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106 Phil. 855

[ G. R. No. L-13361, December 29, 1959 ]




Dona Rosario Fabie y Grey was the owner of  a  lot situated in the City of Manila with a building and improvements thereon erected  at 950-956 Ongpin as evidenced by Original Certificate of Title No.  5030, and by  a will  left by  her upon  her  death  which  was  duly  probated  she devised the  naked ownership of the  whole property to Rosario Grey Vda. de Albar, et  al.  but its usufruct to Josefa  Fabie for  life.

The  pertinent provision of the  will reads  as follows: "Lego a mi a ahijada menor de edad, Maria Josefa de la Paz Fabie, en usufructo vitalicio  las  rentas de  las  fincas * *  * en  la calle Ongpin, Numeros 950 al 956 del Distrito de  Santa Cruz,  Manila,  * *  * y prohibo  enajene,  hipoteque, permuta o transfiera de algun modo mientras que ella sea  menor  de edad."  Said property was  registered  in the name of Rosario Grey Vda. de Albar, et al. as  naked owners  and the right of Josefa Fabie as  life usufructuary was expressly noted on  the new title.   Pursuant to  the 9th clause of the will, an encumbrance was likewise noted on the title prohibiting the usufructuary  from  selling, mortgaging or transferring her right of usufruct during her minority.

During "liberation, as  a consequence of  the fire that gutted the buildings in many portions of Manila, the building on the Ongpin lot was burned,  leaving only the walls and other improvements that were not destroyed by the fire.

One Au Pit, a Chinaman, offered to lease the property for a period of five years at a monthly rental of P500.00, at the same time agreeing to construct on the lot a new building worth  P30,000.00 provided the naked owners as well as the usufructuary sign the agreement of lease.   As the usufructuary maintains that  she has  the exclusive right to cede the property by lease and to receive the full rental value by virtue of her right of usufruct while on the other hand the naked owners maintain that the right of usufruct was extinguished when the building was destroyed, the right of the usufructuary being limited to the legal interest on the value of the lot and the materials, in order that the agreement of lease may  be effected, the  parties agreed on a temporary compromise whereby  the naked owners would receive P100.00, or 20% of the monthly rental of P500.00 and the usufructuary  the  balance of 80%  or P400.00 of said monthly rental.  It was likewise stipulated in the agreement  that  the  title  to the  building to  be constructed would accrue to the land upon its completion as an integral  part of  the  lot covered by the transfer certificate of title issued in the name of the naked owners but subject to the right of usufruct of Josef a Fabie.  The parties expressly reserved the right to litigate their respective claims after the termination of the contract of lease to determine which of said claims was legally correct.

By  reason of  the destruction of the building on  the Ongpin property, the  United States War Damage Commission approved the  claim that  was  presented  for  the damage caused to the property in the amount of P8,574.00 which was paid to and received by the naked owners.  In the meantime, the usufructuary paid  the real estate taxes due  on  the property at Ongpin  for the years 1945 to 1952 in  the  total amount of Pl,989.27, as well as the real estate taxes for the years 1953 and 1954 in the  annual sum of P295.80.

On  October  2,  1952, Rosario  Grey Vda.  de  Albar, et ah commenced the present action to settle the dispute and conflicting views  entertained  by the  parties  in  line  with their agreement and  prayed  that judgment  be rendered declaring  that  the usufruct  in favor of Josefa Fabie is now  only limited  to  receiving the legal  interest  on the value of the land, and that her right to receive any rental under the contract entered into between the parties has already  ceased.

On August 10,  1953, the trial court rendered judgment the dispositive part of which reads:
"EN VIRTUD DE  TODO LO CUAL,  el Juzgado promulga  decisi6n a favor de la demandada usufructuaria, declarando:

(a) Que su usufructo vitalicio continua sobre la finca en Ongpin con  derecho exclusivo de  percibir  durante  su  vida  la  totalidad de sus rentas, sin que  los demandantes  tengan  derecho  de inmiscuirse en la administracion de dicha finca;

(b) Con derecho  de percibir el 6%  de la  cantidad  de  P8,574.00 percibidos como indemnizacion  de guerra  desde Enero 11, 1950;

(c) Al  reembolso de  la suma die  Pl,989.27 pagados o  abonados por la demandada como  pagos  del  amillaramiento desde  la  fecha de la Contestacion,  Octubre 22,  1953;

(d) Mas la suma de P2,000.00 como  danos y perjuicios en forma de honorarios de abogado y gastos de litigio.

(e) Con las costas  a cargo de los demandantes."
On appeal by plaintiffs, the Court of Appeals modified the decision as follows:
"Wherefore, we hereby affirm the decision appealed from  in  so far as it holds that appellee's  right of life usufruct  subsists and is  in  full force and effect upon the Ongpin lot and  the building now existing thereon, and that  she  is entitled  to  receive from appellants the legal  interest or  6%  interest per annum of the amount of P3,272.00 from the time it was actually received from the Philippine War Damage Commission for the whole period  of the usufruct, and  appellants  are hereby required  to give  sufficient security for the  payment of such interest, and  we hereby  reverse said decision, declaring: that reimbursement to appellee of the sum of Pl,987.27 paid by her for real estate taxes is deffered until the termination  of the usufruct,  and that she is not entitled  to any amount for attorney's fees.  Without pronouncement regarding costs."
Plaintiffs interposed the present petition for review.

The main  issue  to  be determined  fringes on  the interpretation of that  portion of  the will  which devises  to Josefa Fabie all the  rentals  of the  property situated  in Ongpin and  Sto.  Cristo  Streets, City  of  Manila.  The pertinent provision of the  will reads: "Lego a mi ahijada menor de edad Maria Josefa de la Paz Fabie, en usufmcto vitalicio las rentas de las tineas situadas  en la calle Santo Cristo *  * * y en la  calle Ongpin,  Numeros 950 al 956 del Distrito de Santa Cruz, Manila."   Petitioners contend that this provision of the will should be interpreted  as constituting only a life usufruct on the rentals  of the buildings erected on  the  lands and that  once these buildings are  destroyed the  sufruct is extinguished.   Respondent, on the other hand, contends that that provision should be interpreted as constituting a life  usufruct both  on the buildings and  the lands because the  former cannot  be separated from the latter.

In Lopez vs.  Constantino, 74  Phil., 160, we said:
"It may indeed seem  at first blush that the rents out of which the pension  was  payable were earned by  or  paid  for the building only, independently of the lot on which it was erected;  but  further reflection will show that such impression is  wrong.  When both land and building belong to the same owner, as in  this case,  the  rents on the building  constitute an earning of  the  capital  invested  in the acquisition of both land and building. There can be  a land without a  building, but there can be no building  without land. The land, being an indispensable part of the rented premises  cannot  be considered as having no rental value whatsoever."  (Italics supplied)
In another part  of the decision, this  Court said:  "Since appellant's participation in the rents of the leased premises by way of life pension was part of  the  consideration  of the sale, it cannot be deemed extinguished so long as she lives and so long as the land exists, because that land may be rented to anyone who may desire to erred a building thereon,"   (Italics supplied)

From the above,  it  is  clear that when  the  deceased constituted the life usufruct on the rentals of the  "fincas situadas" in Ongpin and Sto.  Cristo streets, she meant to impose the encumbrance both on the building and the land on which it is erected for indeed the building cannot exist without the land.  And as.this Court well said, 'The land, being an indispensable part of the rented premises cannot be  considered  as having  no  rental value  whatsoever." Moreover, in the Spanish language, the term "fincas" has a broad scope;  it includes not only building but  land as well.   (Diccionario Ingles-Español, por Martines Amador) Since only the building was  destroyed and the  usufruct is  constituted not only on the building but  on  the land as well, then the usufruct  is not deemed extinguished by the destruction of the building for under the law usufruct is  extinguished only by the total loss of the thing subject of the encumbrance  (Article 603, old Civil  Code).

In our opinion, this case comes under Article 517 of the same Code which provides: "If the usufruct is constituted on immovable property of which a building forms  part, and the latter should be destroyed in any  manner  whatsoever, the  usufructuary shall have a right to make use of the land and materials."   This is a  temporary  measure calculated to maintain the usufruct alive until the very thing that has been destroyed be reconstructed or replaced. The  reason is  obvious: since the usufruct has not  been extinguished by  the destruction  of the  building and the usufruct is for life as in this case, it is but fair that the usufructuary continue  to enjoy the use of  the land  and the materials that may  have been left by the fire or to the use of the new  building that may be constructed  on the land.   To  hold  otherwise  would  be to  affirm  that the usufruct has been extinguished.

The question that now arises is:  Who is called upon to undertake the new construction, and at whose cost?  Of course, this is addressed to the wisdom and  discretion of the usufructuary who, to all intents and purposes is deemed as the  administrator  of the  property.   This has been clarified in the case of Fabie vs. Gutierrez  David,  75 Phil., 536,  which was litigated between  the  same parties and wherein the scope of the same provision  of  the  will  has been the subject of interpretation.   The following is what this  Court  said:
"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 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 repair 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 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 or administration have been vested by the court, with his consent,  in the usufructuary."
In the instant case,  however, a happy compromise was reached by the parties in view of the offer of one  Chinaman to lease the land for five years and to construct thereon a building worth  P30,000.00  upon the condition that upon its completion the building would become an integral part  of the  land on which it is erected.  This means that its naked ownership  should belong to petitioners and its beneficial  ownership  to respondent.   This   is a  happy medium which fits into the purpose  contemplated in Article 517 above referred to:  that the usufruct should  continue on the  land and the  new improvement that may be constructed thereon.

We therefore hold that  the  Court of Appeals did not err in finding that  appellee's right of usufruct subsists and is in full  force and effect  upon the  Ongpin lot and the building existing thereon, affirming the decision of the trial court.

Petitioners' contention that the Court of Appeals  erred in ruling that the damages paid by the War Damage Commission to said petitioners was  intended to be an indemnity for the  destruction of the building in question and in ordering them to pay respondent 6% interest per annum on the amount  of the damage paid is  also untenable, for it cannot be denied that a war damage  payment  is intended to replace  part of the capital invested in the building destroyed or to assuage somewhat the  material loss of its owner.  It cannot be maintained that war damage payments are intended to be a mere gesture of appreciation  of  the people  of the United States of America towards our people for it is a well-known fact that countless of our countrymen who suffered in the last war or whose kin-folks lost their lives did not receive any war damage payment because they  have no  damaged  property that could be indemnified.   The ruling that 6%  interest per annum  of such  war  damage  payment  should  be paid to respondent  from the time it was  actually  received to the end of the life of the usufruct should, in my opinion, be modified in the sense that that obligation should only be valid up to the date the new building was  constructed by the Chinaman who leased the property upon the theory that the amount of damage paid by the War Damage Commission  which was intended to replace the old building has in turn been replaced by the new.  However, the majority is of the opinion that the same  should also be subject to usufruct for life because it has not been used in  the construction of the new building, although they suggested the alternative that the naked owners may turn over the money to the usufructuary so that she may use it  during her lifetime  subject to its return to them after  her death if they desire to be relieved of this encumbrance.

We  find, however, merit in the contention  that the real estate  taxes paid by respondent  in her capacity as usufructuary  for  several years previous to the present litigation should be paid by her, as she did, instead of by petitioners not only because she is the only  recipient of all the benefits of the property but because she bound herself to pay such taxes  in a formal agreement approved  by  the  court  in Civil  Case No. 1659  oi;  the  Court of First  Instance  of Manila (Fabie vs. Gutierrez David, supra).   In that case, which involved  the same parties and  the same properties subject of  usufruct,  the  parties  submitted  an  amicable agreement which was approved by  the court wherein the usufructuary, herein respondent, bound herself to pay all the real estate taxes, special assessment  and insurance premiums, and make all the necessary repairs on each  of the properties covered by the usufruct and in accordance with said agreement,  respondent paid  all the taxes for the years  1945 to 1954.  In said agreement,  it was  also stipulated that the same  "shall be  in  effect  during the term of  the usufruct and  shall be binding on  the successors and assigns  of  each of the parties."  There is  therefore no  valid reason why petitioners should now be ordered  to reimburse  respondent  for all the real taxes she had paid on the property.  In this  respect, the decision of the Court of Appeals should be modified.

Wherefore, with the modification that petitioners should not be made to reimburse the  real estate  taxes  paid  by the respondent for the years abovementioned, the decision appealed from is  affirmed in all  other respects, without pronouncement as to costs.

Labrador, Endencia, Barrera, and Gutierrez David, JJ., concur.



I concur in the learned opinion of the majority, penned by Mr. Justice Bautista Angelo,  with the exception of that portion thereof on page 10, which holds that the payment to the usufructuary of the 6% interest per annum of the war damage payment should end on the date of the  construction of the new building by the Chinaman who leased the property, from which ruling  I dissent.

It will be noticed  that both the trial  court and the Court  of Appeals were  of the  opinion that said payment of interest should continue during the lifetime of the  usufruct.   I  agree to said opinion.   The reason is obvious. The war damage payment is the equivalent of  the building destroyed.  Since the usufructuary had a right to the use or  the fruits of the  building,  she therefore had the right  to the interest on the war damage payment during her lifetime.  In my opinion, the construction of the  new building does not relieve  the owners of the land who received the war damage payment from continuing the payment  of interest.  Had  said owners of the land used the war damage payment to construct the building,  then  they would  be  free from paying interest because the rent of the new building would correspond to the  interest on the war damage payment.   But the fact  is the new building was not constructed by the owners of the land, but by the Chinese lessee.

The majority opinion states that the usufructuary would then be receiving  the interest on  the war damage payment and  also the rent of  the new building a sort of double benefit, which is said to be unfair.  That is  one view. The other view is that at the end of the usufruct, the owners of the land or their  heirs shall have received not only equivalent or value of the old building destroyed, in the form of the war damage payment  but also  the new building constructed absolutely at no cost or expense to them also a  double benefit, which might also be  regarded as unfair following the point of view of the majority opinion. So, in this  respect of double benefit, both parties stand on the same footing.  Viewed thus, there is nothing unfair in the arrangement.

Furthermore, we should not lose sight of  the fact that the usufructuary, as the majority opinion well states  has a right  to the use and the fruits not only of the improvements, such as buildings on the land, but of the  land itself.  Consequently,  anything built on the land would be subject  to the usufruct,  and the fruits thereof,  such as rents, would go to the usufructuary.  This  naturally  includes the interest on the  war damage payment for the old building destroyed during the war, which payment is the equivalent of said building.  Had the owners of the land used the amount of said payment to construct another building on the land,  or should they have used the sum to add  another story or  extension of  the  building constructed thereon by  the  Chinese lessee, there would surely be no question that any rent therefrom would belong to the usufructuary, because then it  could  be regarded as improvement  on the land, which, as already said, is  the equivalent or a  reproduction of said old building.  Just because the owners of the land kept said war damage payment for their own use did not relieve them of the obligation  of paying the interest on the same to the  usufructuary, because otherwise, they would be having  not  only the naked  ownership of the equivalent of  said building, but also its fruits.

The  foregoing are some of the reasons for my dissent.

Paras, C. J., Bengzon, and Concepcion, JJ.,  concur.

REYES, J. B. L., J.:

I concur in the opinion of Justice Montemayor, specially because the usufructuary receives only  a part of the rent of the  new building.