22, 1947 Jose Hemedes
executed a document entitled Donation Inter Vivos
With Resolutory Conditions[3] whereby he conveyed
ownership over the subject land, together with all its
improvements, in favor of his third wife, Justa
Kauapin, subject to the following resolutory
conditions:
(a) Upon the death or remarriage of the DONEE, the
title to the property donated shall revert to any of the
children, or their heirs, of the DONOR expressly
designated by the DONEE in a public document
conveying the property to the latter; or
(b) In absence of such an express designation made
by the DONEE before her death or remarriage
contained in a public instrument as above provided,
the title to the property shall automatically revert to
the legal heirs of the DONOR in common.
Pursuant to the first condition abovementioned, Justa
Kausapin executed on September 27, 1960 a Deed of
Conveyance of Unregistered Real Property by
Reversion[4] conveying to Maxima Hemedes the
subject property under the following terms That the said parcel of land was donated unto me by
the said Jose Hemedes, my deceased husband, in a
deed of DONATION INTER VIVOS WITH RESOLUTORY
CONDITIONS executed by the donor in my favor, and
duly accepted by me on March 22, 1947, before
Notary Public Luis Bella in Cabuyao, Laguna;

That the donation is subject to the resolutory

conditions appearing in the said deed of DONATION
INTER VIVOS WITH RESOLUTORY CONDITIONS, as
follows:
(a) Upon the death or remarriage of the DONEE, the
title to the property donated shall revert to any of the
children, or their heirs, of the DONOR expressly
designated by the DONEE in a public document
conveying the property to the latter; or
(b) In absence of such an express designation made
by the DONEE before her death or remarriage
contained in a public instrument as above provided,
the title to the property shall automatically revert to
the legal heirs of the DONOR in common.
That, wherefore, in virtue of the deed of donation
above mentioned and in the exercise of my right and
privilege under the terms of the first resolutory
condition therein contained and hereinabove
reproduced, and for and in consideration of my love
and affection, I do hereby by these presents convey,
transfer, and deed unto my designee, MAXIMA
HEMEDES, of legal age, married to RAUL RODRIGUEZ,
Filipino and resident of No. 15 Acacia Road, Quezon
City, who is one of the children and heirs of my
donor, JOSE HEMEDES, the ownership of, and title to
the property hereinabove described, and all rights
and interests therein by reversion under the first
resolutory condition in the above deed of donation;
Except the possession and enjoyment of the said
property which shall remain vested in me during my
lifetime, or widowhood and which upon my death or
remarriage shall also automatically revert to, and be
transferred to my designee, Maxima Hemedes.
Maxima Hemedes, through her counsel, filed an
application for registration and confirmation of title
over the subject unregistered land. Subsequently,
Original Certificate of Title (OCT) No. (0-941) 0198[5] was issued in the name of Maxima Hemedes
married to Raul Rodriguez by the Registry of Deeds
of Laguna on June 8, 1962, with the annotation that
Justa Kausapin shall have the usufructuary rights
over the parcel of land herein described during her
lifetime or widowhood.
It is claimed by R & B Insurance that on June 2, 1964,
Maxima Hemedes and her husband Raul Rodriguez
constituted a real estate mortgage over the subject
property in its favor to serve as security for a loan
which they obtained in the amount of P6,000.00. On
February 22, 1968, R & B Insurance extrajudicially
foreclosed the mortgage since Maxima Hemedes
failed to pay the loan even after it became due on
August 2, 1964. The land was sold at a public auction
on May 3, 1968 with R & B Insurance as the highest
bidder and a certificate of sale was issued by the
sheriff in its favor. Since Maxima Hemedes failed to
redeem the property within the redemption period, R
& B Insurance executed an Affidavit of Consolidation
dated March 29, 1974 and on May 21, 1975 the
Register of Deeds of Laguna cancelled OCT No. (0941) 0-198 and issued Transfer Certificate of Title
(TCT) No. 41985 in the name of R & B Insurance. The
annotation of usufruct in favor of Justa Kausapin was
maintained in the new title.[6]
Despite the earlier conveyance of the subject land in
favor of Maxima Hemedes, Justa Kausapin executed a
Kasunduan on May 27, 1971 whereby she transferred
the same land to her stepson Enrique D. Hemedes,
pursuant to the resolutory condition in the deed of
donation executed in her favor by her late husband

Jose Hemedes. Enrique D. Hemedes obtained two

declarations of real property - in 1972, and again, in
1974, when the assessed value of the property was
raised. Also, he has been paying the realty taxes on
the property from the time Justa Kausapin conveyed
the property to him in 1971 until 1979. In the
cadastral survey of Cabuyao, Laguna conducted from
September 8, 1974 to October 10, 1974, the property
was assigned Cadastral No. 2990, Cad. 455-D,
Cabuyao Cadastre, in the name of Enrique
Hemedes. Enrique Hemedes is also the named owner
of the property in the records of the Ministry of
Agrarian Reform office at Calamba, Laguna.
On February 28, 1979, Enriques D. Hemedes sold the
property to Dominium Realty and Construction
Corporation (Dominium). On April 10, 1981, Justa
Kausapin executed an affidavit affirming the
conveyance of the subject property in favor of
Enrique D. Hemedes as embodied in the Kasunduan
dated May 27, 1971, and at the same time denying
the conveyance made to Maxima Hemedes.
On May 14, 1981, Dominium leased the property to
its sister corporation Asia Brewery, Inc. (Asia
Brewery) who, even before the signing of the
contract of lease, constructed two warehouses made
of steel and asbestos costing about P10,000,000.00
each. Upon learning of Asia Brewerys constructions
upon the subject property, R & B Insurance sent it a
letter on March 16, 1981 informing the former of its
ownership of the property as evidenced by TCT No.
41985 issued in its favor and of its right to
appropriate the constructions since Asia Brewery is a
builder in bad faith. On March 27, 1981, a conference
was held between R & B Insurance and Asia Brewery
but they failed to arrive at an amicable settlement.
On May 8, 1981, Maxima Hemedes also wrote a letter
addressed to Asia Brewery wherein she asserted that
she is the rightful owner of the subject property by
virtue of OCT No. (0-941) 0-198 and that, as such,
she has the right to appropriate Asia Brewerys
constructions, to demand its demolition, or to compel
Asia Brewery to purchase the land. In another letter
of the same date addressed to R & B Insurance,
Maxima Hemedes denied the execution of any real
estate mortgage in favor of the latter.
On August 27, 1981, Dominium and Enrique D.
Hemedes filed a complaint [7] with the Court of First
Instance of Binan, Laguna for the annulment of TCT
No. 41985 issued in favor of R & B Insurance and/or
the reconveyance to Dominium of the subject
property. Specifically, the complaint alleged that
Dominium was the absolute owner of the subject
property by virtue of the February 28, 1979 deed of
sale executed by Enrique D. Hemedes, who in turn
obtained ownership of the land from Justa Kausapin,
as evidenced by the Kasunduan dated May 27,
1971. The plaintiffs asserted that Justa Kausapin
never transferred the land to Maxima Hemedes and
that Enrique D. Hemedes had no knowledge of the
registration proceedings initiated by Maxima
Hemedes.
After considering the merits of the case, the trial
court rendered judgment on February 22, 1989 in
favor of plaintiffs Dominium and Enrique D.
Hemedes, the dispositive portion of which states
WHEREFORE, judgment is hereby rendered:
(a) Declaring Transfer Certificate of Title No. 41985 of
the Register of Deeds of Laguna null and void and
ineffective;

(b) Declaring Dominium Realty and Construction

Corporation the absolute owner and possessor of the
parcel of land described in paragraph 3 of the
complaint;
(c) Ordering the defendants and all persons acting
for and/or under them to respect such ownership and
possession of Dominium Realty and Construction
Corporation and to forever desist from asserting
adverse claims thereon nor disturbing such
ownership and possession; and
(d) Directing the Register of Deeds of Laguna to
cancel said Transfer Certificate of Title No. 41985 in
the name of R & B Insurance Corporation, and in lieu
thereof, issue a new transfer certificate of title in the
name of Dominium Realty and Construction
Corporation. No pronouncement as to costs and
attorneys fees.[8]
Both R & B Insurance and Maxima Hemedes
appealed from the trial courts decision. On
September 11, 1992 the Court of Appeals affirmed
the assailed decision in toto and on December 29,
1992, it denied R & B Insurances motion for
reconsideration. Thus, Maxima Hemedes and R & B
Insurance filed their respective petitions for review
with this Court on November 3, 1992 and February
22, 1993, respectively.
In G.R. No. 107132[9], petitioner Maxima Hemedes
makes the following assignment of errors as regards
public respondents ruling
I
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
APPLYING ARTICLE 1332 OF THE NEW CIVIL CODE IN
DECLARING
AS
SPURIOUS
THE
DEED
OF
CONVEYANCE OF UNREGISTERED REAL PROPERTY BY
REVERSION EXECUTED BY JUSTA KAUSAPIN IN FAVOR
OF PETITIONER MAXIMA HEMEDES.
II
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
NOT FINDING AS VOID AND OF NO LEGAL EFFECT
THE KASUNDUAN DATED 27 MAY 1971 EXECUTED BY
JUSTA KAUSAPIN IN FAVOR OF RESPONDENT ENRIQUE
HEMEDES AND THE SALE OF THE SUBJECT PROPERTY
BY RESPONDENT ENRIQUE HEMEDES IN FAVOR OF
RESPONDENT
DOMINIUM
REALTY
AND
CONSTRUCTION CORPORATION.
III
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
NOT
FINDING
RESPONDENTS
ENRIQUE
AND
DOMINIUM IN BAD FAITH.
IV
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
DECLARING THAT ORIGINAL CERTIFICATE OF TITLE
NO. (0-941) 0-198 ISSUED IN THE NAME OF
PETITIONER MAXIMA HEMEDES NULL AND VOID.
V
RESPONDENT COURT OF APPEALS ERRED IN NOT
FINDING THAT NO LOAN WAS OBTAINED BY
PETITIONER MAXIMA HEMEDES FROM RESPONDENT R
& B INSURANCE CORPORATION.
VI
RESPONDENT COURT OF APPEALS ERRED IN NOT
FINDING THAT NO REAL ESTATE MORTGAGE OVER
THE SUBJECT PROPERTY WAS EXECUTED BY
PETITIONER MAXIMA HEMEDES IN FAVOR OF
RESPONDENT R & B INSURANCE CORPORATION.
VII
RESPONDENT COURT OF APPEALS ERRED IN NOT
FINDING THAT THE VALID TITLE COVERING THE
SUBJECT PROPERTY IS THE ORIGINAL CERTIFICATE OF

TITLE NO. (0-941) 0-198 IN THE NAME OF PETITIONER

MAXIMA HEMEDES AND NOT THE TRANSFER
CERTIFICATE OF TITLE (TCT) NO. 41985 IN THE NAME
OF R & B INSURANCE CORPORATION.[10]
Meanwhile, in G.R. No. 108472 [11], petitioner R & B
Insurance assigns almost the same errors, except
with regards to the real estate mortgage allegedly
executed
by
Maxima
Hemedes
in
its
favor. Specifically, R & B Insurance alleges that:
I
RESPONDENT COURT ERRONEOUSLY ERRED IN
APPLYING ARTICLE 1332 OF THE CIVIL CODE.
II
RESPONDENT COURT SERIOUSLY ERRED IN GIVING
CREDENCE ON (sic) THE KASUNDUAN BY AND
BETWEEN
JUSTA
KAUSAPIN
AND
ENRIQUE
NOTWITHSTANDING THE FACT THAT JUSTA KAUSAPIN
BY WAY OF A DEED OF CONVEYANCE OF
UNREGISTERED REAL PROPERTY BY REVERSION
CEDED THE SUBJECT PROPERTY TO MAXIMA SOME
ELEVEN (11) YEARS EARLIER.
III
RESPONDENT COURT SERIOUSLY ERRED IN GIVING
CREDENCE ON (sic) THE AFFIDAVIT OF REPUDIATION
OF JUSTA KAUSAPIN NOTWITHSTANDING THE FACT
THAT SHE IS A BIAS (sic) WITNESS AND EXECUTED
THE SAME SOME TWENTY-ONE (21) YEARS AFTER
THE EXECUTION OF THE DEED OF CONVEYANCE IN
FAVOR OF MAXIMA.
IV
RESPONDENT COURT SERIOUSLY ERRED IN NOT
FINDING THAT THE COMPLAINT OF ENRIQUE AND
DOMINIUM HAS PRESCRIBED AND/OR THAT ENRIQUE
AND DOMINIUM WERE GUILTY OF LACHES.
V
RESPONDENT COURT SERIOUSLY ERRED IN FINDING
R & B AS A MORTGAGEE NOT IN GOOD FAITH.
VI
RESPONDENT COURT SERIOUSLY ERRED IN NOT
GRANTING THE DAMAGES PRAYED FOR BY R & B IN
ITS COUNTERCLAIM AND CROSSCLAIM.[12]
The primary issue to be resolved in these
consolidated petitions is which of the two
conveyances by Justa Kausapin, the first in favor of
Maxima Hemedes and the second in favor of Enrique
D. Hemedes, effectively transferred ownership over
the subject land.
The Register of Deeds of Laguna issued OCT No. (0941) 0-198 in favor of Maxima Hemedes on the
strength of the Deed of Conveyance of Unregistered
Real Property by Reversion executed by Justa
Kausapin. Public respondent upheld the trial courts
finding that such deed is sham and spurious and has
no evidentiary value under the law upon which
claimant Maxima Hemedes may anchor a valid claim
of ownership over the property. In ruling thus, it gave
credence to the April 10, 1981 affidavit executed by
Justa Kausapin repudiating such deed of conveyance
in favor of Maxima Hemedes and affirming the
authenticity of the Kasunduan in favor of Enrique D.
Hemedes. Also, it considered as pivotal the fact that
the deed of conveyance in favor of Maxima Hemedes
was in English and that it was not explained to Justa
Kausapin, although she could not read nor
understand English; thus, Maxima Hemedes failed to
discharge her burden, pursuant to Article 1332 of the
Civil Code, to show that the terms thereof were fully
explained to Justa Kausapin. Public respondent
concluded by holding that the registration of the

property on the strength of the spurious deed of

conveyance is null and void and does not confer any
right of ownership upon Maxima Hemedes. [13]
Maxima Hemedes argues that Justa Kausapins
affidavit should not be given any credence since she
is obviously a biased witness as it has been shown
that she is dependent upon Enrique D. Hemedes for
her daily subsistence, and she was most probably
influenced by Enrique D. Hemedes to execute the
Kasunduan in his favor. She also refutes the
applicability of article 1332. It is her contention that
for such a provision to be applicable, there must be a
party seeking to enforce a contract; however, she is
not enforcing the Deed of Conveyance of
Unregistered Real Property by Reversion as her basis
in claiming ownership, but rather her claim is
anchored upon OCT No. (0-941) 0-198 issued in her
name, which document can stand independently
from the deed of conveyance. Also, there exist
various circumstances which show that Justa
Kausapin did in fact execute and understand the
deed
of
conveyance
in
favor
of
Maxima
Hemedes. First, the Donation Intervivos With
Resolutory Conditions executed by Jose Hemedes in
favor of Justa Kausapin was also in English, but she
never alleged that she did not understand such
document. Secondly, Justa Kausapin failed to prove
that it was not her thumbmark on the deed of
conveyance in favor of Maxima Hemedes and in fact,
both Enrique D. Hemedes and Dominium objected to
the request of Maxima Hemedes counsel to obtain a
specimen thumbmark of Justa Kausapin.[14]
Public respondents finding that the Deed of
Conveyance of Unregistered Real Property By
Reversion executed by Justa Kausapin in favor of
Maxima Hemedes is spurious is not supported by the
factual findings in this case.. It is grounded upon the
mere denial of the same by Justa Kausapin. A party
to a contract cannot just evade compliance with his
contractual obligations by the simple expedient of
denying the execution of such contract. If, after a
perfect and binding contract has been executed
between the parties, it occurs to one of them to
allege some defect therein as a reason for annulling
it, the alleged defect must be conclusively proven,
since the validity and fulfillment of contracts cannot
be left to the will of one of the contracting parties.[15]
Although
a
comparison
of
Justa
Kausapins
thumbmark with the thumbmark affixed upon the
deed of conveyance would have easily cleared any
doubts as to whether or not the deed was forged, the
records do not show that such evidence was
introduced by private respondents and the lower
court decisions do not make mention of any
comparison having been made.[16] It is a legal
presumption that evidence willfully suppressed would
be adverse if produced.[17]The failure of private
respondents to refute the due execution of the deed
of conveyance by making a comparison with Justa
Kausapins thumbmark necessarily leads one to
conclude that she did in fact affix her thumbmark
upon the deed of donation in favor of her
stepdaughter.
Moreover, public respondents reliance upon Justa
Kausapins repudiation of the deed of conveyance is
misplaced for there are strong indications that she is
a biased witness. The trial court found that Justa
Kausapin was dependent upon Enrique D. Hemedes

for financial assistance.[18] Justa Kausapins own

testimony attests to this fact Atty. Conchu:
Q: Aling Justa, can you tell the Honorable Court why
you donated this particular property to Enrique
Hemedes?
A: Because I was in serious condition and he was the
one supporting me financially.
Q: As of today, Aling Justa are you continuing to
receive any assistance from Enrique Hemedes?
A: Yes Sir.
(TSN pp. 19 and 23, November 17, 1981) [19]
Even Enrique Hemedes admitted that Justa Kausapin
was dependent upon him for financial support. The
transcripts state as follows:
Atty. Mora:
Now you said that Justa Kausapin has been receiving
from you advances for food, medicine & other
personal or family needs?
E. Hemedes:
A: Yes.
Q: Was this already the practice at the time this
Kasunduan was executed?
A: No that was increased, no, no, after this
document.
xxx xx xxx
Q: And because of these accommodations that you
have given to Justa Kausapin; Justa Kausapin has in
turn treated you very well because shes very grateful
for that, is it not?
A: I think thats human nature.
Q: Answer me categorically, Mr. Hemedes shes very
grateful?
A: Yes she might be grateful but not very grateful.
(TSN, p. 34, June 15, 1984)[20]
A witness is said to be biased when his relation to the
cause or to the parties is such that he has an
incentive to exaggerate or give false color to his
statements, or to suppress or to pervert the truth, or
to state what is false.[21] At the time the present case
was filed in the trial court in 1981, Justa Kausapin
was already 80 years old, suffering from worsening
physical infirmities and completely dependent upon
her stepson Enrique D. Hemedes for support. It is
apparent that Enrique D. Hemedes could easily have
influenced his aging stepmother to donate the
subject property to him. Public respondent should not
have given credence to a witness that was obviously
biased and partial to the cause of private
respondents. Although it is a well-established rule
that the matter of credibility lies within the province
of the trial court, such rule does not apply when the
witness credibility has been put in serious doubt,
such as when there appears on the record some fact
or circumstance of weight and influence, which has
been overlooked or the significance of which has
been misinterpreted.[22]
Finally, public respondent was in error when it
sustained the trial courts decision to nullify the Deed
of Conveyance of Unregistered Real Property by
Reversion for failure of Maxima Hemedes to comply
with article 1332 of the Civil Code, which states:
When one of the parties is unable to read, or if the
contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been
fully explained to the former.
Article 1332 was intended for the protection of a
party to a contract who is at a disadvantage due to

his illiteracy, ignorance, mental weakness or other

handicap.[23] This article contemplates a situation
wherein a contract has been entered into, but the
consent of one of the parties is vitiated by mistake or
fraud committed by the other contracting party.
[24]
This is apparent from the ordering of the
provisions under Book IV, Title II, Chapter 2, section 1
of the Civil Code, from which article 1332 is
taken. Article 1330 states that A contract where consent is given through mistake,
violence, intimidation, undue influence, or fraud is
voidable.
This is immediately followed by provisions explaining
what constitutes mistake, violence, intimidation,
undue influence, or fraud sufficient to vitiate consent.
[25]
In order that mistake may invalidate consent, it
should refer to the substance of the thing which is
the object of the contract, or to those conditions
which have principally moved one or both parties to
enter into the contract.[26] Fraud, on the other hand,
is present when, through insidious words or
machinations of one of the contracting parties, the
other is induced to enter into a contract which,
without them, he would not have agreed to.
[27]
Clearly, article 1332 assumes that the consent of
the contracting party imputing the mistake or fraud
was given, although vitiated, and does not cover a
situation where there is a complete absence of
consent.
In this case, Justa Kausapin disclaims any knowledge
of the Deed of Conveyance of Unregistered Real
Property by Reversion in favor of Maxima
Hemedes. In fact, she asserts that it was only during
the hearing conducted on December 7, 1981 before
the trial court that she first caught a glimpse of the
deed of conveyance and thus, she could not have
possibly affixed her thumbmark thereto. [28] It is
private respondents own allegations which render
article 1332 inapplicable for it is useless to determine
whether or not Justa Kausapin was induced to
execute said deed of conveyance by means of fraud
employed by Maxima Hemedes, who allegedly took
advantage of the fact that the former could not
understand English, when Justa Kausapin denies
even having seen the document before the present
case was initiated in 1981.
It has been held by this Court that mere
preponderance of evidence is not sufficient to
overthrow a certificate of a notary public to the effect
that the grantor executed a certain document and
acknowledged the fact of its execution before him. To
accomplish this result, the evidence must be so
clear, strong and convincing as to exclude all
reasonable controversy as to the falsity of the
certificate, and when the evidence is conflicting, the
certificate will be upheld.[29] In the present case, we
hold that private respondents have failed to produce
clear, strong, and convincing evidence to overcome
the positive value of the Deed of Conveyance of
Unregistered Real Property by Reversion a notarized
document. The mere denial of its execution by the
donor will not suffice for the purpose.
In upholding the deed of conveyance in favor of
Maxima Hemedes, we must concomitantly rule that
Enrique D. Hemedes and his transferee, Dominium,
did not acquire any rights over the subject
property. Justa Kausapin sought to transfer to her
stepson exactly what she had earlier transferred to
Maxima Hemedes the ownership of the subject

property pursuant to the first condition stipulated in

the deed of donation executed by her husband. Thus,
the donation in favor of Enrique D. Hemedes is null
and void for the purported object thereof did not
exist at the time of the transfer, having already been
transferred to his sister.[30] Similarly, the sale of the
subject property by Enrique D. Hemedes to
Dominium is also a nullity for the latter cannot
acquire more rights than its predecessor-in-interest
and is definitely not an innocent purchaser for value
since Enrique D. Hemedes did not present any
certificate of title upon which it relied.
The declarations of real property by Enrique D.
Hemedes, his payment of realty taxes, and his being
designated as owner of the subject property in the
cadastral survey of Cabuyao, Laguna and in the
records of the Ministry of Agrarian Reform office in
Calamba, Laguna cannot defeat a certificate of title,
which is an absolute and indefeasible evidence of
ownership of the property in favor of the person
whose name appears therein.[31] Particularly, with
regard to tax declarations and tax receipts, this Court
has held on several occasions that the same do not
by themselves conclusively prove title to land.[32]
We come now to the question of whether or not R &
B Insurance should be considered an innocent
purchaser of the land in question. At the outset, we
note that both the trial court and appellate court
found that Maxima Hemedes did in fact execute a
mortgage over the subject property in favor of R & B
Insurance. This finding shall not be disturbed
because, as we stated earlier, it is a rule that the
factual findings of the trial court, especially when
affirmed by the Court of Appeals, are entitled to
respect, and should not be disturbed on appeal. [33]
In holding that R & B Insurance is not a mortgagee in
good faith, public respondent stated that the fact
that the certificate of title of the subject property
indicates upon its face that the same is subject to an
encumbrance, i.e. usufructuary rights in favor of
Justa Kausapin during her lifetime or widowhood,
should have prompted R & B Insurance to
...investigate further the circumstances behind this
encumbrance on the land in dispute, but which it
failed to do. Also, public respondent considered
against R & B Insurance the fact that it made it
appear in the mortgage contract that the land was
free from all liens, charges, taxes and encumbrances.
[34]

R & B Insurance alleges that, contrary to public

respondents ruling, the presence of an encumbrance
on the certificate of title is not reason for the
purchaser or a prospective mortgagee to look beyond
the face of the certificate of title. The owner of a
parcel of land may still sell the same even though
such land is subject to a usufruct; the buyers title
over the property will simply be restricted by the
rights of the usufructuary. Thus, R & B Insurance
accepted the mortgage subject to the usufructuary
rights of Justa Kausapin. Furthermore, even assuming
that R & B Insurance was legally obliged to go
beyond the title and search for any hidden defect or
inchoate right which could defeat its right thereto, it
would not have discovered anything since the
mortgage was entered into in 1964, while the
Kasunduan conveying the land to Enrique D.
Hemedes was only entered into in 1971 and the
affidavit repudiating the deed of conveyance in favor

of Maxima Hemedes was executed by Justa Kausapin

in 1981.[35]
We sustain petitioner R & B Insurances 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
mortgagors
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 propertys 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
respondents 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 mortgagors 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.
The factual findings of the trial court, particularly
when affirmed by the appellate court, carry great
weight and are entitled to respect on appeal, except
under
certain
circumstances.[47] One
such
circumstance that would compel the Court to review
the factual findings of the lower courts is where the
lower courts manifestly overlooked certain relevant
facts not disputed by the parties and which, if
properly considered, would justify a different
conclusion.[48] Also, it is axiomatic that the drawing of
the proper legal conclusions from such factual
findings are within the peculiar province of this Court.
[49]

As regards R & B Insurances prayer that Dominium

be ordered to demolish the warehouses or that it be
declared the owner thereof since the same were built
in bad faith, we note that such warehouses were
constructed
by
Asia
Brewery,
not
by
Dominium. However, despite its being a necessary
party in the present case, the lower courts never
acquired jurisdiction over Asia Brewery, whether as a
plaintiff or defendant, and their respective decisions
did not pass upon the constructions made upon the
subject property. Courts acquire jurisdiction over a
party plaintiff upon the filing of the complaint, while
jurisdiction over the person of a party defendant is
acquired upon the service of summons in the manner
required by law or by his voluntary appearance. As a
rule, if a defendant has not been summoned, the
court acquires no jurisdiction over his person, and
any personal judgment rendered against such
defendant is null and void.[50] In the present case,
since Asia Brewery is a necessary party that was not
joined in the action, any judgment rendered in this
case shall be without prejudice to its rights.[51]
As to its claim for moral damages, we hold that R & B
Insurance is not entitled to the same for it has not
alleged nor proven the factual basis for the
same. Neither is it entitled to exemplary damages,
which may only be awarded if the claimant is entitled
to moral, temperate, liquidated or compensatory
damages.[52] R & B Insurances claim for attorneys
fees must also fail. The award of attorneys fees is the
exception rather than the rule and counsels fees are

not to be awarded every time a party wins a suit. Its

award pursuant to article 2208 of the Civil Code
demands factual, legal and equitable justification and
cannot be left to speculation and conjecture.[53] Under
the circumstances prevailing in the instant case,
there is no factual or legal basis for an award of
attorneys fees.
WHEREFORE, the assailed decision of public
respondent and its resolution dated February 22,

1989 are REVERSED. We uphold petitioner R & B

Insurances 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. SO ORDERED.