MERCEDES MORALIDAD VS. SPS.

DIOSDADO AND ARLENE PERNES

FACTS: Petitioner is the registered owner of a parcel of land in Davao City which is
the subject of the controversy. The petitioner had worked in U.S.A. for years until
retirement. Being single, she would usually stay in the house of her niece, respondent
Arlene Pernes, at Mandug, Davao City during her vacation and that in 1986, when
she received news from Arlene that Mandug was infested by NPA rebels and many
women and children were victims of crossfire between government troops and the
insurgents, she immediately sent money to buy a lot in Davao City proper where
Arlene and her family could transfer and settle down. Petitioner wanted the property
to be also available to any of her kins wishing to live and settle in Davao City and
made known this intention in a document she executed on July 21, 1986. which
reads:
I, MERCEDES VIA MORALIDAD, of legal age, single, hereby
declare:
1.
That it is my desire that Mr. and Mrs. Diosdado M. Pernes
may build their house therein and stay as long as they like;
2.
That anybody of my kins who wishes to stay on the
aforementioned real property should maintain an atmosphere of cooperation, live in
harmony and must avoid bickering with one another;
3.
That 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;
4.
That anyone of my kins who cannot conform with the wishes
of the undersigned may exercise the freedom to look for his own;
5.
That any proceeds or income derived from the
aforementioned properties shall be allotted to my nearest kins who have less in life in
greater percentage and lesser percentage to those who are better of in standing.

of whether respondents right to possess a portion of petitioners land had already

expired or was already terminated was not yet resolved. The CA further ruled that
what governs the rights of the parties is the law on usufruct but petitioner failed to
establish that respondents right to possess had already ceased.
ISSUES:
What provisions of the Civil Code should govern the rights of the parties.
Whether or not the respondents right to possess the land had been terminated.
HELD: Usufruct is defined under Article 562 of the Civil Code in the following wise:
ART. 562. Usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and substance, unless the title constituting it or the law otherwise
provides.
Usufruct, in essence, is nothing else but simply allowing one to enjoy anothers
property. It is also defined as the right to enjoy the property of another temporarily,
including both the jus utendi and the jus fruendi, with the owner retaining the jus
disponendi or the power to alienate the same.
It is undisputed that petitioner, in a document, made known her intention to give
respondents and her other kins the right to use and to enjoy the fruits of her property
and the respondents were being given the right to build their own house on the
property and to stay thereat as long as they like. Paragraph #5 of the same
document earmarks proceeds or income derived from the aforementioned
properties for the petitioners nearest kins who have less in life in greater
percentage and lesser percentage to those who are better of in standing. The
established facts undoubtedly gave respondents not only the right to use the property
but also granted them, among the petitioners other kins, the right to enjoy the fruits
thereof.
There are other modes or instances whereby the usufruct shall be considered
terminated or extinguished. For sure, the Civil Code enumerates such other modes of
extinguishment:
ART. 603. Usufruct is extinguished:

In her retirement, 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 which resulted in violent confrontations and the filing of suits at the
barangay lupon and to the Ombudsman for conduct unbecoming of public servants
and at the MTCC, an ejectment suit for unlawful detainer.
The MTCC rendered judgment for the petitioner directing the defendants to vacate
the premises and to yield peaceful possession thereof to plaintiff. Respondent
spouses appealed to the RTC where the decision of the MTCC was reversed, holding
that respondents possession of the property in question was not by mere tolerance of
the petitioner but rather by her express consent. It further ruled that Article 1678 of the
Civil Code on reimbursement of improvements introduced is inapplicable since said
provision contemplates of a lessor-lessee arrangement, which was not the factual
milieu obtaining in the case. Instead, the RTC ruled that what governed the parties
relationship are Articles 448 and 546 of the Civil Code.
Petitioner went to the CA wherein her petition was denied on the ground that it is still
premature to apply Articles 448 and 546 of the Civil Code considering that the issue

(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.

The document executed by the petitioner constitutes the title creating, and sets forth
the conditions of the usufruct. Paragraph #3 thereof states That 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. 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 That 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 kins constitutes a resolutory condition which, by
express wish of the petitioner, extinguishes the usufruct. 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.
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. By express provision of law, respondents, as
usufructuary, do not have the right to reimbursement for the improvements they may
have introduced on the property. We quote Articles 579 and 580 of the Civil Code:
Art. 579. The usufructuary may make on the property held in usufruct such useful
improvements or expenses for mere pleasure as he may deem proper, provided he
does not alter its form or substance; but he shall have no right to be indemnified
therefor. He may, however, remove such improvements, should it be possible to do so
without damage to the property
Art. 580. The usufructuary may set off the improvements he may have made on the
property against any damage to the same.
HEMEDES V. CA
G.R. No. 107132, October 8, 1999; Gonzaga-Reyes, J.
FACTS: A parcel of land was originally owned by the late Jose Hemedes, father of
Maxima Hemedes and Enrique Hemedes. Jose Hemedes executed a document
entitled Donation Inter Vivos with Resolutory Conditions whereby he conveyed
ownership over the subject land, together with all its improvements, in favor of his
third wife, Justa Kauapin, subject to the following resolutory conditions:
(a)

Upon the death or remarriage of the DONEE, the title to the

property donated shall revert to any of the children, or their

heirs, of the DONOR expressly designated by the DONEE

in a public document conveying the property to the latter; or
(b)

In absence of such an express designation made by the

DONEE before her death or remarriage contained in a
public instrument as above provided, the title to the
property shall automatically revert to the legal heirs of the
DONOR in common.

Pursuant to the first condition above mentioned, Justa Kausapin executed a

Deed of Conveyance of Unregistered Real Property by Reversion conveying to
Maxima Hemedes the subject property. An OCT was issued in the name of Maxima
Hemedes by the Registry of Deeds of Laguna, with the annotation that Justa
Kausapin shall have the usufructuary rights over the parcel of land herein described
during her lifetime or widowhood.
Maxima Hemedes and her husband Raul Rodriguez constituted a real estate
mortgage over the subject property in its favor to serve as security for a loan which
they obtained in the amount of P6,000.00 from & B Insurance. The latter
extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan
even after it became due. The land was sold at a public auction with R & B Insurance
as the highest bidder and a certificate of sale was issued by the sheriff in its favor.
The annotation of usufruct in favor of Justa Kausapin was maintained in the new title.
Despite the earlier conveyance of the subject land in favor of Maxima
Hemedes, Justa Kausapin executed a Kasunduan whereby she transferred the
same land to her stepson Enrique Hemedes, pursuant to the resolutory condition in
the deed of donation executed in her favor by her late husband Jose Hemedes.
Enrique Hemedes later sold the property to Dominium Realty and Construction
Corporation (Dominium). Justa Kausapin executed an affidavit affirming the
conveyance of the subject property in favor of Enrique Hemedes as embodied in the
Kasunduan, and at the same time denying the conveyance made to Maxima
Hemedes.
Dominium leased the property to its sister corporation Asia Brewery, Inc.
(Asia Brewery) who, even before the signing of the contract of lease, constructed two
warehouses made of steel and asbestos costing about P10,000,000.00 each. Upon
learning of Asia Brewerys constructions upon the subject property, R & B Insurance
sent it a letter informing the former of its ownership of the property and of its right to
appropriate the constructions since Asia Brewery is a builder in bad faith. A
conference was held between R & B Insurance and Asia Brewery but they failed to
arrive at an amicable settlement.
Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein
she asserted that she is the rightful owner of the subject property and that, as such,
she has the right to appropriate Asia Brewerys constructions, to demand its
demolition, or to compel Asia Brewery to purchase the land. In another letter of the
same date addressed to R & B Insurance, Maxima Hemedes denied the execution of
any real estate mortgage in favor of the latter.
ISSUE: Whether or not R & B Insurance should be considered an innocent purchaser
of the land in question

HELD: Yes. The annotation of usufructuary rights in favor of Justa Kausapin upon
Maxima Hemedes OCT dose not impose upon R & B Insurance the obligation to
investigate the validity of its mortgagors title. Usufruct gives a right to enjoy the
property of another with the obligation of preserving its form and substance. The
usufructuary is entitled to all the natural, industrial and civil fruits of the property and
may personally enjoy the thing in usufruct, lease it to another, or alienate his right of
usufruct, even by a gratuitous title, but all the contracts he may enter into as such
usufructuary shall terminate upon the expiration of the usufruct. Clearly, only the jus
utendi and jus fruendi over the property is transferred to the usufructuary. The owner
of the property maintains the jus disponendi or the power to alienate, encumber,
transform, and even destroy the same. This right is embodied in the Civil Code, which
provides that the owner of property the usufruct of which is held by another, may
alienate it, although he cannot alter the propertys form or substance, or do anything
which may be prejudicial to the usufructuary. There is no doubt that the owner may
validly mortgage the property in favor of a third person and the law provides that, in
such a case, the usufructuary shall not be obliged to pay the debt of the mortgagor,
and should the immovable be attached or sold judicially for the payment of the debt,
the owner shall be liable to the usufructuary for whatever the latter may lose by
reason thereof. Based on the foregoing, the annotation of usufructuary rights in favor
of Justa Kausapin is not sufficient cause to require R & B Insurance to investigate
Maxima Hemedes title, contrary to public respondents ruling, for the reason that
Maxima Hemedes ownership over the property remained unimpaired despite such
encumbrance. R & B Insurance had a right to rely on the certificate of title and was
not in bad faith in accepting the property as a security for the loan it extended to
Maxima Hemedes.

donation executed in her favor by her late husband Jose Hemedes. Enrique D.
Hemedes obtained two declarations of real property, 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 the cadastral survey, the
property was assigned in the name of Enrique Hemedes. Enrique Hemedes is also
the named owner of the property in the records of the Ministry of Agrarian Reform
office at Calamba, Laguna.

***
FACTS: Jose Hemedes executed a document entitled Donation Inter Vivos With
Resolutory Conditions conveying ownership a parcel of land, together with all its
improvements, in favor of his third wife, Justa Kauapin, subject to the resolutory
condition that upon the latters death or remarriage, the title to the property donated
shall revert to any of the children, or heirs, of the DONOR expressly designated by
the DONEE.

ISSUE: W/N the donation in favor of Enrique Hemedes was valid?

Pursuant to said condition, Justa Kausapin executed a Deed of Conveyance of

Unregistered Real Property by Reversion conveying to Maxima Hemedes the subject
property.
Maxima Hemedes and her husband Raul Rodriguez constituted a real estate
mortgage over the subject property in favor of R & B Insurance to serve as security
for a loan which they obtained.
R & B Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes
failed to pay the loan even. The land was sold at a public auction with R & B
Insurance as the highest bidder. A new title was subsequently issued in favor the
R&B. The annotation of usufruct in favor of Justa Kausapin was maintained in the
new title.
Despite the earlier conveyance of the subject land in favor of Maxima Hemedes,
Justa Kausapin executed a Kasunduan whereby she transferred the same land to
her stepson Enrique D. Hemedes, pursuant to the resolutory condition in the deed of

Enriques D. Hemedes sold the property to Dominium Realty and Construction

Corporation (Dominium).
Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia
Brewery) who made constructions therein. Upon learning of Asia Brewerys
constructions, R & B Insurance sent it a letter informing the former of its ownership of
the property. A conference was held between R & B Insurance and Asia Brewery but
they failed to arrive at an amicable settlement.
Maxima Hemedes also wrote a letter addressed to Asia Brewery asserting that she is
the rightful owner of the subject property and denying the execution of any real estate
mortgage in favor of R&B.
Dominium and Enrique D. Hemedes filed a complaint with the CFI for the annulment
of TCT issued in favor of R & B Insurance and/or the reconveyance to Dominium of
the subject property alleging that Dominion was the absolute owner of the land.
The trial court ruled in favor of Dominium and Enrique Hemedes.

HELD: NO. Enrique D. Hemedes and his transferee, Dominium, did not acquire any
rights over the subject property. Justa Kausapin sought to transfer to her stepson
exactly what she had earlier transferred to Maxima Hemedes the ownership of the
subject property pursuant to the first condition stipulated in the deed of donation
executed by her husband. Thus, the donation in favor of Enrique D. Hemedes is null
and void for the purported object thereof did not exist at the time of the transfer,
having already been transferred to his sister. Similarly, the sale of the subject property
by Enrique D. Hemedes to Dominium is also a nullity for the latter cannot acquire
more rights than its predecessor-in-interest and is definitely not an innocent
purchaser for value since Enrique D. Hemedes did not present any certificate of title
upon which it relied.
The declarations of real property by Enrique D. Hemedes, his payment of realty taxes,
and his being designated as owner of the subject property in the cadastral survey of
Cabuyao, Laguna and in the records of the Ministry of Agrarian Reform office in
Calamba, Laguna cannot defeat a certificate of title, which is an absolute and
indefeasible evidence of ownership of the property in favor of the person whose name
appears therein. Particularly, with regard to tax declarations and tax receipts, this
Court has held on several occasions that the same do not by themselves conclusively
prove title to land.