G.R. No. 152809 August 3, 2006

MERCEDES MORALIDAD, Petitioner, vs. SPS. DIOSDADO PERNES and ARLENE PERNES, Respondents

Facts:

The petitioner, Mercedes Moralidad in her younger day taught in Davao City, Quezon City and Manila. She had the good fortune of furthering her studies at the University of Pennsylvania, U.S.A and later on 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.

Being single, during her vacation in the Philippines, she usually stays at the house of her niece, respondent Arlene Pernes at Mandug, Davao City.

Sometime in 1986, the place of Arlene in Davao was attacked by the rebels. Mercedes, shocked and saddened about this development immediately sent money to Araceli, Arlene’s 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 which contains among others her intention of making the said property available to her kins as well as its fruits in the condition that they should maintain an atmosphere of cooperation, live in harmony and avoid bickering one another.

When petitioner retired in 1993, she lived with the family with Arlene, however, their relation became sour because members of the Pernes family were impervious to her suggestions and attempts to change certain practices concerning health and sanitation within their compound.

Deciding for petitioner, the lupon apparently ordered the Pernes family to vacate petitioner’s 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. Administrative were charge against the spouses but it did not prosper.

August 3, 1998, petitioner filed with MTCC an unlawful detainer suit against 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 petitioner’s 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 ruled in petitioner’s favor. MTCC Decision: The respondent spouses, although builders in good faith vis-à-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. The respondents’ continued possession of the premises turned unlawful upon their receipt of the demand to vacate, such possession being merely at petitioner’s tolerance, absence any rental.

Spouses appealed to the RTC of Davao which ruled in favor of the spouses. RTC’s Decision:

Respondents’ possession of the property in question was not 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.

CA concede the applicability of Articles 448 and 546 of the civil Code to the case but ruled that it is still premature to apply the same considering that the issue of whether respondents’ right to possess a portion of petitioner’s land had already expired or was already terminated was not yet resolved. 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.

ISSUE: W/N the established relationship between the parties is one of usufruct and W/N the demand made by the petitioner terminated the respondent’s right to possess. HELD: The SC ruled in favor of the petitioner. The Court is inclined to agree with the CA that what was constituted between the parties herein is one of usufruct over a piece of land, with the petitioner being the owner of the property upon whom the naked title thereto remained and the respondents being two (2) among other unnamed usufructuaries who were simply referred to as petitioner’s kin. The Court, however, cannot go along with the CA’s holding that the action for unlawful detainer must be dismissed on ground of prematurity. Usufruct is defined under Article 562 of the Civil Code in the following wise:

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

Usufruct, in essence, is nothing else but simply allowing one to enjoy another’s property. 9 It is also defined as the right to enjoy the property of another temporarily, including both the jus utendi and the jus fruendi, 10 with the owner retaining the jus disponendi or the power to alienate the same. As to whether or not the demand terminated the respondent’s right to possess. It is undisputed that petitioner expressly authorized respondents to 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.

However, the stipulation in the contract is only of the ways of terminating the usufruct. There are other modes or instances whereby the usufruct shall be considered terminated or extinguished. For sure, the Civil Code enumerates such other modes of extinguishment:

ART. 603. Usufruct is extinguished: (1) By the death of the usufructuary, unless a contrary intention clearly appears; (2) By expiration of the period for which it was constituted, or by the fulfillment of any resolutory condition provided in the title creating the usufruct; (3) By merger of the usufruct and ownership in the same person; (4) By renunciation of the usufructuary; (5) By the total loss of the thing in usufruct; (6) By the termination of the right of the person constituting the usufruct; (7) By prescription. (Emphasis supplied.)

The document executed by the petitioner dated July 21, 1986 constitutes the title creating, and sets forth the conditions of, the usufruct. Paragraph #3 thereof states "[T]hat anyone of my kins may enjoy the privilege to stay therein and may avail the use thereof. Provided, however, that the same is not inimical to the purpose thereof" (Emphasis supplied). What may be inimical to the purpose constituting the usufruct may be gleaned from the preceding paragraph wherein petitioner made it abundantly clear "that anybody of my kins who wishes to stay on the aforementioned property should maintain an atmosphere of cooperation, live in harmony and must avoid bickering with one another." That the maintenance of a peaceful and harmonious relations between and among kin constitutes an indispensable condition for the continuance of the usufruct is clearly deduced from the succeeding Paragraph #4 where petitioner stated "[T]hat anyone of my kins who cannot conform with the wishes of the undersigned may exercise the freedom to look for his own." In fine, the occurrence of any of the following: the loss of the atmosphere of cooperation, the bickering or the cessation of harmonious relationship between/among kin constitutes a resolutory condition which, by express wish of the petitioner, extinguishes the usufruct. 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." 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. 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. Art. 580. The usufructuary may set off the improvements he may have made on the property against any damage to the same.

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

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

Facts:

Jose Hemedes, father of Maxima Hemedes and Enrique D. Hemedes was the owner of an unregistered parcel of land, identified as Lot No. 6, plan Psu-111331, w/ area of 21,773 square meters, situated in Sala, Cabuyao, Laguna.

On March 22, 1947 Jose Hemedes executed a document entitled "Donation Inter Vivos With Resolutory Conditions" whereby he conveyed ownership over the subject land, together with all its improvements, in favor of his third wife, Justa Kausapin, subject to the following resolutory conditions:

(a) Upon the death or remarriage of the DONEE, the title to the property donated shall revert to any of the children, or their heirs, of the DONOR expressly designated by the DONEE in a public document conveying the property to the latter; or

(b) In absence of such an express designation made by the DONEE before her death or remarriage contained in a public instrument as above provided, the title to the property shall automatically revert to the legal heirs of the DONOR in common.

Pursuant to the first condition above mentioned, Justa Kausapin executed on September 27, 1960 a "Deed of Conveyance of Unregistered Real Property by Reversion" conveying to Maxima Hemedes the subject property under the terms that ownership is thus transferred to her but the enjoyment and possession will remain to Justa during her lifetime or widowhood until her death.

Maxima, thereafter was able to obtain an OCT of the parcel of land with the annotation at the back of the title which states that "Justa Kausapin shall have the usufructuary rights over the parcel of land herein described during her lifetime or widowhood."

Maxima executed a real mortgage with the R and B Insurance for security of their P6,000 loan. They failed to pay the said loan, prompting the foreclosure of the property. R and B Insurance was the highest bidder, and since Maxima failed to redeem the property. R and B was able to consolidate title in its name.

Meanwhile, it turned out that Justa executed another “Kasunduan”, this time in favor of Enrique conveying the same land by virtue of the document executed by Jose.

After the conveyance, Enrique performed acts of ownership by paying realty taxes and registration in the Ministry of Agrarian Reform Office.

He later sold the land in favor of Dominium Realty and denied having conveyed the said land to Maxima.

Dominium later leased the property to Asia Brewery, its sister company who immediately built warehouses on the said land.

Upon learning such, Maxima, R and B and Justa all wrote a letter to Asia Brewery each asserting their ownership over the land. Maxima even denied having mortgaged the property to R and B Insurance.

Dominium and Enrique D. Hemedes filed a complaint with the Court of First Instance of Binan, Laguna for the annulment of TCT No. 41985 issued in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property.

The complaint alleged that Dominium was the absolute owner and that Justa never conveyed the said land to Maxima and had no knowledge of the registration proceedings initiated by Maxima.

The RTC ruled in favor of Dominium and Enrique. CA affirmed in toto the decision of the RTC.

ISSUE: 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 and W/N a real property maybe mortgaged despite the encumbrance effected by usufruct annotated to it. HELD: The court ruled in favor of Maxima and upheld the validity of mortgaged in favor of R and B Insurance. Justa and Enrique argues that Art. 1332 should be applied because the said document was executed in English, while Justa cannot read and write and therefore could not have validly understood the contents of the said contract. Maxima, on the other hand, aver that Justa is biased since she is entirely dependent to Enrique for her sustainability and therefore her giving of statement is done only in favor of Enrique. She also claims that Art. 1332 cannot be made applicable since her claim of ownership is not anchored on the Deed of Conveyance but rather on the OCT. The Court finds for Maxima because Justa and Enrique only made a mere denial to repudiate the said contract, between a notarized public document and a mere denial, it is the former which should be given more credence. Also, her insistent refusal to give her thumb mark for comparison taints a doubt as to their claim. Furthermore, Justa Kausapin's repudiation of the deed of conveyance is misplaced for there are strong indications that she is a biased witness. The trial court found that Justa Kausapin was dependent upon Enrique D. Hemedes for financial assistance. 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. 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. Finally, public respondent was in error when it sustained the trial court's decision to nullify the "Deed of Conveyance of Unregistered Real Property by Reversion" for failure of Maxima Hemedes to comply with article 1332 of the Civil Code, which states:

When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.

Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his illiteracy, ignorance, mental weakness or other handicap. This article contemplates a situation where in 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.

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. 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. 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. We come now to the question of whether or not R & B Insurance should be considered an innocent purchaser of the land in question. We sustain petitioner R & B Insurance's claim that it is entitled to the protection of a mortgagee in good faith. It is a well-established principle that every person dealing with registered land may safely rely on the correctness of the certificate of title issued and the law will in no way oblige him to go behind the certificate to determine the condition of the property. 36 An innocent purchaser for value 37 is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person. The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes' OCT dose not impose upon R & B Insurance the obligation to investigate the validity of its mortgagor's title. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance. 39 The usufructuary is entitled to all the natural, industrial and civil fruits of the property 40 and may personally enjoy the thing in usufruct, lease it to another, or alienate his right of usufruct, even by a gratuitous title, but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct. Clearly, only the jus utendi and jus fruendi over the property is transferred to the usufructuary. The owner of the property maintains the jus disponendi or the power to alienate, encumber, transform, and even destroy the same. 43 This right is embodied in the Civil Code, which provides that the owner of property the usufruct of which is held by another, may alienate it, although he cannot alter the property's form or substance, or do anything which may be prejudicial to the usufructuary. 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. Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is not sufficient cause to require R & B Insurance to investigate Maxima Hemedes' title, contrary to public respondent's ruling, for the reason that Maxima Hemedes' ownership over the property remained unimpaired despite such encumbrance. R & B Insurance had a right to rely on the certificate of title and was not in bad faith in accepting the property as a security for the loan it extended to Maxima Hemedes.

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.

G.R. No. L-1592 September 20, 1949 In the estate of E.M. Bachrach, deceased. MARY MCDONALD BACHRACH, petitioner-appellee, vs. SOPHIE M.

SEIFERT, ELISA ELIANOFF, AND THE HEIRS OF THE DECEASED GINDA M. SKUNDINA,oppositors-appellants.

Facts:

In testate proceedings, civil case No. 51955 of the Court of First Instance of Manila, the will of E. M. Bachrach, who died on September 28, 1937, provided for the distribution of the considerable property which he had left. The provisions of the will which are important in this case are contained in the sixth and eighth paragraphs which read as follows:

Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach for life all the fruits and usufruct of the remainder of all my estate after payment of the legacies, bequests and gifts provided for above; and she may enjoy such usufruct and use or spend such fruits as she may in any manner wish. Eighth: It is my wish that upon the death of my beloved wife, Mary McDonald Bachrach, all my estate, personal, real and otherwise, and all the fruits and usufruct thereof which during her life pertained to her, shall be divided as follows:

One-half thereof shall be given to such charitable hospitals in the Philippines as she may designate; in case she fails to designate, then said sum shall be given to the Chief Executive of these Islands who shall distribute it, share and share alike to all charitable hospitals in the Philippines excluding those belonging to the governments of the Philippines or of the United States;

One-half thereof shall be divided, share and share alike by and between my legal heirs, to the exclusion of my brothers.

The widow Mary McDonald Bachrach as administratrix and executrix had been administering the property left by her deceased husband and enjoying the usufruct thereof.

The other heirs Sophie M. Seifert, Ginda M. Skundina, Elisa Elianoff and Annie Bachrach Levine on September 14, 1940, filed a petition, agreed to by usufructuary Mary McDonald Bachrach, and the Solicitor General representing the Government of the Philippines, asking that the administratrix "be authorized to pay your petitioners from and after July 1, 1940, and until they receive their share of the estate left by the deceased E.M. Bachrach upon the death of his widow, a monthly allowance of P500, P250, P250, and P250, respectively, and the additional sum of P3,000 to the heir Sophie M. Seifert, who is in poor health, the said allowances to be deducted from your petitioners' share of the estate of the deceased E.M. Bachrach upon the death of the widow."

CFI granted the petition.

From July 1, 1940 to December 31, 1941, the administratrix made the payments as ordered, having paid the total amount of P40,250. Payments during the Japanese occupation which would have amounted to P32,500, was suspended.

Then payments were resumed from August, 1945 to January, 1947. Thereafter, the executrix declined to make further payments.

The heirs petitioned the lower court for a writ of execution, ordering the administratrix to pay the allowances for February, 1947 and those in arrears for the period comprising from January 1, 1942 to July 31, 1945.

This petition was denied and the heirs filed a petition for mandamus in the Supreme Court under G. R. No. L-1379. 1 The petition for mandamus was granted by this Court and the lower court was ordered to proceed in the execution of its order of October 2, 1940 and to issue the proper writ.

In the meantime, the administratrix Mary McDonald Bachrach, filed in the same case No. 51955 in the Court of First Instance of Manila a petition on February 19, 1947, recommending the liquidation of the assets of the estate of her deceased husband destined for charity because due to the havoc and miseries brought about by the last war, the charitable institutions to be benefited badly needed the property bequeathed to them under the will.

In another petition by the same administratrix Mary McDonald filed on February 18, 1947, she alleged that under the order of the court of October 2, 1940, she had already paid to the heirs P40,250; that besides that amount the heirs were demanding the amount of P32,500 representing the allowances that had accrued during the Japanese occupation while the estate was financially and economically prostrate; that the allowances paid to said heirs were taken from the fruits and income of the estate which belong exclusively to her as a usufructuary, that is to say, that the allowances paid to the heirs were advances from her personal funds; and that unless the heirs gave sufficient security for the protection of the administratrix, the ½ of the property corresponding to the heirs which consists mainly of shares of stock, when sold later, may not be sufficient to reimburse her estate after her death for the allowances made or given to the heirs from her personal funds.

On the basis of said allegations, the administratrix prayed the court that she be relieved from the obligation to pay the heirs the monthly allowances ordered by the court in its order of October 2, 1940, and in the alternative, in the event that the court ordered her to continue the payments of said allowances, that she be authorized to sell as much of the assets of the ½ destined for the instituted heirs as may be necessary to enable her to continue the payment of said allowances.

ISSUE: W/N Mary Bachrach may validly liquidate the ½ of the assets of the heirs to answer for their allowance. HELD: The answer is in the negative. Our first impression was that the appellants had no valid reason for objecting to the sale of the ½ of the estate adjudicated to them because in that way they would receive their shares earlier; furthermore, that the administratrix was warranted in asking for the sale of said ½ of the property adjudicated to the heirs or as much thereof as was sufficient to reimburse for the allowances being paid by her to the heirs from her personal funds or from the fruit of the said ½ which, as a usufructuary, be longed to her. Upon a closer scrutiny of the record however, not only of this case (G. R. No. L-1592) but also of G. R. No. L-1379 of which we take judicial notice, for which reason, said last case was cited and referred to for purposes of background so as to give a clear understanding of the facts in this case, we find that the allowance being paid to the heirs are really not paid from the personal funds of the administratrix but from the cash corresponding to the ½ of the estate adjudicated to the heirs, which cash, is deposited in the bank. According to the decision of the Supreme Court in the mandamuscase (G. R. No. L-1379) promulgated on December 19, 1947, the administratrix had in her possession the sum of P351,116.91 which has already been adjudicated to and belongs, although pro indiviso, to the heirs of the deceased E. M. Bachrach and that furthermore, the monthly allowances being paid to the heirs or due them should be paid from this sum and not from the personal funds of the administratrix Mary McDonald Bachrach. Furthermore, the very order of the lower court of October 2, 1940, authorizing the administratrix to pay to the heirs the monthly allowances already mentioned, stipulated in its fourth paragraph that said allowances should be taken from the properties to be turned over to the heirs of the deceased E. M. Bachrach and shall be deducted from the share of said heirs upon the death of the widow.. In the opinion of this Court, the cash in the possession of the administratrix corresponding to the ½ of the estate adjudicated to the heirs is sufficient for the monthly allowances being paid to the heirs and that there is no necessity for the sale of the ½ of the estate corresponding to them.

The main objection to the heirs to the sale of ½ of the estate adjudicated to them, which ½ besides the cash already mentioned, consist mostly of shares of stock, is that said shares if sold now may not command a good price and that furthermore said heirs prefer to keep said shares intact as long as there is no real necessity for their sale. Of course, once said cash in the hands of the administratrix, corresponding to the heirs is exhausted because of the payment of the allowances made to the heirs, some other arrangements might be necessary. The administratrix would then have a right and reason to refuse the payment of said allowances from her said personal funds or from the fruits of the estate, which as a usufructuary, belong to her during her lifetime. But, until that point is reached, we see no valid reason for ordering the sale of the ½ of the estate belonging to the heirs over their objection.

G.R. No. 45534 JOSEFA RIZAL MERCADO, ET AL., plaintiffs-appellants, vs. ALFREDO HIDALGO RIZAL, defendant-appellee

Facts:

The properties left by the deceased Paciano Rizal y Mercado belonged, in usufruct, to nine heirs and, in naked ownership, to seven others. The plaintiffs are two of the nine usufructuaries and the defendant is one of the naked owners.

In 1932, 1933 and 1934, the amount of P6,503.80 was paid for the tax of these lands. Of this amount the naked owners made the plaintiffs pay P1,445.29, or P722.64 each, representing one-ninth of the taxes paid during the aforesaid years.

As the plaintiffs were not agreeable to this payment, because they were mere usufructuaries and they contend that the duty devolves upon the naked owners, this amount was deducted from the products corresponding to them and applied to the payment of land tax.

The plaintiff alleged that, the naked owners being the ones under a duty to pay the tax for the lands, they should recover the amount which was deducted from their share on the fruits and applied, against their will, to the payment of the tax. The naked owners, with the exception of ordered.

The defendant, agreed and paid to each of the plaintiffs sum of P206.47, which is one-seventh of the P1,445.29 deducted from the products of the land corresponding to the plaintiffs.

The present action was brought to compel the defendant to pay also to the plaintiffs the amount of P206.47.

A demurrer was interposed to the complaint for failure to allege facts sufficient to constitute a cause of action. The court sustained the demurrer on the ground that the action is premature under article 505 of the Civil Code providing:

Any taxes which may be imposed directly upon the capital, during the usufruct, shall be chargeable to the owner. If paid the latter, the usufructuary shall pay him the proper interest on any sums he may have disbursed by reason thereof; if the usufructuary should advance the amounts of such taxes he shall recover them upon the expiration of the usufruct.

This ruling of the trial court is erroneous.

ISSUE: W/N it is rightful that the taxes be paid by the usufructuary. HELD: Negative.

Pursuant to the aforequoted provision, the tax directly burdens the capital, that is, the real value of the property and should be paid by the owner (Ong Lengco vs. Monroy, G.R. No. 19411, July 18, 1923). It is contended, however, that under the second paragraph of the aforequoted article, if the usufructuary should pay the tax, he would be entitled to reimbursement for the amount thereof only upon the expiration of the usufruct, and the usufruct being still afoot, it is premature for the plaintiffs, as usufructuaries who advanced the payment of the tax, to bring the action for the recovery of what they paid. There is, however, no basis for this reasoning.

The plaintiffs did not pay the tax. They objected to this payment. They did not consent to the deduction thereof from their share in the products, and much less to the application thereof to this payment which they believe they are not bound to make. In fact they did not make the payment; the naked owners were the ones who made it without their consent and with money belonging to them as their share of the fruits coming to them in their capacity as usufructuaries.

The plaintiffs, in claiming the amount of P206.47, do not rely on paragraph 2 of article 505 of the Civil Code above quoted, for having paid the tax on the lands, but on the first paragraph thereof because it is their contention that, as usufructuaries, they are not the ones called upon to make this payment.

[G.R. No. L-9023. November 13, 1956.] BISLIG BAY LUMBER COMPANY. INC., Plaintiff-Appellee, vs. THE PROVINCIAL GOVERNMENT OF

SURIGAO, Defendant-Appellant.

Facts:

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. The 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 Plaintiff the amount claimed in the complaint. This is an appeal from said decision.

ISSUE: W/N Bislig should pay the taxes levied upon the road that they constructed. HELD: NO. It is the theory of Appellant that, in as much 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 Appellee but also of the public in general. We are inclined to uphold the theory of Appellee. In the first place, it cannot be disputed that the ownership of the road that was constructed by Appellee belongs to the government by right accession not only because it is inherently incorporated or attached to the timber land leased to Appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government In the second place, while the road was constructed by Appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the Appellee and the government and by public in by the general. Thus, under said lease contract, Appellee cannot prevent the use of portions, of the concession for homesteading purposes (clause 12). It is also in duty bound to allow the free use of forest products within the concession for the personal use of individuals residing in or within the vicinity of the land (clause 13). The government has reserved the right to set aside communal forest for the use of the inhabitants of the region, and to set forest reserves for public uses (clause 14). It can also grant licenses covering any portion of the territory for the cutting and extraction of timber to be used in public works, for mining purposes, or for the construction of railway lines (clause 15). And, if it so desires, it can provide for logging railroad, cable ways timber chute os slide, telephone lines, pumping stations log landings, and other rights of way for the use of forest licensees, concessionaires, permittees, or other lessees (clause 26).

In other words, the government has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to Appellee, although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of section 2 of Commonwealth Act No. 470. 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 Appellee is but a partial usufructuary of the road in question. As to the Jurisdiction It should have been the newly created Court of Tax Appeals that should have the jurisdiction of the 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 throughout the Philippines and to hear and decide them as soon as possible. But nevertheless, the Court already took up the case, since it may eventually land to their jurisdiction once appeal from the decision of the said court is made.

[G.R. No. L-28034. February 27, 1971.] THE BOARD OF ASSESSMENT APPEALS OF ZAMBOANGA DEL SUR and PLACIDO L. LUMBAY, in his capacity as Provincial Assessor of Zamboanga del Sur, Petitioners, v. SAMAR MINING COMPANY, INC. and THE COURT OF TAX APPEALS, Respondents.

Facts:

Samar is a domestic corporation engaged in the mining industry. As the mining claims and the mill of Samar are located inland and at a great distance from the loading point or pier site, it decided to construct a gravel road as a convenient means of hauling its ores from the mine site at Buug to the pier area at Pamintayan, Zamboanga del Sur;

that as an initial step in the construction of a 42-kilometer road which would traverse public lands Samar, in 1958 and 1959, filed with the Bureau of Lands and the Bureau of Forestry miscellaneous lease applications for a road right of way on lands under the jurisdiction of said bureaus where the proposed road would traverse;

that having been given temporary permit to occupy and use the lands applied for by it, said respondent constructed a road thereon, known as the Samico road; that although the gravel road was finished in 1959, and had since then been used by the respondent in hauling its iron from its mine site to the pier area, and that its lease applications were approved on October 7, 1965, the execution of the corresponding lease contracts were held in abeyance even up to the time this case was brought to the Court of Tax Appeals.

On June 5, 1964, Samar received a letter from the Provincial Assessor of Zamboanga del Sur assessing the 13.8 kilometer road 2 constructed by it for real estate tax purposes in the total sum of P1,117,900.00.

On July 14, 1964, Samar appealed to the Board of Assessment Appeals of Zamboanga del Sur, (hereinafter referred to as Board, for short), contesting the validity of the assessment upon the ground that the road having been constructed entirely on a public land cannot be considered an improvement subject to tax within the meaning of section 2 of Commonwealth Act 470, and invoking further the decision of this Court in the case of Bislig Bay Lumber Company, Inc. v. The Provincial Government of Surigao, G.R. No. L-9023, promulgated on November 13, 1956.

The Board denied the said petition and even its subsequent motion for reconsideration and moved for the immediate enforceability of the decision.

Samar elevated the case to the Court of Tax Appeals. On June 28, 1967, the Court of Tax Appeals ruled that it had jurisdiction to entertain the appeal and then reversed the resolution of the Board.

The Court of Tax Appeals ruled that since the road is constructed on public lands such that it is an integral part of the land and not an independent improvement thereon, and that upon the termination of the lease the road as an improvement will automatically be owned by the national government, Samar should be exempt from paying the real estate tax assessed against it.

ISSUE: W/N respondent Samar should pay realty tax on the assessed value of the road it constructed on alienable or disposable public lands that are leased to it by the government. HELD: Samar is exempted from payment. Petitioners maintain that the road is an improvement and, therefore, taxable under Section 2 of the Assessment Law (Commonwealth Act No. 470.

"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."

There is no question that the road constructed by respondent Samar on the public lands leased to it by the government is an improvement. But as to whether the same is taxable under the aforequoted provision of the Assessment Law, this question has already been answered in the negative by this Court.

It is contended by petitioners that the ruling in the Bislig case is not applicable in the present case because if the concessionaire in the Bislig case was exempt from paying the realty tax it was because the road in that case was constructed on a timberland or on an indisposable public land, while in the instant case what is being taxed is 13.8 kilometer portion of the road traversing alienable public lands. This contention has no merit. The pronouncement in the Bislig case contains no hint whatsoever that the road was not subject to tax because it was constructed on inalienable public lands. What is emphasized in the lease is that the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed and the improvement is the property of the government by right of accession. Under Section 3(a) of the Assessment Law (Com. Act 470), all properties owned by the government, without any distinction, are exempt from taxation.