December 20, 1911 G.R. No. 6969 VICENTE REYES, plaintiff-appellant, vs. JOSE GREY, ET AL., defendants-appellees.

Facts: Remedios Grey, wife of the plaintiff, died intestate in 1905 without ascendants or descendants, leaving a surviving husband and one sister and three brothers. Under the law, the sisters and brothers are called to inherit all of the estate of the deceased, subject only to the right of the surviving husband, the plaintiff, to a usufructuary interest in one-half thereof. Administration proceedings in the estate of the deceased wife not taken out until June 15, 1907, when Jose Grey, one of the defendants, was appointed administrator. In these administration proceedings, the Court of First Instance of this city issued a decree on December 3, 1910, declaring that each one of the defendants in the case at the bar was entitled to one-fourth part of the estate of the deceased Remedios Grey, subject to the plaintiffs (Vicente Reyes) right to usufruct. Prior to the appointment of the administrator for the estate of Remedios Grey, and as the result of certain judicial proceedings had against her surviving husband, his usufructuary interest in the estate of his deceased wife was sold under execution and deeds issued therefor to the purchaser, the defendant Jose Grey. Such deeds still subsist in full force and effect, no steps ever having been taken either to annul or set them aside or to redeem the interest of the plaintiff thus sold. The plaintiff, as surviving husband of the deceased Remedios Grey, now sues the sister and brothers of his deceased wife, claiming of them the payment of his usufructuary interest in the property of the deceased, basing his claim upon two grounds: first, that the execution sale and the sheriffs deeds executed pursuant thereto did not divest him of his usufructuary interest in the property and that the defendants still remain charge with its payment; and second, the defendants having failed to appear from the order of the probate court dated December 3, 1910, which order was issued some three years after an attempt was made to sell under execution the plaintiffs usufructuary interest, and that order having become final, it settled the plaintiffs right to a usufructuary interest, and the defendants cannot now deny this fact. Issue: W/N a usufructuary interest in real property is not such an interest or right as can be sold under execution. Held: No Ratio: Section 450 of the Code of Civil Procedure provides as follows: SEC. 450. Property liable to execution. All goods, chattels, moneys, and other property, both real and personal, or any interest therein of the judgment debtor, not exempt by law, and all property and rights of property seized and held under attachment in the action, shall be liable to execution. Shares and interests in any corporation or company, and debts, credits, and all other property, both real and personal, or any interest in either real or personal property, and all other property not capable of manual delivery, may be attached on execution, in like manner as upon writs of attachment.

The term property as here applied to lands comprehends every species of title, inchoate or complete; legal or equitable. This statute authorizes the sale under execution of every kind of property, and every interest in property

which is, or may be, the subject of private ownership and transfer. It deals with equitable rights and interests as it deals with legal, without anywhere expressly recognizing or any distinction between them. Article 480 of the Civil Code reads: The usufructuary may personally enjoy the thing in usufruct, lease it to another person, or alienate his right to the usufruct, even for a good consideration; . . . . If the usufructuary right is one which may be leased or sold, it must logically and necessarily follow that such a right is an interest in real property within the meaning of section 450 of the Code of Civil Procedure. It was the plaintiffs usufructuary right in real property which was sold under execution. This right was conferred upon him at the death of his wife by operation of law, and by virtue of such a right he was entitled to receive all the natural, industrial, and civil fruits of said real property in usufruct. He was entitled to hold the actual, material possession of such property during his lifetime, and was obligated only to preserve its form and substance. In other words, he was entitled, subject to his restriction, to use the property as his own. He was the real owner of this interest, and article 480 conferred upon him the right to enjoy the possession of the property or lease it to another or to sell such interest outright. We think the real test, as to whether or not property can be attached and sold upon execution is does the judgment debtor hold such a beneficial interest in such property that he can sell or otherwise dispose of it for value? If he does, then the property is subject to execution and payment of his debts. The right of usufruct is such an interest, and when the sheriff sold the plaintiffs usufructuary right by virtue of an execution, he had no further interest in said property. The plaintiffs second contention that the defendants, by failing to appeal from the order of the court in the administration proceedings dated December 3, 1910, wherein the right of plaintiff to a usufructuary interest in the property was recognized, have lost their right to refuse such payment to him at this time, is not well founded. The plaintiff had no interest in this property at the time the probate court issued this order. The order only set out the fact that under the law the plaintiff was entitled to a usufructuary interest in one-half of the estate of his deceased wife. It was not a finding that in the meantime the plaintiff had not sold, leased, or otherwise disposed of or lost such right of participation. This order merely fixed the legal status of the plaintiff and did not have the effect of canceling or annulling the sale made by the sheriff. Again, the plaintiff instituted the action in the case at bar on June 1, 1910, several months prior to the order of December 3, 1910. The right to recover was traversed by the defendants on July 1 of that same year, and the question was pending and undetermined at the time the probate court issued its order.

October 31, 1961 G.R. No. L-17072 CRISTINA MARCELO VDA. DE BAUTISTA, plaintiff-appellee, vs. BRIGIDA MARCOS, ET AL., defendants-appellants. Facts: On May 17, 1954, Brigida Marcos obtained a loan in the amount of P2,000 from Bautista and to secure payment thereof conveyed to the latter by way of mortgage a two (2)-hectare portion of an unregistered parcel of land situated. The deed of mortgage provided that it was to last for three years, that possession of the land mortgaged was to be turned over to the mortgagee by way of usufruct, but with no obligation on her part to apply the harvests to the principal obligation; that said mortgage would be released only upon payment of the principal loan of P2,000 without any interest; and that the mortgagor promised to defend and warrant the mortgagees rights over the land mortgaged.

Subsequently, or in July, 1956, mortgagor Brigida Marcos filed in behalf of the heirs of her deceased mother, an application for the issuance of a free patent over the land in question, on the strength of the cultivation and occupation of said land by them and their predecessor since July, 1915. As a result, Free Patent was issued to the applicants on January 25, 1957, and on February 22, 1957, it was registered in their names under an OCT. Marcos indebtedness of P2,000 to plaintiff having remained unpaid up to 1959, the latter, on March 4, 1959, filed the present action against Brigida and her husband in the court for the payment thereof, or in default of the debtors to pay, for the foreclosure of her mortgage on the land give as security. Defendants moved to dismiss the action, pointing out that the land in question is covered by a free patent and could not, therefore, under the Public Land Law, be taken within five years from the issuance of the patent for the payment of any debts of the patentees contracted prior to the expiration of said five-year period; but the lower court denied the motion to dismiss on the ground that the law cited does not apply because the mortgage sought to be foreclosed was executed before the patent was issued. Defendants then filed their answer, reiterating the defense invoked in their motion to dismiss, and alleging as well that the real contract between the parties was an antichresis and not a mortgage. The lower court rendered judgment finding the mortgage valid to the extent of the mortgagors pro -indiviso share of 15,333 square meters in the land in question, on the theory that the Public Land Law does not apply in this case because the mortgage in question was executed before a patent was issued over the land in question; that the agreement of the parties could not be antichresis because the deed clearly shows a mortgage with usufruct in favor of the mortgagee; and ordered the payment of the mortgage loan of P2,000 to plaintiff or, upon defendants failure to do so, the foreclosure of plaintiffs mortgage on defendant Brigida Marcos undivided share in the land in question. From this judgment, defendants Brigida Marcos and her husband appealed to this Court. Issue: Whether or not a mortgagee may foreclose a mortgage on a piece of land covered by a free patent where the mortgage was executed before the patent was issued and is sought to be foreclosed within five years from its issuance. Held: The judgment appealed from is reversed insofar as it orders the foreclosure of the mortgage in question, but affirmed in all other respects. Ratio: The right of plaintiff-appellee to foreclose her mortgage on the land in question depends not so much on whether she could take said land within the prohibitive period of five years from the issuance of defendants patent for the satisfaction of the indebtedness in question, but on whether the deed of mortgage is at all valid and enforceable, since the land mortgaged was apparently still part of the public domain when the deed of mortgage was constituted. As it is an essential requisite for the validity of a mortgage that the mortgagor be the absolute owner of the thing mortgaged (Art. 2085), the mortgage here in question is void and ineffective because at the time it was constituted, the mortgagor was not yet the owner of the land mortgaged and could not, for that reason, encumber the same to the plaintiff-appellee. Nor could the subsequent acquisition by the mortgagor of title over said land through the issuance of a free patent validate and legalize the deed of mortgage under the doctrine of estoppel (Art. 1434) since upon the issuance of said patient, the land in question was thereby brought under the operation of the Public Land Law that prohibits the taking of said land for the satisfaction of debts contracted prior to the expiration of five years from the date of the issuance of the patent (sec. 118, C.A. No. 141). This prohibition should include not only debts contracted during the five-year period immediately preceding the issuance of the patent but also those contracted before such issuance, if the purpose and policy of the law, which is to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him, is to be upheld.

The invalidity of the mortgage does not, however, imply the concomitant invalidity of the collate agreement in the same deed of mortgage whereby possession of the land mortgaged was transferred to plaintiff-appellee in usufruct, without any obligation on her part to account for its harvests or deduct them from defendants indebtedness of P2,000. Marcos, who, together with her sisters, was in possession of said land by herself and through her deceased mother before her since 1915, had possessory rights over the same even before title vested in her as co-owner by the issuance of the free patent to her and her sisters, and these possessory right she could validly transfer and convey to plaintiff-appellee, as she did in the deed of mortgage. The latter, upon the other hand, believing her mortgagor to be the owner of the land mortgaged and not being aware of any flaw which invalidated her mode of acquisition, was a possessor in good faith (Art. 526), and as such had the right to all the fruits received during the entire period of her possession in good faith (Art. 544). She is, therefore, entitled to the full payment of her credit of P2,000 from defendants, without any obligation to account for the fruits or benefits obtained by her from the land in question.