CASES in USUFRUCT

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.
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:
(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.
x x x x x x x x x
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 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.
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 Flameo, 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 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.
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
Flameo (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 thedesahucio 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.
Moran, C.J., Paras, Jaranilla, Feria, De Joya, Pablo, Perfecto, Bengzon, and
Briones, JJ., concur.

[G.R. No. L-28034. February 27, 1971.]

THE BOARD OF ASSESSMENT APPEALS OF ZAMBOANGA DEL SUR
and PLACIDO L. LUMBAY, in his capacity as Provincial Assessor of
Zamboanga del Sur, Petitioners, v. SAMAR MINING COMPANY, INC.
and THE COURT OF TAX APPEALS, Respondents.

Solicitor General Antonio P. Barredo, Assistant Solicitor General
Pacifico P. de Castro and Solicitor Lolita O. Gal-lang, for Petitioners.

Pacifico de Ocampo and Sofronio G. Sayo for respondent Samar
Mining Company, Inc.


D E C I S I O N


ZALDIVAR, J.:


Appeal from the decision of the Court of Tax Appeals, in its CTA Case No.
1705, declaring respondent Samar Mining Company, Inc. (hereinafter
referred to as Samar, for short) exempt from paying the real property
tax assessed against it by the Provincial Assessor of Zamboanga del Sur.

There is no dispute as to the facts of this case. Samar is a domestic
corporation engaged in the mining industry. As the mining claims and
the mill of Samar are located inland and at a great distance from the
loading point or pier site, it decided to construct a gravel road as a
convenient means of hauling its ores from the mine site at Buug to the
pier area at Pamintayan, Zamboanga del Sur; that as an initial step in the
construction of a 42-kilometer road which would traverse public lands
Samar, in 1958 and 1959, filed with the Bureau of Lands and the Bureau
of Forestry miscellaneous lease applications for a road right of way on
lands under the jurisdiction of said bureaus where the proposed road
would traverse; that having been given temporary permit to occupy and
use the lands applied for by it, said respondent constructed a road
thereon, known as the Samico road; that although the gravel road was
finished in 1959, and had since then been used by the respondent in
hauling its iron from its mine site to the pier area, and that its lease
applications were approved on October 7, 1965, the execution of the
corresponding lease contracts were held in abeyance even up to the time
this case was brought to the Court of Tax Appeals. 1

On June 5, 1964, Samar received a letter from the Provincial Assessor of
Zamboanga del Sur assessing the 13.8 kilometer road 2 constructed by it
for real estate tax purposes in the total sum of P1,117,900.00. On July 14,
1964, Samar appealed to the Board of Assessment Appeals of
Zamboanga del Sur, (hereinafter referred to as Board, for short),
contesting the validity of the assessment upon the ground that the road
having been constructed entirely on a public land cannot be considered
an improvement subject to tax within the meaning of section 2 of
Commonwealth Act 470, and invoking further the decision of this Court
in the case of Bislig Bay Lumber Company, Inc. v. The Provincial
Government of Surigao, G.R. No. L-9023, promulgated on November 13,
1956. On February 10, 1965, after the parties had submitted a
stipulation of facts, Samar received a resolution of the Board, dated
December 22, 1964, affirming the validity of the assessment made by the
Provincial Assessor of Zamboanga del Sur under tax declaration No.
3340, but holding in abeyance its enforceability until the lease contracts
were duly executed.

On February 16, 1965, Samar moved to reconsider the resolution of the
Board, praying for the cancellation of tax declaration No. 3340, and on
August 3, 1965, Samar received Resolution No. 13 not only denying its
motion for reconsideration but modifying the Boards previous
resolution of December 22, 1964 declaring the assessment immediately
enforceable, and that the taxes to be paid by Samar should accrue or
commence with the year 1959. When its second motion for
reconsideration was again denied by the Board, Samar elevated the case
to the Court of Tax Appeals.

The jurisdiction of the Court of Tax Appeals to take cognizance of the
case was assailed by herein petitioners (the Board and the Provincial
Assessor of Zamboanga del Sur) due to the failure of Samar to first pay
the realty tax imposed upon it before interposing the appeal, and prayed
that the resolution of the Board appealed from be affirmed. On June 28,
1967, the Court of Tax Appeals ruled that it had jurisdiction to entertain
the appeal and then reversed the resolution of the Board. The Court of
Tax Appeals ruled that since the road is constructed on public lands such
that it is an integral part of the land and not an independent
improvement thereon, and that upon the termination of the lease the
road as an improvement will automatically be owned by the national
government, Samar should be exempt from paying the real estate tax
assessed against it. Dissatisfied with the decision of the Court of Tax
Appeals, petitioners Board and Placido L. Lumbay, as Provincial Assessor
of Zamboanga del Sur, interposed the present petition for review before
this Court.

The issue to be resolved in the present appeal is whether or not
respondent Samar should pay realty tax on the assessed value of the
road it constructed on alienable or disposable public lands that are
leased to it by the government.

Petitioners maintain that the road is an improvement and, therefore,
taxable under Section 2 of the Assessment Law (Commonwealth Act No.
470) which provides as follows:jgc:chanrobles.com.ph

"Sec. 2. Incidence of real property tax. Except in chartered cities, there
shall be levied, assessed, and collected, an annual, ad valorem tax on real
property including land, buildings, machinery, and other improvements
not hereinafter specifically exempted."cralaw virtua1aw library

There is no question that the road constructed by respondent Samar on
the public lands leased to it by the government is an improvement. But
as to whether the same is taxable under the aforequoted provision of the
Assessment Law, this question has already been answered in the
negative by this Court. In the case of Bislig Bay Lumber Co., Inc. v.
Provincial Government of Surigao, 100 Phil. 303, where a similar issue
was raised as to whether the timber concessionaire should be required
to pay realty tax for the road it constructed at its own expense within the
territory of the lumber concession granted to it, this Court, after citing
Section 2 of Commonwealth Act 470, held:jgc:chanrobles.com.ph

"Note that said section authorizes the levy of real tax not only on lands,
buildings, or machinery that may be erected thereon, but also on any
other improvements, and considering the road constructed by appellee
on the timber concession granted to it as an improvement, appellant
assessed the tax now in dispute upon the authority of the above
provision of the law.

"It is the theory of appellant that, inasmuch as the road was constructed
by appellee for its own use and benefit it is subject to real tax even if it
was constructed on a public land. On the other hand, it is the theory of
appellee that said road exempt from real tax because (1) the road
belongs to the national government by right of accession, (2) the road
belongs to the be removed or separated from the land on which it is
constructed and so it is part and parcel of the public land, and (3),
according to the evidence, the road was built not only for the use and
benefit of appellee but also of the public in general.

"We are inclined to uphold the theory of appellee. In the first place, it
cannot be disputed that the ownership of the road that was constructed
by appellee belongs to the government by right of accession not only
because it is inherently incorporated or attached to the timber land
leased to appellee but also because upon the expiration of the
concession, said road would ultimately pass to the national government
(Articles 440 and 445, new Civil Code; Tobatabo v. Molero, 22 Phil., 418).
In the second place, while the road was constructed by appellee
primarily for its use and benefit, the privilege is not exclusive, for, under
the lease contract entered into by the appellee and the government, its
use can also be availed of by the employees of the government and by
the public in general. . . . In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since,
as above shown, the road in question cannot be considered as an
improvement which belongs to appellee, although in part is for its
benefit, it is clear that the same cannot be the subject of assessment
within the meaning of section 2 of Commonwealth Act No. 470.

"We are not oblivious of the fact that the present assessment was made
by appellant on the strength of an opinion rendered by the Secretary of
Justice, but we find that the same is predicated on authorities which are
not in point, for they refer to improvements that belong to the lessees
although constructed on lands belonging to the government. It is well
settled that a real tax, being a burden upon the capital, should be paid by
the owner of the land and not by a usufructuary (Mercado v. Rizal, 67
Phil., 608; Article 597, new Civil Code). Appellee is but a partial
usufructuary of the road in question."cralaw virtua1aw library

Again, in the case of Municipality of Cotabato, Et. Al. v. Santos, Et Al., 105
Phil. 963, this Court ruled that the lessee who introduced improvements
consisting of dikes, gates and guard-houses on swamp lands leased to
him by the Bureau of Fisheries, in converting the swamps into fishponds,
is exempt from payment of realty taxes on those improvements. This
Court held:jgc:chanrobles.com.ph

"We however believe that the assessment on the improvements
introduced by defendant on the fishpond has included more than what is
authorized by law. The improvements as assessed consist of dikes, gates
and guard-houses and bodegas totals P6,850.00 which appellants are not
now questioning, but they dispute the assessment on the dikes and gates
in this wise: After the swamps were leased to appellants, the latter
cleared the swamps and built dikes, by pushing the soil to form these
dikes in the same way that paddies are built on lands intended for the
cultivation of palay, the only difference being that dikes used in
fishponds are relatively much larger than the dikes used in ricelands.
We believe this contention to be correct, because those dikes can really
be considered as integral parts of the fishponds and not as independent
improvements. They cannot be taxed under the assessment law. The
assessment, therefore, with regard to improvements should be modified
excluding the dikes and gates."cralaw virtua1aw library

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

It is also contended by petitioners that the Court of Tax Appeals can not
take cognizance of the appeal of Samar from the resolution of the Board
assessing realty tax on the road in question, because Samar had not first
paid under protest the realty tax assessed against it as required under
the provisions of Section 54 of the Assessment Law (Com. Act 470),
which partly reads as follows:jgc:chanrobles.com.ph

"SEC. 54. Restriction upon power of Court to impeach tax. No court
shall entertain any suit assailing the validity of a tax assessment under
this Act until the taxpayer shall have paid under protest the taxes
assessed against him, no shall any court declare any tax invalid by
reason . . ."cralaw virtua1aw library

The extent and scope of the jurisdiction of the Court of Tax Appeals
regarding matters related to assessment or real property taxes are
provided for in Section 7, paragraph (3) and Section 11 of Republic Act
No. 1125, which partly read as follows:jgc:chanrobles.com.ph

"SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal, as herein provided
x x x


(3) Decisions of provincial or city Board of Assessment Appeals in cases
involving the assessment and taxation of real property or other matters
arising under the Assessment Law, including rules and regulations
relative thereto."cralaw virtua1aw library

"SEC. 11. Who may appeal; effect of appeal. Any person, association or
corporation adversely affected by a decision or ruling of . . . any
provincial or city Board of Assessment Appeals may file an appeal in the
Court of Tax Appeals within thirty days after the receipt of such decision
or ruling."cralaw virtua1aw library

In this connection the Court of Tax Appeals, in the decision appealed
from, said:jgc:chanrobles.com.ph

"Prior to the enactment of Republic Act No. 1125, all civil actions
involving the legality of any tax, impost or assessment were under the
jurisdiction of the Court of First Instance (Sec. 44, Republic Act No. 296).
It is clear, therefore, that before the creation of the Court of Tax Appeals
all cases involving the legality of assessments for real property taxes, as
well as the refund thereof, were properly brought and taken cognizance
by the said court. However, with the passage by Congress and the
approval by the President of Republic Act No. 1125, the jurisdiction over
cases involving the validity of realty tax assessment were transferred
from the Court of First Instance to the Court of Tax Appeals (See Sec. 22,
Rep. Act No. 1125). The only exception to the grant of exclusive appellate
jurisdiction to the Tax Court relates to cases involving the refund of real
property taxes which remained with the Court of First Instance (See of
Cabanatuan, Et. Al. v. Gatmaitan, Et Al., G.R. No. L-19129, February 28,
1963).

"A critical and analytical study of Section 7 of Republic Act No. 1125, in
relation to subsections (1), (2) and (3) thereof, will readily show that it
was the intention of Congress to lodge in the Court of Tax Appeals the
exclusive appellate jurisdiction over cases involving the legality of real
property tax assessment. as distinguished from cases involving the
refund of real property taxes. To require the taxpayer, as contended by
respondents, to pay first the disputed real property tax before he can file
an appeal assailing the legality and validity of the realty tax assessment
will render nugatory the appellate jurisdictional power of the Court of
Tax Appeals as envisioned in Section 7 (3), in relation to Section 11, of
Republic Act No. 1125. If we follow the contention of respondents to its
logical conclusion, we cannot conceive of a case involving the legality
and validity of real property tax assessment, decided by the Board of
Assessment Appeals, which can be appealed to the Court of Tax Appeals,
The position taken by respondents is, therefore, in conflict with the
Explanatory Note contained in House Bill No. 175, submitted during the
First Session, Third Congress of the Republic of the Philippines, and the
last paragraph of Section 21 of Republic Act No. 1125 which provide as
follows:chanrob1es virtual 1aw library

SEC. 21. General provisions.
x x x


Any law or part of law, or any executive order, rule or regulation or part
thereof, inconsistent with the provisions of this Act is hereby repealed.

"Accordingly, we hold that this Court can entertain and give due course
to petitioners appeal assailing the legality and validity of the real
property tax assessment here in question without paying first the
disputed real property tax as required by Section 54 of the Assessment
Law."cralaw virtua1aw library

We agree with the foregoing view of the Court of Tax Appeals. It should
be noted that what is involved in the present case is simply an
assessment of realty tax, as fixed by the Provincial Assessor of
Zamboanga del Sur, which was disputed by Samar before the Board of
Assessment Appeals of said province. There was no demand yet for
payment of the realty tax. In fact the letter of Provincial Assessor, of June
5, 1964, notifying Samar of the assessment, states as
follows:jgc:chanrobles.com.ph

"Should you find the same to be not in accordance with law or its
valuation to be not satisfactory, you may appeal this assessment under
Section 17 of Commonwealth Act 470 to the Board of Assessment
Appeals, through the Municipal Treasurer of Buug, Zamboanga del Sur,
within 60 days from the date of your receipt hereof." 3

Accordingly Samar appealed to the Board questioning the validity of the
assessment. The Board rendered a resolution over-ruling the contention
of Samar that the assessment was illegal. Then Samar availed of its right
to appeal from the decision of the Board to the Court of Tax Appeals as
provided in Section 11 of Republic Act 1125. Section 11 does not require
that before an appeal from the decision of the Board of Assessment
Appeals can be brought to the Court of Tax Appeals it must first be
shown that the party disputing the assessment had paid under protest
the realty tax assessed. In the absence of such a requirement under the
law, all that is necessary for a party aggrieved by the decision of the
Board of Assessment Appeals is to file his notice of appeal to the Court of
Tax Appeals within 30 days after receipt of the decision of the Board of
Assessment Appeals, as provided in Section 11 of Republic Act 1125.

This Court, in the case of City of Cabanatuan v. Gatmaitan, 4
said:jgc:chanrobles.com.ph

". . . if the real estate tax has already been paid it is futile for a taxpayer to
take the matter to the City Board of Assessment Appeals for the
jurisdiction of that body is merely confined to the determination of the
reasonableness of the assessment or taxation of the property and is not
extended to the authority of requiring the refund of the tax unlike cases
involving assessment of internal revenue taxes. In the circumstances, we
hold that this case comes under the jurisdiction of the proper court of
first instance it involving the refund of a real estate tax which does not
come under the appellate jurisdiction of the Court of Tax
Appeals."cralaw virtua1aw library

From the aforequoted portion of the decision of this Court, We gather
that the only question that may be brought before the City or Provincial
Board of Assessment Appeals is the question which relates to the
reasonableness or legality of the realty tax that is assessed against a
taxpayer. Such being the case, it would be unjust to require the realty
owner to first pay the tax, that he precisely questions, before he can
lodge an appeal to the Court of Tax Appeals. We believe that it is not the
intendment of the law that in questioning before the Court of Tax
Appeals the validity or reasonableness of the assessment approved by
the Board of Assessment Appeals the taxpayer should first pay the
questioned tax. It is Our view that in so far as appeals from the decision
or resolution of the Board of Assessment Appeals, Section 54 of
Commonwealth Act 470 does not apply, and said section can be
considered as impliedly repealed by Sections 7, 11 and 21 of Republic
Act 1125.

IN VIEW OF THE FOREGOING, the decision of the Court of Tax Appeals,
appealed from, is affirmed, without pronouncement as to costs. It is so
ordered.

G.R. No. L-44428 September 30, 1977
AVELINO BALURAN, petitioner,
vs.
HON. RICARDO Y. NAVARRO, Presiding Judge, Court of First Instance
of Ilocos Norte, Branch I and ANTONIO OBEDENCIO, respondents.
Alipio V. Flores for petitioner.
Rafael B. Ruiz for private respondent.

MUOZ PALMA, J.:
Spouses Domingo Paraiso and Fidela Q. Paraiso were the owners of a
residential lot of around 480 square meters located in Sarrat, Ilocos
Norte. On or about February 2, 1964, the Paraisos executed an
agreement entitled "BARTER" whereby as party of the first part they
agreed to "barter and exchange" with spouses Avelino and Benilda
Baluran their residential lot with the latter's unirrigated riceland
situated in Sarrat, Ilocos Norte, of approximately 223 square meters
without any permanent improvements, under the following conditions:
1. That both the Party of the First Part and the Party of
the Second Part shall enjoy the material possession of
their respective properties; the Party of the First Part
shall reap the fruits of the unirrigated riceland and the
Party of the Second Part shall have a right to build his
own house in the residential lot.
2. Nevertheless, in the event any of the children of
Natividad P. Obencio, daughter of the First Part, shall
choose to reside in this municipality and build his own
house in the residential lot, the Party of the Second Part
shall be obliged to return the lot such children with
damages to be incurred.
3. That neither the Party of the First Part nor the Party of
the Second Part shall encumber, alienate or dispose of in
any manner their respective properties as bartered
without the consent of the other.
4. That inasmuch as the bartered properties are not yet
accordance with Act No. 496 or under the Spanish
Mortgage Law, they finally agreed and covenant that this
deed be registered in the Office of the Register of Deeds
of Ilocos Norte pursuant to the provisions of Act No. 3344
as amended. (p. 28, rollo)
On May 6, 1975 Antonio Obendencio filed with the Court of First
Instance of Ilocos Norte the present complaint to recover the above-
mentioned residential lot from Avelino Baluran claiming that he is the
rightful owner of said residential lot having acquired the same from his
mother, Natividad Paraiso Obedencio, and that he needed the property
for Purposes Of constructing his house thereon inasmuch as he had
taken residence in his native town, Sarrat. Obedencio accordingly prayed
that he be declared owner of the residential lot and that defendant
Baluran be ordered to vacate the same forfeiting his (Obedencio) favor
the improvements defendant Baluran had built in bad faith.
1

Answering the complaint, Avelino Baluran alleged inter alia (1) that the
"barter agreement" transferred to him the ownership of the residential
lot in exchange for the unirrigated riceland conveyed to plaintiff's
Predecessor-in-interest, Natividad Obedencio, who in fact is still in On
thereof, and (2) that the plaintiff's cause of action if any had prescribed.
2

At the pre-trial, the parties agreed to submit the case for decision on the
basis of their stipulation of facts. It was likewise admitted that the
aforementioned residential lot was donated on October 4, 1974 by
Natividad Obedencio to her son Antonio Obedencio, and that since the
execution of the agreement of February 2, 1964 Avelino Baluran was in
possession of the residential lot, paid the taxes of the property, and
constructed a house thereon with an value of P250.00.
3
On November 8,
1975, the trial Judge Ricardo Y. Navarro rendered a decision the
dispositive portion of which reads as follows:
Consequently, the plaintiff is hereby declared owner of
the question, the defendant is hereby ordered to vacate
the same with costs against defendant.
Avelino Baluran to whom We shall refer as petitioner, now seeks a
review of that decision under the following assignment of errors:
I The lower Court erred in holding that the barter
agreement did not transfer ownership of the lot in suit to
the petitioner.
II The lower Court erred in not holding that the right
to re-barter or re- exchange of respondent Antonio
Obedencio had been barred by the statute of limitation.
(p. 14, Ibid.)
The resolution of this appeal revolves on the nature of the undertaking
contract of February 2, 1964 which is entitled "Barter Agreement."
It is a settled rule that to determine the nature of a contract courts are
not bound by the name or title given to it by the contracting
parties.
4
This Court has held that contracts are not what the parties may
see fit to call them but what they really are as determined by the
principles of law.
5
Thus, in the instant case, the use of the, term "barter"
in describing the agreement of February 2, 1964, is not controlling. The
stipulations in said document are clear enough to indicate that there was
no intention at all on the part of the signatories thereto to convey the
ownership of their respective properties; all that was intended, and it
was so provided in the agreement, was to transfer the material
possession thereof. (condition No. 1, see page I of this Decision) In fact,
under condition No. 3 of the agreement, the parties retained the right to
alienate their respective properties which right is an element of
ownership.
With the material ion being the only one transferred, all that the parties
acquired was the right of usufruct which in essence is the right to enjoy
the Property of another.
6
Under the document in question, spouses
Paraiso would harvest the crop of the unirrigated riceland while the
other party, Avelino Baluran, could build a house on the residential lot,
subject, however, to the condition, that when any of the children of
Natividad Paraiso Obedencio, daughter of spouses Paraiso, shall choose
to reside in the municipality and build his house on the residential lot,
Avelino Baluran shall be obliged to return the lot to said children "With
damages to be incurred." (Condition No. 2 of the Agreement) Thus, the
mutual agreement each party enjoying "material possession" of the
other's property was subject to a resolutory condition the happening
of which would terminate the right of possession and use.
A resolutory condition is one which extinguishes rights and obligations
already existing.
7
The right of "material possession" granted in the
agreement of February 2, 1964, ends if and when any of the children of
Natividad Paraiso, Obedencio (daughter of spouses Paraiso, Party of the
First Part) would reside in the municipality and build his house on the
property. Inasmuch as the condition opposed is not dependent solely on
the will of one of the parties to the contract the spouses Paraiso
but is Part dependent on the will of third persons Natividad
Obedencio and any of her children the same is valid.
8

When there is nothing contrary to law, morals, and good customs Or
Public Policy in the stipulations of a contract, the agreement constitutes
the law between the parties and the latter are bound by the terms
thereof.
9

Art. 1306 of the Civil Code states:
Art. 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
Morals, good customs, public order, or public policy.
Contracts which are the private laws of the contracting
parties, should be fulfilled according to the literal sense
of their stipulations, if their terms are clear and leave no
room for doubt as to the intention of the contracting
parties, for contracts are obligatory, no matter what their
form may be, whenever the essential requisites for their
validity are present. (Philippine American General
Insurance Co., Inc. vs. Mutuc, 61 SCRA 22)
The trial court therefore correctly adjudged that Antonio Obedencio is
entitled to recover the possession of the residential lot Pursuant to the
agreement of February 2, 1964.
Petitioner submits under the second assigned error that the causa, of
action if any of respondent Obedencio had Prescribed after the lapse of
four years from the date of execution of the document of February 2,
1964. It is argued that the remedy of plaintiff, now respondent, Was to
ask for re-barter or re-exchange of the properties subject of the
agreement which could be exercised only within four years from the
date of the contract under Art. 1606 of the Civil Code.
The submission of petitioner is untenable. Art. 1606 of the Civil Code
refers to conventional redemption which petitioner would want to apply
to the present situation. However, as We stated above, the agreement of
the parties of February 2, 1964, is not one of barter, exchange or even
sale with right to repurchase, but is one of or akin the other is the use or
material ion or enjoyment of each other's real property.
Usufruct may be constituted by the parties for any period of time and
under such conditions as they may deem convenient and beneficial
subject to the provisions of the Civil Code, Book II, Title VI
on Usufruct. The manner of terminating or extinguishing the right of
usufruct is primarily determined by the stipulations of the parties which
in this case now before Us is the happening of the event agreed upon.
Necessarily, the plaintiff or respondent Obedencio could not demand for
the recovery of possession of the residential lot in question, not until he
acquired that right from his mother, Natividad Obedencio, and which he
did acquire when his mother donated to him the residential lot on
October 4, 1974. Even if We were to go along with petitioner in his
argument that the fulfillment of the condition cannot be left to an
indefinite, uncertain period, nonetheless, in the case at bar, the
respondent, in whose favor the resolutory condition was constituted,
took immediate steps to terminate the right of petitioner herein to the
use of the lot. Obedencio's present complaint was filed in May of 1975,
barely several months after the property was donated to him.
One last point raised by petitioner is his alleged right to recover
damages under the agreement of February 2, 1964. In the absence of
evidence, considering that the parties agreed to submit the case for
decision on a stipulation of facts, We have no basis for awarding
damages to petitioner.
However, We apply Art. 579 of the Civil Code and hold that petitioner
will not forfeit the improvement he built on the lot but may remove the
same without causing damage to the property.
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. He
may, however, removed such improvements, should it be
possible to do so without damage to the
property. (Emphasis supplied)
Finally, We cannot close this case without touching on the unirrigated
riceland which admittedly is in the possession of Natividad Obedencio.
In view of our ruling that the "barter agreement" of February 2, 1964,
did not transfer the ownership of the respective properties mentioned
therein, it follows that petitioner Baluran remains the owner of the
unirrigated riceland and is now entitled to its Possession. With the
happening of the resolutory condition provided for in the agreement, the
right of usufruct of the parties is extinguished and each is entitled to a
return of his property. it is true that Natividad Obedencio who is now in
possession of the property and who has been made a party to this case
cannot be ordered in this proceeding to surrender the riceland. But
inasmuch as reciprocal rights and obligations have arisen between the
parties to the so-called "barter agreement", We hold that the parties and
for their successors-in-interest are duty bound to effect a simultaneous
transfer of the respective properties if substance at justice is to be
effected.
WHEREFORE, Judgment is hereby rendered: 1) declaring the petitioner
Avelino Baluran and respondent Antonio Obedencio the respective
owners the unirrigated riceland and residential lot mentioned in the
"Barter Agreement" of February 2, 1964; 2) ordering Avelino Baluran to
vacate the residential lot and removed improvements built by
thereon, provided, however that he shall not be compelled to do so unless
the unirrigated riceland shall five been restored to his possession either
on volition of the party concerned or through judicial proceedings which
he may institute for the purpose.
Without pronouncement as to costs. So Ordered.


G.R. No. 148830. April 13, 2005
NATIONAL HOUSING AUTHORITY, Petitioners,
vs.
COURT OF APPEALS, BULACAN GARDEN CORPORATION and
MANILA SEEDLING BANK FOUNDATION, INC., Respondents.
D E C I S I O N
CARPIO, J.:
The Case
This is a petition for review
1
seeking to set aside the Decision
2
dated 30
March 2001 of the Court of Appeals ("appellate court") in CA-G.R. CV No.
48382, as well as its Resolution dated 25 June 2001 denying the motion
for reconsideration. The appellate court reversed the Decision
3
of
Branch 87 of the Regional Trial Court of Quezon City ("trial court") dated
8 March 1994 in Civil Case No. Q-53464. The trial court dismissed the
complaint for injunction filed by Bulacan Garden Corporation ("BGC")
against the National Housing Authority ("NHA"). BGC wanted to enjoin
the NHA from demolishing BGCs facilities on a lot leased from Manila
Seedling Bank Foundation, Inc. ("MSBF"). MSBF allegedly has
usufructuary rights over the lot leased to BGC.
Antecedent Facts
On 24 October 1968, Proclamation No. 481 issued by then President
Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City
owned by the NHA
4
as reserved property for the site of the National
Government Center ("NGC"). On 19 September 1977, President Marcos
issued Proclamation No. 1670, which removed a seven-hectare portion
from the coverage of the NGC. Proclamation No. 1670 gave MSBF
usufructuary rights over this segregated portion, as follows:
Pursuant to the powers vested in me by the Constitution and the laws of
the Philippines, I, FERDINAND E. MARCOS, President of the Republic of
the Philippines, do hereby exclude from the operation of Proclamation
No. 481, dated October 24, 1968, which established the National
Government Center Site, certain parcels of land embraced therein and
reserving the same for the Manila Seedling Bank Foundation, Inc., for use
in its operation and projects, subject to private rights if any there be,
and to future survey, under the administration of the Foundation.
This parcel of land, which shall embrace 7 hectares, shall be
determined by the future survey based on the technical descriptions
found in Proclamation No. 481, and most particularly on the original
survey of the area, dated July 1910 to June 1911, and on the subdivision
survey dated April 19-25, 1968. (Emphasis added)
MSBF occupied the area granted by Proclamation No. 1670. Over the
years, MSBFs occupancy exceeded the seven-hectare area subject to its
usufructuary rights. By 1987, MSBF occupied approximately 16 hectares.
By then the land occupied by MSBF was bounded by Epifanio de los
Santos Avenue ("EDSA") to the west, Agham Road to the east, Quezon
Avenue to the south and a creek to the north.
On 18 August 1987, MSBF leased a portion of the area it occupied to BGC
and other stallholders. BGC leased the portion facing EDSA, which
occupies 4,590 square meters of the 16-hectare area.
On 11 November 1987, President Corazon Aquino issued Memorandum
Order No. 127 ("MO 127") which revoked the reserved status of "the 50
hectares, more or less, remaining out of the 120 hectares of the NHA
property reserved as site of the National Government Center." MO 127
also authorized the NHA to commercialize the area and to sell it to the
public.
On 15 August 1988, acting on the power granted under MO 127, the NHA
gave BGC ten days to vacate its occupied area. Any structure left behind
after the expiration of the ten-day period will be demolished by NHA.
BGC then filed a complaint for injunction on 21 April 1988 before the
trial court. On 26 May 1988, BGC amended its complaint to include MSBF
as its co-plaintiff.
The Trial Courts Ruling
The trial court agreed with BGC and MSBF that Proclamation No. 1670
gave MSBF the right to conduct the survey, which would establish the
seven-hectare area covered by MSBFs usufructuary rights. However, the
trial court held that MSBF failed to act seasonably on this right to
conduct the survey. The trial court ruled that the previous surveys
conducted by MSBF covered 16 hectares, and were thus inappropriate to
determine the seven-hectare area. The trial court concluded that to
allow MSBF to determine the seven-hectare area now would be grossly
unfair to the grantor of the usufruct.
On 8 March 1994, the trial court dismissed BGCs complaint for
injunction. Thus:
Premises considered, the complaint praying to enjoin the National
Housing Authority from carrying out the demolition of the plaintiffs
structure, improvements and facilities in the premises in question is
hereby DISMISSED, but the suggestion for the Court to rule that
Memorandum Order 127 has repealed Proclamation No. 1670 is
DENIED. No costs.
SO ORDERED.
5

The NHA demolished BGCs facilities soon thereafter.
The Appellate Courts Ruling
Not content with the trial courts ruling, BGC appealed the trial courts
Decision to the appellate court. Initially, the appellate court agreed with
the trial court that Proclamation No. 1670 granted MSBF the right to
determine the location of the seven-hectare area covered by its
usufructuary rights. However, the appellate court ruled that MSBF did in
fact assert this right by conducting two surveys and erecting its main
structures in the area of its choice.
On 30 March 2001, the appellate court reversed the trial courts ruling.
Thus:
WHEREFORE, premises considered, the Decision dated March 8, 1994 of
the Regional Trial Court of Quezon City, Branch 87, is hereby REVERSED
and SET ASIDE. The National Housing Authority is enjoined from
demolishing the structures, facilities and improvements of the plaintiff-
appellant Bulacan Garden Corporation at its leased premises located in
Quezon City which premises were covered by Proclamation No. 1670,
during the existence of the contract of lease it (Bulacan Garden) had
entered with the plaintiff-appellant Manila Seedling Bank Foundation,
Inc.
No costs.
SO ORDERED.
6

The NHA filed a motion for reconsideration, which was denied by the
appellate court on 25 June 2001.
Hence, this petition.
The Issues
The following issues are considered by this Court for resolution:
WHETHER THE PETITION IS NOW MOOT BECAUSE OF THE
DEMOLITION OF THE STRUCTURES OF BGC; and
WHETHER THE PREMISES LEASED BY BGC FROM MSBF IS WITHIN THE
SEVEN-HECTARE AREA THAT PROCLAMATION NO. 1670 GRANTED TO
MSBF BY WAY OF USUFRUCT.
The Ruling of the Court
We remand this petition to the trial court for a joint survey to determine
finally the metes and bounds of the seven-hectare area subject to MSBFs
usufructuary rights.
Whether the Petition is Moot because of the
Demolition of BGCs Facilities
BGC claims that the issue is now moot due to NHAs demolition of BGCs
facilities after the trial court dismissed BGCs complaint for injunction.
BGC argues that there is nothing more to enjoin and that there are no
longer any rights left for adjudication.
We disagree.
BGC may have lost interest in this case due to the demolition of its
premises, but its co-plaintiff, MSBF, has not. The issue for resolution has
a direct effect on MSBFs usufructuary rights. There is yet the central
question of the exact location of the seven-hectare area granted by
Proclamation No. 1670 to MSBF. This issue is squarely raised in this
petition. There is a need to settle this issue to forestall future disputes
and to put this 20-year litigation to rest.
On the Location of the Seven-Hectare Area Granted by
Proclamation No. 1670 to MSBF as Usufructuary
Rule 45 of the 1997 Rules of Civil Procedure limits the jurisdiction of this
Court to the review of errors of law.
7
Absent any of the established
grounds for exception,
8
this Court will not disturb findings of fact of
lower courts. Though the matter raised in this petition is factual, it
deserves resolution because the findings of the trial court and the
appellate court conflict on several points.
The entire area bounded by Agham Road to the east, EDSA to the west,
Quezon Avenue to the south and by a creek to the north measures
approximately 16 hectares. Proclamation No. 1670 gave MSBF a usufruct
over only a seven-hectare area. The BGCs leased portion is located along
EDSA.
A usufruct may be constituted for a specified term and under such
conditions as the parties may deem convenient subject to the legal
provisions on usufruct.
9
A usufructuary may lease the object held in
usufruct.
10
Thus, the NHA may not evict BGC if the 4,590 square meter
portion MSBF leased to BGC is within the seven-hectare area held in
usufruct by MSBF. The owner of the property must respect the lease
entered into by the usufructuary so long as the usufruct
exists.
11
However, the NHA has the right to evict BGC if BGC occupied a
portion outside of the seven-hectare area covered by MSBFs
usufructuary rights.
MSBFs survey shows that BGCs stall is within the seven-hectare area.
On the other hand, NHAs survey shows otherwise. The entire
controversy revolves on the question of whose land survey should
prevail.
MSBFs survey plots the location of the seven-hectare portion by starting
its measurement from Quezon Avenue going northward along EDSA up
until the creek, which serves as the northern boundary of the land in
question. Mr. Ben Malto ("Malto"), surveyor for MSBF, based his survey
method on the fact that MSBFs main facilities are located within this
area.
On the other hand, NHAs survey determines the seven-hectare portion
by starting its measurement from Quezon Avenue going towards Agham
Road. Mr. Rogelio Inobaya ("Inobaya"), surveyor for NHA, based his
survey method on the fact that he saw MSBFs gate fronting Agham
Road.
BGC presented the testimony of Mr. Lucito M. Bertol ("Bertol"), General
Manager of MSBF. Bertol presented a map,
12
which detailed the area
presently occupied by MSBF. The map had a yellow-shaded portion,
which was supposed to indicate the seven-hectare area. It was clear
from both the map and Bertols testimony that MSBF knew that it had
occupied an area in excess of the seven-hectare area granted by
Proclamation No. 1670.
13
Upon cross-examination, Bertol admitted that
he personally did not know the exact boundaries of the seven-hectare
area.
14
Bertol also admitted that MSBF prepared the map without
consulting NHA, the owner of the property.
15

BGC also presented the testimony of Malto, a registered forester and the
Assistant Vice-President of Planning, Research and Marketing of MSBF.
Malto testified that he conducted the land survey, which was used to
construct the map presented by Bertol.
16
Bertol clarified that he
authorized two surveys, one in 1984 when he first joined MSBF, and the
other in 1986.
17
In both instances, Mr. Malto testified that he was asked
to survey a total of 16 hectares, not just seven hectares. Malto testified
that he conducted the second survey in 1986 on the instruction of
MSBFs general manager. According to Malto, it was only in the second
survey that he was told to determine the seven-hectare portion. Malto
further clarified that he based the technical descriptions of both surveys
on a previously existing survey of the property.
18

The NHA presented the testimony of Inobaya, a geodetic engineer
employed by the NHA. Inobaya testified that as part of the NHAs Survey
Division, his duties included conducting surveys of properties
administered by the NHA.
19
Inobaya conducted his survey in May 1988 to
determine whether BGC was occupying an area outside the seven-
hectare area MSBF held in usufruct.
20
Inobaya surveyed the area
occupied by MSBF following the same technical descriptions used by
Malto. Inobaya also came to the same conclusion that the area occupied
by MSBF, as indicated by the boundaries in the technical descriptions,
covered a total of 16 hectares. He further testified that the seven-hectare
portion in the map presented by BGC,
21
which was constructed by Malto,
does not tally with the boundaries BGC and MSBF indicated in their
complaint.
Article 565 of the Civil Code states:
ART. 565. The rights and obligations of the usufructuary shall be those
provided in the title constituting the usufruct; in default of such title, or
in case it is deficient, the provisions contained in the two following
Chapters shall be observed.
In the present case, Proclamation No. 1670 is the title constituting the
usufruct. Proclamation No. 1670 categorically states that the seven-
hectare area shall be determined "by future survey under the
administration of the Foundation subject to private rights if there be
any." The appellate court and the trial court agree that MSBF has the
latitude to determine the location of its seven-hectare usufruct portion
within the 16-hectare area. The appellate court and the trial court
disagree, however, whether MSBF seasonably exercised this right.
It is clear that MSBF conducted at least two surveys. Although both
surveys covered a total of 16 hectares, the second survey specifically
indicated a seven-hectare area shaded in yellow. MSBF made the first
survey in 1984 and the second in 1986, way before the present
controversy started. MSBF conducted the two surveys before the lease to
BGC. The trial court ruled that MSBF did not act seasonably in exercising
its right to conduct the survey. Confronted with evidence that MSBF did
in fact conduct two surveys, the trial court dismissed the two surveys as
self-serving. This is clearly an error on the part of the trial court.
Proclamation No. 1670 authorized MSBF to determine the location of the
seven-hectare area. This authority, coupled with the fact that
Proclamation No. 1670 did not state the location of the seven-hectare
area, leaves no room for doubt that Proclamation No. 1670 left it to
MSBF to choose the location of the seven-hectare area under its usufruct.
More evidence supports MSBFs stand on the location of the seven-
hectare area. The main structures of MSBF are found in the area
indicated by MSBFs survey. These structures are the main office, the
three green houses, the warehouse and the composting area. On the
other hand, the NHAs delineation of the seven-hectare area would cover
only the four hardening bays and the display area. It is easy to
distinguish between these two groups of structures. The first group
covers buildings and facilities that MSBF needs for its operations. MSBF
built these structures before the present controversy started. The
second group covers facilities less essential to MSBFs existence. This
distinction is decisive as to which survey should prevail. It is clear that
the MSBF intended to use the yellow-shaded area primarily because it
erected its main structures there.
Inobaya testified that his main consideration in using Agham Road as the
starting point for his survey was the presence of a gate there. The
location of the gate is not a sufficient basis to determine the starting
point. MSBFs right as a usufructuary as granted by Proclamation No.
1670 should rest on something more substantial than where MSBF
chose to place a gate.
To prefer the NHAs survey to MSBFs survey will strip MSBF of most of
its main facilities. Only the main building of MSBF will remain with MSBF
since the main building is near the corner of EDSA and Quezon Avenue.
The rest of MSBFs main facilities will be outside the seven-hectare area.
On the other hand, this Court cannot countenance MSBFs act of
exceeding the seven-hectare portion granted to it by Proclamation No.
1670. A usufruct is not simply about rights and privileges. A
usufructuary has the duty to protect the owners interests. One such
duty is found in Article 601 of the Civil Code which states:
ART. 601. The usufructuary shall be obliged to notify the owner of any
act of a third person, of which he may have knowledge, that may be
prejudicial to the rights of ownership, and he shall be liable should he
not do so, for damages, as if they had been caused through his own fault.
A usufruct gives a right to enjoy the property of another with the
obligation of preserving its form and substance, unless the title
constituting it or the law otherwise provides.
22
This controversy would
not have arisen had MSBF respected the limit of the beneficial use given
to it. MSBFs encroachment of its benefactors property gave birth to the
confusion that attended this case. To put this matter entirely to rest, it is
not enough to remind the NHA to respect MSBFs choice of the location
of its seven-hectare area. MSBF, for its part, must vacate the area that is
not part of its usufruct. MSBFs rights begin and end within the seven-
hectare portion of its usufruct. This Court agrees with the trial court that
MSBF has abused the privilege given it under Proclamation No. 1670.
The direct corollary of enforcing MSBFs rights within the seven-hectare
area is the negation of any of MSBFs acts beyond it.
The seven-hectare portion of MSBF is no longer easily determinable
considering the varied structures erected within and surrounding the
area. Both parties advance different reasons why their own surveys
should be preferred. At this point, the determination of the seven-
hectare portion cannot be made to rely on a choice between the NHAs
and MSBFs survey. There is a need for a new survey, one conducted
jointly by the NHA and MSBF, to remove all doubts on the exact location
of the seven-hectare area and thus avoid future controversies. This new
survey should consider existing structures of MSBF. It should as much as
possible include all of the facilities of MSBF within the seven-hectare
portion without sacrificing contiguity.
A final point. Article 605 of the Civil Code states:
ART. 605. Usufruct cannot be constituted in favor of a town,
corporation, or association for more than fifty years. If it has been
constituted, and before the expiration of such period the town is
abandoned, or the corporation or association is dissolved, the usufruct
shall be extinguished by reason thereof. (Emphasis added)
The law clearly limits any usufruct constituted in favor of a corporation
or association to 50 years. A usufruct is meant only as a lifetime grant.
Unlike a natural person, a corporation or associations lifetime may be
extended indefinitely. The usufruct would then be perpetual. This is
especially invidious in cases where the usufruct given to a corporation or
association covers public land. Proclamation No. 1670 was issued 19
September 1977, or 28 years ago. Hence, under Article 605, the usufruct
in favor of MSBF has 22 years left.
MO 127 released approximately 50 hectares of the NHA property as
reserved site for the National Government Center. However, MO 127
does not affect MSBFs seven-hectare area since under Proclamation No.
1670, MSBFs seven-hectare area was already "exclude[d] from the
operation of Proclamation No. 481, dated October 24, 1968, which
established the National Government Center Site."
WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001
and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET
ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court
of Quezon City, which shall order a joint survey by the National Housing
Authority and Manila Seedling Bank Foundation, Inc. to determine the
metes and bounds of the seven-hectare portion of Manila Seedling Bank
Foundation, Inc. under Proclamation No. 1670. The seven-hectare
portion shall be contiguous and shall include as much as possible all
existing major improvements of Manila Seedling Bank Foundation, Inc.
The parties shall submit the joint survey to the Regional Trial Court for
its approval within sixty days from the date ordering the joint survey.
SO ORDERED.