1

USUFRUCT

G.R. No. L-2659 October 12, 1950

In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY McDONALD BACHRACH,petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants.

Ross, Selph, Carrascoso and Janda for appellants.

Delgado and Flores for appellee.

OZAETA, J.:

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus of the estate, which pertains to the
remainderman? That is the question raised in the appeal.

The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in his last will and testament made various
legacies in cash and willed the remainder of his estate as follows:

Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach for life all the fruits and usufruct of the
remainder of all my estate after payment of the legacies, bequests, and gifts provided for above; and she may enjoy said usufruct and use or spend
such fruits as she may in any manner wish.

The will further provided that upon the death of Mary McDonald Bachrach, one-half of the all his estate "shall be divided share and share alike by
and between my legal heirs, to the exclusion of my brothers."

The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co., Inc., received from the latter 54,000 shares
representing 50 per cent stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life tenant of the
estate, petitioned the lower court to authorize the Peoples Bank and Trust Company as administrator of the estate of E. M. Bachrach, to her the said
54,000 share of stock dividend by endorsing and delivering to her the corresponding certificate of stock, claiming that said dividend, although paid
out in the form of stock, is fruit or income and therefore belonged to her as usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal heirs
of the deceased, opposed said petition on the ground that the stock dividend in question was not income but formed part of the capital and therefore
belonged not to the usufructuary but to the remainderman. And they have appealed from the order granting the petition and overruling their
objection.

While appellants admits that a cash dividend is an income, they contend that a stock dividend is not, but merely represents an addition to the invested
capital. The so-called Massachusetts rule, which prevails in certain jurisdictions in the United States, supports appellants' contention . It regards cash
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dividends, however large, as income, and stock dividends, however made, as capital. (Minot vs. Paine, 99 Mass., 101; 96 Am. Dec., 705.) It holds
that a stock dividend is not in any true sense any true sense any dividend at all since it involves no division or severance from the corporate assets of
the dividend; that it does not distribute property but simply dilutes the shares as they existed before; and that it takes nothing from the property of the
corporation, and nothing to the interests of the shareholders.

On the other hand, so called Pennsylvania rule, which prevails in various other jurisdictions in the United States, supports appellee's contention. This
rule declares that all earnings of the corporation made prior to the death of the testator stockholder belong to the corpus of the estate, and that all
earnings, when declared as dividends in whatever form, made during the lifetime of the usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)

. . . It is clear that testator intent the remaindermen should have only the corpus of the estate he left in trust, and that all dividends should go the life
tenants. It is true that profits realized are not dividends until declared by the proper officials of the corporation, but distribution of profits, however
made, in dividends, and the form of the distribution is immaterial. (In re Thompson's Estate, 262 Pa., 278; 105 Atl. 273, 274.)

In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky, speaking thru its Chief Justice, said:

. . . Where a dividend, although declared in stock, is based upon the earnings of the company, it is in reality, whether called by one name or another,
the income of the capital invested in it. It is but a mode of distributing the profit. If it be not income, what is it? If it is, then it is rightfully and
equitably the property of the life tenant. If it be really profit, then he should have it, whether paid in stock or money. A stock dividend proper is the
issue of new shares paid for by the transfer of a sum equal to their par value from the profits and loss account to that representing capital stock; and
really a corporation has no right to a dividend, either in cash or stock, except from its earnings; and a singular state of case — it seems to us, an
unreasonable one — is presented if the company, although it rests with it whether it will declare a dividend, can bind the courts as to the proper
ownership of it, and by the mode of payment substitute its will for that of that of the testator, and favor the life tenants or the remainder-men, as it
may desire. It cannot, in reason, be considered that the testator contemplated such a result. The law regards substance, and not form, and such a rule
might result not only in a violation of the testator's intention, but it would give the power to the corporation to beggar the life tenants, who, in this
case, are the wife and children of the testator, for the benefit of the remainder-men, who may perhaps be unknown to the testator, being unborn when
the will was executed. We are unwilling to adopt a rule which to us seems so arbitrary, and devoid of reason and justice. If the dividend be in fact a
profit, although declared in stock, it should be held to be income. It has been so held in Pennsylvania and many other states, and we think it the
correct rule. Earp's Appeal, 28 Pa. St. 368; Cook, Stocks & S. sec. 554. . . .

We think the Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. Under section 16 of our Corporation Law, no
corporation may make or declare any dividend except from the surplus profits arising from its business. Any dividend, therefore, whether cash or
stock, represents surplus profits. Article 471 of the Civil Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and
civil fruits of the property in usufruct. And articles 474 and 475 provide as follows:

ART. 474. Civil fruits are deemed to accrue day by day, and belong to the usufructuary in proportion to the time the usufruct may last.
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ART. 475. When a usufruct is created on the right to receive an income or periodical revenue, either in money or fruits, or the interest on bonds or
securities payable to bearer, each matured payment shall be considered as the proceeds or fruits such right.

When it consists of the enjoyment of the benefits arising from an interest in an industrial or commercial enterprise, the profits of which are not
distributed at fixed periods, such profits shall have the same consideration.lawphil.net

In either case they shall be distributed as civil fruits, and shall be applied in accordance with the rules prescribed by the next preceding article.

The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend are civil fruits of the original investment. They
represent profits, and the delivery of the certificate of stock covering said dividend is equivalent to the payment of said profits. Said shares may be
sold independently of the original shares, just as the offspring of a domestic animal may be sold independently of its mother.

The order appealed from, being in accordance with the above-quoted provisions of the Civil Code, his hereby affirmed, with costs against the
appellants.

[G.R. No. 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]

 4
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
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(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) 0-198 [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. (0-941) 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
 6
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
 7
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.

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]
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[11]
Meanwhile, in G.R. No. 108472 , 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.

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.
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The Register of Deeds of Laguna issued OCT No. (0-941) 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:
 10
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]
 11
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
 12
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]
 13
[42]
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 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
 14
[50]
personal judgment rendered against such defendant is null and void. 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.
 15

G.R. No. L-123 December 12, 1945

JOSEFA FABIE, petitioner,

vs.
JOSE GUTIERREZ DAVID, Judge of First Instance of Manila, NGO BOO SOO and JUAN GREY, respondents.

Sancho Onocencio for petitioner.

Serverino B. Orlina for respondent Ngo Soo.
No appearance for other respondents.

OZAETA, J.:

The petitioner Josefa Fabie is the usufructuary of the income of certain houses located at 372-376 Santo Cristo, Binondo, and 950-956 Ongpin, Santa
Cruz, Manila, under the ninth clause of the will of the deceased Rosario Fabie y Grey, which textually reads as follows:

NOVENO. — Lego a mi ahijada menor de edad, Maria Josefa de la Paz Fabie, en usufructo vitalicio las rentas de las fincas situadas en la Calle
Santo Cristo Numeros 372 al 376 del Disrito de Binondo, de esta Ciudad de Manila, descrita en el Certificado Original de Titulo No. 3824; y en la
Calle Ongpin, Numeros 950 al 956 del Distrito de Santa Cruz, Manila descrita en el Certificado Original de Titulo No. 5030, expedidos por el
Registrador de Titulos de Manila, y prohibo enajene, hipoteque, permute o transfiera de algun modo mientras que ella sea menor de edad. Nombro a
Serafin Fabie Macario, mi primo por linea paterna tutor de la persona y bienes de mi ahijada menor, Maria Josefa de la Paz Fabie.

The owner of Santo Cristo property abovementioned is the respondent Juan Grey, while those of the Ongpin property are other person not concern
herein. Previous to September 1944 litigation arose between Josefa Fabie as plaintiff and Juan Grey as defendant and the owner of the Ongpin
property as intervenors, involving the administration of the houses mentioned in clause 9 of the will above quoted (civil case No. 1659 of the Court
of First Instance of Manila). That suit was decided by the court on September 2, 1944, upon a stipulation in writing submitted by the parties to and
approved by the court. The pertinent portions of said stipulation read as follows:
 16
(4) Heretofore, the rent of said properties have been collected at times by the respective owners of the properties, at other times by the usufructuary,
and lastly by the defendant Juan Grey as agent under a written agreement dated March 31, 1942, between the owners of both properties and the
usufructuary.

(5) When the rents were collected by the owners, the net amounts thereof were duly paid to the usufructuary after the expenses for real estate taxes,
repairs and insurance premiums, including the documentary stamps, on the properties and the expenses of collecting the rents had been deducted, and
certain amount set aside as a reserve for contingent liabilities. When the rents were collected by the usufructuary, she herself paid the expenses
aforesaid. When the rents are collected by the defendant Juan Grey under the agreement of March 31, 1942, the net amounts thereof were duly paid
to the usufructuary, after deducting and setting aside the items aforesaid, monthly, until the month of October 1943, when the usufructuary refused to
continue with the agreement of March 31, 1942.

xxx xxx xxx

II. The parties hereto jointly petition the Court to render judgment adopting the foregoing as finding of facts and disposing that:

(8) Beginning with the month of September 1944, the usufructuary shall collect all the rents of the both the Sto. Cristo and the Ongpin properties.

(9) The usufructuary shall, at her own cost and expense, pay all the real estate taxes, special assessments, and insurance premiums, including the
documentary stamps, and make all the necessary repairs on each of the properties, promptly when due or, in the case of repairs, when the necessary,
giving immediate, written notice to the owner or owners of the property concerned after making such payment or repairs. In case of default on the
part of the usufructuary, the respective owners of the properties shall have the right to make the necessary payment, including penalties and interest,
if any, on the taxes and special assessments, and the repairs and in that event the owner or owners shall entitled to collect all subsequent rents of the
property concerned until the amount paid by him or them and the expenses of collection are fully covered thereby, after which the usufructuary shall
again collect the rents in accordance herewith.

(10) The foregoing shall be in effect during the term of the usufruct and shall be binding on the successors and assigns of each of the parties.

(11) Nothing herein shall be understood as affecting any right which the respective owners of the properties have or may have as such and which is
not specifically the subject of this stipulation.

In June 1945 Josefa Fabie commenced an action of unlawful detainer against the herein respondent Ngo Boo Soo (who says that his correct name is
Ngo Soo), alleging in her amended complaint that the defendant is occupying the premises located at 372-376 Santo Cristo on a month-to month
rental payable in advance not latter than the 5th of each month; that she is the administratrix and usufructuary of said premises; "that the defendant
offered to pay P300 monthly rent payable in advance not later than the 5th of every month, beginning the month of April 1945, for the said of
premises including the one door which said defendant, without plaintiff's consent and contrary to their agreement, had subleased to another Chinese,
but plaintiff refused, based on the fact that the herein plaintiff very badly needs the said house to live in, as her house was burned by the Japanese on
the occasion of the entry of the American liberators in the City and which was located then at No. 38 Flores, Dominga, Pasay; that defendant was
 17
duly notified on March 24 and April 14, 1945, to leave the said premises, but he refused"; and she prayed for judgment of eviction and for unpaid
rentals.

The defendant answered alleging that he was and since 1908 had been a tenant of the premises in question, which he was using and had always used
principally as a store and secondarily for living quarters; that he was renting it from its owner and administrator Juan Grey; "that plaintiff is merely
the usufructuary of the income therefrom, and by agreement between her and said owner, which is embodied in a final judgment of the Court of First
Instance of Manila, her only right as usufructuary of the income is to receive the whole of such income; that she has no right or authority to eject
tenants, such right being in the owner and administrator of the house, the aforesaid Juan Grey, who has heretofore petitioned this Court for
permission to intervene in this action; that plaintiff herein has never had possession of said property; that defendant's lease contract with the owner of
the house is for 5-year period, with renewal option at the end of each period, and that his present lease due to expire on December 31, 1945 . . .; that
on June 1, 1945, defendant made a written offer to plaintiff to compromise and settle the question of the amount of rent to be paid by defendant . . .
but said plaintiff rejected the same for no valid reason whatever and instituted the present action; that the reason plaintiff desires to eject defendant
from the property is that she wishes to lease the same to other persons for a higher rent, ignoring the fact that as usufructuary of the income of the
property she has no right to lease the property; that the defendant has subleased no part of the house to any person whomsoever.

Juan Grey intervened in the unlawful detainer suit, alleging in his complaint in intervention that he is the sole and absolute owner of the premises in
question; that the plaintiff Josefa Fabie is the usufructuary of the income of said premises; by virtue of a contract between him and the intervenor
which will expire on December 31, 1945, with the option to renew it for another period of five years from and after said date; that under the
agreement between the intervenor and plaintiff Josefa Fabie in civil case No. 1659 of the Court of First Instance of Manila, which was approved by
the court and incorporated in its decision of September 2, 1944, the only right recognized in favor of Josefa Fabie as usufructuary of the income of
said premises is to receive the rents therefrom when due; and that as usufructuary she has no right nor authority to administer the said premises nor to
lease them nor to evict tenants, which right and authority are vested in the intervenor as owner of the premises.

The municipal court (Judge Mariano Nable presiding) found that under paragraph 9 of the stipulation incorporated in the decision of the Court First
Instance of Manila in civil; case No. 1659, the plaintiff usufructuary is the administratrix of the premises in question, and that the plaintiff had proved
her cause. Judgment was accordingly rendered ordering the defendant Ngo Soo to vacate the premises and to pay the rents at the rate of P137.50 a
month beginning April 1, 1945. The complaint in intervention was dismissed.

Upon appeal to the Court of First Instance of Manila the latter (thru Judge Arsenio P. Dizon) dismissed the case for the following reason: "The main
issue *** is not a mere question of possession but precisely who is entitled to administer the property subject matter of this case and who should be
the tenant, and the conditions of the lease. These issues were beyond the jurisdiction of the municipal court. This being case, this Court, as appellate
court, is likewise without jurisdiction to take cognizance of the present case." A motion for reconsideration filed by the plaintiff was denied by Judge
Jose Gutierrez David, who sustained the opinion of Judge Dizon.lawphi1.net

The present original action was instituted in this Court by Josefa Fabie to annul the order of the dismissal and to require to the Court of First Instance
to try and decide the case on the merits. The petitioner further prays that the appeal of the intervenor Juan Grey be declared out of time on the ground
that he receive copy of the decision on August 3 but did not file his notice of appeal until August 25, 1945.
 18
1. The first question to determine is whether the action instituted by the petitioner Josefa Fabie in the municipal court is a purely possessory action
and as such within the jurisdiction of said court, or an action founded on property right and therefore beyond the jurisdiction of the municipal court.
In other words, is it an action of unlawful detainer within the purview of section 1 of Rule 72, or an action involving the title to or the respective
interests of the parties in the property subject of the litigation?

Said section 1 of Rule 72 provides that "a landlord, vendor, vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or the legal
representatives or assigns of any such landlord, vendor vendee, or other person, may, at any time within one year after such unlawful deprivation of
withholding of possession, bring an action in the proper inferior court against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the restitution of such possession, together with the damages and costs."

It is admitted by the parties that the petitioner Josefa Fabie is the usufructuary of the income of the property in question and that the respondent Juan
Grey is the owner thereof. It is likewise admitted that by virtue of a final judgment entered in civil case No. 1659 of the Court of First Instance of
Manila between the usufructuary and the owner, the former has the right to collect all the rents of said property for herself with the obligation on her
part to pay all the real estate taxes, special assessments, and insurance premiums, and make all necessary repairs thereon, and in case default on her
part the owner shall have the right to do all those things, in which event he shall be entitled to collect all subsequent rents of the property concerned
until the amount paid by him and the expenses of collection are fully satisfied, after which the usufructuary shall again collect the rents. There is
therefore no dispute as to the title to or the respective interests of the parties in the property in question. The naked title to the property is to
admittedly in the respondent Juan Grey, but the right to all the rents thereof, with the obligation to pay the taxes and insurance premiums and make
the necessary repairs, is, also admittedly, vested in the usufructuary, the petitioner Josefa Fabie, during her lifetime. The only question between the
plaintiff and the intervenor is: Who has the right to manage or administer the property — to select the tenant and to fix the amount of the rent?
Whoever has that right has the right to the control and possession of the property in question, regardless of the title thereto. Therefore, the action is
purely possessory and not one in any way involving the title to the property. Indeed, the averments and the prayer of the complaint filed in the
municipal court so indicate, and as a matter of fact the defendant Ngo Soo does not pretend to be the owner of the property, but on the contrary
admits to be a mere tenant thereof. We have repeatedly held that in determining whether an action of this kind is within the original jurisdiction of the
municipal court or of the Court of First Instance, the averments of the complaint and the character of the relief sought are primarily to be consulted;
that the defendant in such an action cannot defeat the jurisdiction of the justice of the peace or municipal court by setting up title in himself; and that
the factor which defeats the jurisdiction of said court is the necessity to adjudicate the question of title. (Mediran vs.Villanueva, 37 Phil., 752, 759;
Medel vs. Militante, 41 Phil., 526, 529; Sevilla vs. Tolentino, 51 Phil., 333; Supia and Batioco vs. Quintero and Ayala, 59 Phil., 312;
Lizo vs. Carandang, G.R. No. 47833, 2 Off. Gaz., 302; Aguilar vs.Cabrera and Flameño, G.R. No. 49129.)

The Court of First Instance was evidently confused and led to misconstrue the real issue by the complaint in intervention of Juan Grey, who, allying
himself with the defendant Ngo Soo, claimed that he is the administrator of the property with the right to select the tenant and dictate the conditions
of the lease, thereby implying that it was he and not the plaintiff Josefa Fabie who had the right to bring the action and oust the tenant if necessary.
For the guidance of that court and to obviate such confusion in its disposal of the case on the merits, we deem it necessary and proper to construe the
judgment entered by the Court of First Instance of Manila in civil case No. 1659, entitled "Josefa Fabie and Jose Carandang, plaintiffs, vs. Juan Grey,
defendant, and Nieves G. Vda. de Grey, et al., intervenors-defendants" which judgment was pleaded by the herein respondents Juan Grey and Ngo
 19
Soo in the municipal court. According the decision, copy of which was submitted to this Court as Appendix F of the petition and as Annex 1 of the
answer, there was an agreement, dated March 31, 1942, between the usufructuary Josefa Fabie and the owner Juan Grey whereby the latter as
agent collected the rents of the property in question and delivered the same to the usufructuary after deducting the expenses for taxes, repairs,
insurance premiums and the expenses of collection; that in the month of October 1943 the usufructuary refused to continue with the said agreement
of March 31, 1942, and thereafter the said case arose between the parties, which by stipulation approved by the court was settled among them in the
following manner: Beginning with the month of September 1944 the usufructuary shall collect all the rents of the property in question; shall, at her
own cost and expense, pay all the real estate taxes, special assessments, and insurance premiums, including the documentary stamps, and make all
the necessary repairs on the property; and in case of default on her part the owner shall the right to do any or all of those things, in which event he
shall be entitled to collect all subsequent rents until the amounts paid by him are fully satisfied, after which the usufructuary shall again collect the
rents. It was further stipulated by the parties and decreed by the court that "the foregoing shall be in effect during the term of the usufruct and shall be
binding on the successors and assigns of each of the parties."

Construing said judgment in the light of the ninth clause of the will of the deceased Rosario Fabie y Grey, which was quoted in the decision and by
which Josefa Fabie was made by the usufructuary during her lifetime of the income of the property in question, we find that the said usufructuary has
the right to administer the property in question. All the acts of administration — to collect the rents for herself, and to conserve the property by
making all necessary repairs and paying all the taxes, special assessments, and insurance premiums thereon — were by said judgment vested in the
usufructuary. The pretension of the respondent Juan Grey that he is the administrator of the property with the right to choose the tenants and to
dictate the conditions of the lease is contrary to both the letter and the spirit of the said clause of the will, the stipulation of the parties, and the
judgment of the court. He cannot manage or administer the property after all the acts of management and administration have been vested by the
court, with his consent, in the usufructuary. He admitted that before said judgment he had been collecting the rents as agent of the usufructuary under
an agreement with the latter. What legal justification or valid excuse could he have to claim the right to choose the tenant and fix the amount of the
rent when under the will, the stipulation of the parties, and the final judgment of the court it is not he but the usufructuary who is entitled to said
rents? As long as the property is properly conserved and insured he can have no cause for complaint, and his right in that regard is fully protected by
the terms of the stipulation and the judgment of the court above mentioned. To permit him to arrogate to himself the privilege to choose the tenant, to
dictate the conditions of the lease, and to sue when the lessee fails to comply therewith, would be to place the usufructuary entirely at his mercy. It
would place her in the absurd situation of having a certain indisputable right without the power to protect, enforce, and fully enjoy it.

One more detail needs clarification. In her complaint for desahucio Josefa Fabie alleges that she needs the premises in question to live in, as her
former residence was burned. Has she the right under the will and the judgment in question to occupy said premises herself? We think that, as a
corollary to her right to all the rent, to choose the tenant, and to fix the amount of the rent, she necessarily has the right to choose herself as the tenant
thereof, if she wishes to; and, as she fulfills her obligation to pay the taxes and insure and conserve the property properly, the owner has no legitimate
cause to complain. As Judge Nable of the municipal court said in his decision, "the pretension that the plaintiff, being a mere usufructuary of the
rents, cannot occupy the property, is illogical if it be taken into account that that could not have been the intention of the testatrix."

We find that upon the pleadings, the undisputed facts, and the law the action instituted in the municipal court by the petitioner Josefa Fabie against
the respondent Ngo Soo is one of unlawful detainer, within the original jurisdiction of said court, and that therefore Judges Dizon and Gutierrez
David of the Court of First Instance erred in holding otherwise and in quashing the case upon appeal.
 20
2. The next question to determine is the propriety of the remedy availed of by the petitioner in this Court. Judging from the allegations and the prayer
of the petition, it is in the nature of certiorari and mandamus, to annul the order of dismissal and to require the Court of First Instance to try and
decide the appeal on the merits. Under section 3 of Rule 67, when any tribunal unlawfully neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, and there is no other plain, speedy, and adequate remedy in the ordinary course of law, it may
be compelled by mandamus to do the act required to be done to protect the rights of the petitioner. If, as we find, the case before the respondent judge
is one of unlawful detainer, the law specifically requires him to hear and decide that case on the merits, and his refusal to do so would constitute an
unlawful neglect in the performance of that duty within section 3 of Rule 67. Taking into consideration that the law requires that an unlawful detainer
case be promptly decided (sections 5 and 8, Rule 72),it is evident that an appeal from the order of dismissal would not be a speedy and adequate
remedy; and under the authority of Cecilio vs. Belmonte (48 Phil., 243, 255), and Aguilar vs. Cabrera and Flameño (G.R. No. 49129), we hold
that mandamus lies in this case.

3. The contention of the petitioner that the appeal of the intervenor Juan Grey was filed out of time is not well founded. Although said respondent
received copy of the decision of the municipal court on August 3, 1945, according to the petitioner (on August 6, 1945, according to the said
respondent), it appears from the sworn answer of the respondent Ngo Soo in this case that on August 8 he filed a motion for reconsideration, which
was granted in part on August 18. Thus, if the judgment was modified on August 18, the time for the intervenor Juan Grey to appeal therefrom did
not run until he was notified of said judgment as modified, and since he filed his notice of appeal on August 23, it would appear that his appeal was
filed on time. However, we observe in this connection that said appeal of the intervenor Juan Grey, who chose not to answer the petition herein,
would be academic in view of the conclusions we have reached above that the rights between him as owner and Josefa Fabie as usufructuary of the
property in question have been definitely settled by final judgment in civil case No. 1659 of the Court of First Instance of Manila in the sense that the
usufructuary has the right to administer and possess the property in question, subject to certain specified obligations on her part.

The orders of dismissal of the respondent Court of First Instance, dated September 22 and October 31, 1945, in the desahucio case (No. 71149) are
set aside that court is directed to try and decide the said case on the merits; with the costs hereof against the respondent Ngo Soo.
 21

[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, v. 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. L-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, v. 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 BENNETT SCHON, Respondents.

Mirano, Mirano & Associates for petitioners in both cases.

 22

Jose V. Valmayor & Samuel SM. Lezama for private respondents in G.R. No. 51333.

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

SYLLABUS

1. CIVIL PROCEDURE; EXCLUSIVE ORIGINAL JURISDICTION OVER CIVIL ACTIONS AND PROCEEDINGS WITHIN THE EXCLUSIVE
ORIGINAL JURISDICTION OF JUVENILE AND DOMESTIC RELATIONS COURTS AND OF THE COURTS OF AGRARIAN RELATIONS
VESTED IN THE APPROPRIATE REGIONAL TRIAL COURT. — 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 regional trial court seized of an agrarian dispute and interpreting and applying statutes and
administrative rules and regulations concerning land reform and the elimination 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.

RE S O LUTI ON

FELICIANO, J.:

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:jgc:chanrobles.com.ph

"TRANSFER CERTIFICATE OF TITLE

NO. T-494

A parcel of land (Lot 2-G of the subdivision plan Psd-28446, Sheet 2, being a portion of Lot 2 (remaining portion) described in plan II-6992,
 23
G.L.R.O. Record No. 133), situated in the Barrio of Panubigan, Municipality of Canlaon, Province of Negros Occidental, Bounded on the N., by Lot
2-A of the subdivision plan; on the E., and S., by Binalbagan River; on the W., by Lot 2-E of the subdivision plan; on the NW., by Lots 2-F and 2-A
of the subdivision plan. . . . containing an area of THREE MILLION THIRTY-THREE THOUSAND AND FORTY EIGHT (3,033,048) square
meters, more or less." 1

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 rentals to Helen
Schon:jgc:chanrobles.com.ph

"TENANTS

1. Carlos Panaligan 2.00 Ha.

2. Amado Marquez 1.50 Ha.

3. Herbert Pedros 1.50 Ha.

4. Antonio Feliciano, Jr. 2.00 Ha.

5. Hugo Aguilos 3.50 Ha.

6. Alberto Gubaton 8.90 Ha.

7. Hulo Aguilos 1.32 Ha.

8. Julia Vda. de Esquelito 2.25 Ha.

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. Elesio Gelongos 3.00 Ha.

 24
14. Espindion Jocson 5.55 Ha.

15. Salvador Muñon 1.5884 Ha.

16. Ulfiano Alegria 1.85 Ha.

17. Ireneo Balera 8.30 Ha.

[TOTAL 56.555 Ha." 2

==========

On 22 October 1972, after the onset of the martial law administration of former President Marcos, Presidential Decree No. 27 was promulgated,
decreeing the "Emancipation of Tenants." The tract of land owned in common by the petitioners, including the portion thereof subject to Helen
Schon’s usufructuary rights, fell within the scope of "Operation Land Transfer." In consequence, staff members of the Department of Agrarian
Relations identified the tenant-tillers of said land, and the necessary parcellary map sketch was made and submitted to the Bureau of Lands Office in
Dumaguete City. 3 Petitioners through counsel sought the opinion of the DAR as to who (petitioners or respondent Helen Schon) should be entitled
to receive the rental payments which continued to be made by the respondent tenants to Helen Schon. The DAR District Officer rendered an opinion
on 30 May 1977 that the rental payments as of 22 October 1972 were properly considered as amortization payments for the land and as such should
pertain to the land-owners and not to the usufructuary. 4

1. Civil Case No. 13828, Court of First Instance of Negros Occidental.

On 22 May 1978, petitioners filed against the spouses Joseph and Helen Schon Civil Case No. 13828 in the then Court of First Instance of Negros
Occidental, for collection of rentals plus damages with prayer for preliminary injunction. There petitioners claimed that since the land subject to
Helen Schon’s usufructuary rights was among the parcels of land which collectively 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 collecting 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
 25
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:jgc:chanrobles.com.ph

". . . it is crystal clear that the contending parties are actually Ramona R. Locsin, Et Al., and the naked owners of 101 hectares of subject agricultural
land, on one hand, and Helen Bennett-Schon, who is the usufructuary of the same land, on the other.

For all legal intents and purposes, Helen Bennett-Schon belongs to the category of a landowner, since she is the recipient of any and all fruits 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 — whose 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
 26
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:chanrobles virtual lawlibrary

"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:chanrob1es virtual 1aw
library

(a) Cases involving the rights and obligation of persons in cultivation and use of agricultural land . . .;

(b) Questions involving rights granted and obligations imposed 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 answer —

‘x x x

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.
 27
51333.

G.R. No. 51333 and G.R. No. 52289 were consolidated by a Resolution of this Court dated 16 June 1982.chanrobles law library

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 whether the petitioners as naked owners of the land subjected to the beneficial owner’s rights
of Helen Schon, became entitled to the payments 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 appropriate 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.
x x x

(7) In all civil actions and special proceedings falling within the exclusive original jurisdiction of juvenile and domestic relations courts and of the
courts of agrarian relations as now provided by law;

x x x."cralaw virtua1aw library

"(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 regional trial court
seized of an agrarian dispute and interpreting and applying statutes and administrative rules and regulations concerning land reform and the
elimination 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.chanrobles lawlibrary : rednad

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 time which has gone by since the first of the consolidated cases reached 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
respondent tenants-lessees since 21 October 1972 to respondent Helen Schon, as well as the issue relating to the possible application of Article 609
 28
of the Civil Code. Because, however, of the nature and importance of the first issue, and considering that the pleadings and the records of these 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 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 petitioners 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 each 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.