1. Hemedes v.

CA
FACTS:
Jose Hermedes executed a Donation Inter vivos with Resolutory Conditions in favour of his
third wife Justa Kausapin in relation to his unregistered property in Sala, Cabuyao, Laguna.
The following are the resolutory conditions contained therein:

(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" 4 conveying to
Maxima Hemedes, the daughter of the late Jose Hermedes, the subject property. However,
Kausapin still retained usufructuary rights relative to the same during her lifetime or
widowhood.
Later, Maxima executed a real estate mortgage on the parcel of land in consideration of a
P6,000 loan from R & B Insurance. Due to her failure to pay said loan, the land was
extrajudicially foreclosed in favour of the insurance company. After Maxima failed to redeem
the property, title was transferred to the insurance company. The usufrunctuary rights of
Kausapin were annotated in the new title.
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.
Enrique Hemedes is also the named owner of the property in the records of the
Ministry of Agrarian Reform office at Calamba, Laguna based on the cadastral
survey. Thereafter, Enrique sold the same 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 Brewery's constructions upon the subject property, R & B Insurance sent it a letter on
March 16, 1981 informing the former of its ownership of the property as evidenced by TCT
No. 41985 issued in its favor and of its right to appropriate the constructions since Asia

Page 1 of 8

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. (0941) 0-198 and that, as such, she has the right to appropriate Asia Brewery's 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.
RTC ruled in favour of Dominium and Enrique.
Both R & B Insurance and Maxima Hemedes appealed from the trial court's decision. On
September 11, 1992 the
Court of Appeals affirmed the assailed decision in toto.
Both R & B Insurance and Maxima filed their respective petitions for review before the SC.
ISSUES:

1. If a parcel of land is subject to usufructuary rights of, will that make the mortgagee who
purchased the same in bad faith?
2. In this case, what are the rights of a usufructuary?
HELD:
1st Issue:
NO. Even if a property is subject to usufructuary rights of another, this will not make a
mortgagee who purchased the same in bad faith.
R & B Insurance alleges that, contrary to public respondent's 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
buyer's 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 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

Page 2 of 8

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
2nd Issue:
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. 41
Clearly, only the jus utendi and jus fruendi over the property is transferred to the
usufructuary. 42 The owner of the property maintains the jus disponendi or the power to
alienate, encumber, transform, and even destroy the same. 43 This right is embodied in the
Civil Code, which provides that the owner of property the usufruct of which is held by
another, may alienate it, although he cannot alter the property's 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
CONCLUSION:
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.
2. Fabie v. Gutierrez David
FACTS:
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.
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

Page 3 of 8

stipulation in writing submitted by the parties to and approved by the court. The pertinent
portions of said stipulation read as follows:
xxx

xxx

xxx

(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.
xxx

xxx

xxx

Thereafter, Fabie filed a case of unlawful detainer against Ngoo Soo, the tenant of the Santo
Cristo property. She alleged in her complaint that:
1. Ngoo Soo sub-leased the same to another Chinese without her consent
2. She wishes to use the property as her residence for her own house was burned by the
Japanese during the entry of the American liberators in the City and that despite
notice to the defendant of her intention, the latter still refused to vacate the
premises; and
3. Ngoo Soo had incurred unpaid rents.
Ngoo Soo denied that he sub-leased the property to any person. He also said that Fabie only
wants to lease the property to other persons for a higher rental rate. He also said that
Fabies only right is to collect rents as a usufruct which does not include evicting tenants.
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 and that he is the
administrator of the same and has the right to file complaints for ejectment and not Fabie.
MTC dismissed the petition for internvention finding that under aforesaid clause 9, Fabie is
the administratix of the property. It also ordered Ngo Soo to vacate the premises and pay the
rents.
RTC dismissed the case saying that the same is not within its jurisdiction since the case did
not only pertain to the issue of possession but who should administer the property, lease or
evict tenants. MR was likewise denied by J. Gutierrez-David.
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.
ISSUES:

Page 4 of 8

1. Who has the right to manage or administer the property to select the tenant and to fix
the amount of the rent?
2. 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?
HELD:
1st Issue:
Fabie has the right ot manage or administer the property and whoever has that right has the
right to the control and possession of the property in question, regardless of the title thereto.
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.
2nd Issue:
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

Page 5 of 8

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."
3. Moralidad v. Pernes
FACTS:
Moralidad bought a property located in Davao City initially for the purpose of letting Arlene,
her niece, together with the latters family 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.
Following her retirement in 1993, petitioner came back to the Philippines to stay with the
respondents on the house they build on the subject property. In the course of time, their
relations turned sour because members of the Pernes family were impervious to her
suggestions and attempts to change certain practices concerning matters of health and
sanitation within their compound.
Thereafter, Moralidad filed a case of unlawful detainer against the respondents. MTC ruled in
favour of the petitioner. Respondents appealed to the RTC. In the meantime, petitioner filed
a Motion for Execution Pending Appeal. The motion was initially granted by the RTC in its
Order of February 29, 2000, but the Order was later withdrawn and vacated by its
subsequent Order dated May 9, 2000 6 on the ground that immediate execution of the
appealed decision was not the prudent course of action to take, considering that the house
the respondents constructed on the subject property might even be more valuable than the
land site.
Eventually, RTC reversed the ruling of the MTC. RTCs judgment was affirmed by the CA. The
CA further ruled that what governs the rights of the parties is the law on usufruct but
petitioner failed to establish that respondents right to possess had already ceased. On this
premise, the CA concluded that the ejectment suit instituted by the petitioner was
premature. The appellate court thus affirmed the appealed RTC decision.
Hence, this present petition.
ISSUES:
1. Whether the existing usufruct may be deemed to have been extinguished or terminated.
2. Are the respondents entitled to reimbursement for the improvements they have built on
the land?
HELD:
1st Issue:
We disagree with the CAs conclusion of law on the matter. The term or period of the
usufruct originally specified provides only one of the bases for the right of a usufructuary to
hold and retain possession of the thing given in usufruct. There are other modes or instances
whereby the usufruct shall be considered terminated or extinguished. For sure, the Civil
Code enumerates such other modes of extinguishment:

Page 6 of 8

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.
From the pleadings submitted by the parties, it is indubitable that there were indeed facts
and circumstances whereby the subject usufruct may be deemed terminated or
extinguished by the occurrence of the resolutory conditions provided for in the title creating
the usufruct, namely, the document adverted to which the petitioner executed on July 21,
1986.
As aptly pointed out by the petitioner in her Memorandum, respondents own evidence
before the MTCC indicated that the relations between the parties "have deteriorated to
almost an irretrievable level." 13 There is no doubt then that what impelled petitioner to file
complaints before the local barangay lupon, the Office of the Ombudsman for Mindanao, and
this instant complaint for unlawful detainer before the MTCC is that she could not live
peacefully and harmoniously with the Pernes family and vice versa.
Thus, the Court rules that the continuing animosity between the petitioner and the Pernes
family and the violence and humiliation she was made to endure, despite her advanced age
and frail condition, are enough factual bases to consider the usufruct as having been
terminated.
2nd Issue:

Page 7 of 8

To reiterate, the relationship between the petitioner and respondents respecting the property
in question is one of owner and usufructuary. Accordingly, respondents claim for
reimbursement of the improvements they introduced on the property during the effectivity
of the usufruct should be governed by applicable statutory provisions and principles on
usufruct. In this regard, we cite with approval what Justice Edgardo Paras wrote on the
matter:
If the builder is a usufructuary, his rights will be governed by Arts. 579 and 580. In case like
this, the terms of the contract and the pertinent provisions of law should govern (3 Manresa
215-216; se also Montinola vs. Bantug, 71 Phil. 449). 14 (Emphasis ours.)
By express provision of law, respondents, as usufructuary, do not have the right to
reimbursement for the improvements they may have introduced on the property. We quote
Articles 579 and 580 of the Civil Code:
Art. 579. The usufructuary may make on the property held in usufruct such useful
improvements or expenses for mere pleasure as he may deem proper, provided he does not
alter its form or substance; but he shall have no right to be indemnified therefor. He may,
however, remove such improvements, should it be possible to do so without damage to the
property. (Emphasis supplied.)
Art. 580. The usufructuary may set off the improvements he may have made on the property
against any damage to the same.
Given the foregoing perspective, respondents will have to be ordered to vacate the premises
without any right of reimbursement. If the rule on reimbursement or indemnity were
otherwise, then the usufructuary might, as an author pointed out, improve the owner out of
his property. 15 The respondents may, however, remove or destroy the improvements they
may have introduced thereon without damaging the petitioners property.

Page 8 of 8