Usufruct Source 1 PDF
Usufruct Source 1 PDF
REPORTS
ANNOTATED
Usufruct
ANNOTATION
USUFRUCT
By
DOMINGO M. LIRA, JR.
________________
§ 1. Usufruct in general.
Usufruct, which is a real right, is one of thelimitations on the right ofdominion because
“Usufructgives a right to enjoy theproperty of another with theobligation of preserving its form
and substance, unless the title constituting it or the law otherwise provides.” (Art. 562, taken
from Art. 467 of the Spanish Civil Code).
Usufruct was recognized in Roman Law and it wastherein defined as “ius alienis rebus utendi
fruendi salva rerum substantia.” (Justinian’ Institutes, II.4.) From this it may be seen that
traditionally it wasrequired in usufruct that there must be no detriment
to the substance of theproperty. Under our law, however,
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it is as in the article above quoted that the form and substance of the property held
in usufruct must be preserved, unless the title constituting it or the law otherwise provides.
Manresa explains this feature of thelaw permitting impairment of the property held
in usufruct in certain cases bystating that the essential requisite of usufruct is theright to
enjoy the property of another, that theobligation to preserve its form and substance is only
accidental. Hence, in this respect there are two kinds of usufruct: normal and abnormal,
depending on whether or not impairment of the property held in usufruct is allowed. (Sec. 4
Manresa 364-368).
Usufruct must be distinguished from thecontract of lease of things whereby
“one of the parties binds himself to give to another the enjoyment or use of a thing for a price
certain, and for a periodwhich may be definite or indefinite. However, no lease for more than
ninety-nine years shall be valid.” (Art. 1643). In a lease of things, as in usufruct, the right is
given to enjoy another person’s property. Here, similarity ends and we note several differences.
Thus: Usufruct is always a real right whereas a lease ofthings is generally a personal right
only; thenaked owner in usufructallows the usufructuary to enjoy the property
whereas the lessor in a lease ofthings makes the lessee enjoy the property leased;
and usufruct refers to all uses of the property whereas a lease of things refers to certain uses
only, to those stipulated. (See 10 Manresa 458). Other distinctions between these two juridical
devices can be given such as, for instance, the fact that a lease ofthings can be created
only by agreement or contract whereas—
“Usufruct is constituted by law, by thewill of private persons expressed in acts inter vivos or
in a last will and testament, and byprescription.” (Art. 563, taken from Art. 468 of theSpanish
Civil Code).
An example of a legalusufruct or that which is constituted by law
is theusufruct of the parents over the property of thechild. In a sense also, theconjugal
partnership is a usufructuary over theseparate property of thespouses. (See Report of theCode
Commission, p. 98). Those created by the will ofprivate persons expressed in acts inter vivos or in
a last will and testament are called voluntary. (See 4 Manresa 370). In the Philippines we can say
that voluntary usufructs are very rare because they do not go with the grain of our native attitude
that ownership be in complete form
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1. By the quality ofthe object whichmay be things or rights; things may be movable or
immovable, the first may be fungibles or non-fungibles, and non-fungibles may be
susceptible or not ofdeterioration.
2. By the quantity ofthe object, usufructmay be total or partial, depending on
whether it involves all or only some ofthe use of the thing.
3. By reason, of thepersons and forms ofthe use, usufructmay be constitutedin favor of a
single person or of many, and in case of thelatter it may be simultaneous or successive.
4. By the manner ofits constitution, usufruct may be established purely, subject to a
condition or a term (from or to a certain day).
5. By the nature of thetitle constituting it, usufruct may be singular or universal (See 4
Manresa 376). (Abad Santos, J. Property, 1962 Ed., pp. 267-269).
§ 2. Rights of theUsufructuary.
The usufructuary has theright to enjoy the property, to the same extent as theowner, but only
with respect to its use and the receipt ofits fruits. He has a right to administer the property
in usufruct. With respect to the use of the property, he has the right to receive from the thing
all the service or benefit that it can give. This is recognized by Article
571, which gives theusufructuary the right to enjoy all the benefits inherent in the thing. He
cannot, however, extract products which do not constitute fruits, because he is bound to
preserve theforms and substance of thething. Thus, he cannot
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convert an orchard into a grazing field nor can he convert a ricefield into a fishpond (Tolentino,
Property, 1972 ed., p. 306).
But dividends from shares of a corporation are fruits, whether in form ofcash or of stock
dividends, and therefore belong to theusufructuary. This is thedoctrine laid down
in thecase of Bachrach vs. Seifert and Elianoff, 87 Phil. 483and reiterated in the later case of Del
Saz Orozco and Araneta, et al., 90 Phil. 399. In the former case theCourt said:
“While appellants admit that a cash dividend is an income, they contend that a stock dividend is
not, but merely represents an addition to the invested capital. The so-called Massachusetts
rule, whichprevails in certain jurisdictions in the United States, supports appellants
contention. It regards cash dividends, however large as income, and stock dividends, however
made, as capital (Minot vs. Paine, 99 Mass. 101; 96 Am. Dec. 705). Itholds that a stock dividend is
not in any true sense any dividend at all since itinvolves no division or severance
from thecorporate assets of thesubject of the dividend; that it does not distribute property but
simply dilutes the shares as they existed before; and that it takes nothing
from the property ofthe corporation and adds nothing to the interests ofthe shareholders.
On the other hand, theso-called Pennsylvania rule, which prevails in various other
jurisdictions in theUnited States, supports appellee’s contention. This rule declares that all
earnings of the corporation made prior to the death ofthe testator stockholder belong
to the corpus of theestate, and that all earnings, when declared as dividends in whatever form,
made during the lifetime of theusufructuary or life tenant are income and belong
to theusufructuary or life tenant (Earp’s Appeal, 28 Pa., 368).
“* * * It is clear that testator intended the remaindermen should have only the corpus ofthe estate he left in
trust, and that all dividends should go to the life tenants. It is true that profits realized are not dividends
until declared by theproper officials of thecorporation, but distribution ofprofits, however, made, is
dividends, and the form of thedistribution is immaterial.’ (In re Thompson’s Estate, 262 Pa., 278; 105 Atl.
273, 274).
In Hite vs. Hite (93 Ky., 257; 20 S.W. 778, 780), the Court of Appeals of Kentucky, speaking thru
its Chief Justice said:
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“* * * Where a dividend, although declared in stock, is based upon the earnings of thecompany, it is in
reality, whether called by one name or another, the income of thecapital invested in it. It is but a
mode of distributing the profit. If it be not income, what is it? If it is, then it is rightfully and
equitably the property of thelife tenant. If it is really profit, then he should have it, whether paid in stock or
money. A stock dividend proper is the issue ofnew shares paid for by thetransfer of a sum equal to their par
value from the profit and loss account to that representing capital stock; and really a corporation has no right
to declare a dividend, either in cash or stock, except from its earnings; and a singular state of case—it seems
to us, an unreasonable one-is presented if the company, although it rests with it whether it will declare a
dividend, can bind the courts as to the proper ownership of it, and by the mode of payment substitute its
will for that ofthe testator, and favor the life tenants or the remainder-men, as it may desire. It cannot, in
reason, be considered that thetestator contemplated such a result. The law regards substance, and not form,
and such a rule might result not only in a violation of thetestator’s intention, but itwould give the power
to thecorporation to beggar the life tenants, who, in this case, are the wife and
children of thetestator, for the benefit of theremainder-men, who may perhaps be unknown to thetestator,
being unborn when the will was executed. We are unwilling to adopt a rule whichto us seems so arbitrary,
and devoid of reason and justice. If the dividend be in fact a profit, although declared in stock, itshould be
held to be income. Ithas been so held in Pennyslvania and many other states, and we think it thecorrect rule.
Earp’s Appeal, 29 Pa. St. 368; Cook, Stocks & S. Sec. 544. * * *”
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“When it consists of theenjoyment of the benefits arising from an interest in an industrial or commercial
enterprise, the profits ofwhich are not distributed at fixed periods, such profits shall have the same
consideration.
“In either case, they shall be distributed as civil fruits, and shall be applied in accordance with rules
prescribed by thenext preceding article.”
The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock
dividend are civil fruits of the original investment. They represent profits,
and the delivery ofthe certificate of stock covering said shares may be sold
independently of theoriginal shares, just as theoffspring of a domestic animal may be sold
independently of its mother.”
“We notice, however, that the lower court overlooked the fact that Marcela Checano is also an
heir ofher late husband to theextent of the usufructassigned to her by law
over the property, whichusufruct she can transfer, assign or otherwise dispose of as she may
please, like any other hereditary property, as she has done in this case, for which reason we opine
that the sale may still be considered valid insofar as such usufruct is concerned.” (Guantia vs.
Tatoy, 88 Phil. 329).
§ 4. Obligations of theUsufructuary.
The usufructuary shall take care of the things given in usufruct as a good father ofthe family
(Art. 589 NCC).
§ 5. Payment of Land Tax.
Usufruct is extinguished: (1) By the death of theusufructuary, unless a contrary intention
clearly appears; (2) By theexpiration of the periodfor which it wasconstituted,
or by thefulfillment of any resolutory condition provided in thetitle creating the usufruct;
(3) By merger of theusufruct and ownerhsip in the same person;
(4) Byrenunciation of theusufructuary; (5) By thetotal loss of the thing in usufruct;
(6) By thetermination of the right ofthe person constituting theusufruct; and (7) Byprescription
(Art. 603 NCC). Besides those mentioned thefollowing are causes forextinguishment of usufructs:
non-fulfillment of theconditions, any cause agreed upon by the parties as a
ground for terminating theusufruct, the rescission or annulment of the act
constituting the usufruct, and the special causes forextinguishment of legal usufructs
(Tolentino, Property, supra, p. 332).
property provides on theface thereof that the lot with a building and improvements thereon are
subject to the right ofappellee “in usufruct”. This being the case, and a usufructuary being
entitled to all the fruits of theproperty in usufruct(Article 566, New Civil Code), the conclusion
is inescapable that appellee as a life usufructuary has theright to enjoy
all the rentals of the realty at Ongpin consisting of the lot and building erected thereon. And
in the event the latter is destroyed in whatever manner, as in fact it wasburned
during the liberation of Manila, the usufruct is not thereby extinguished but appellee as
“theusufructuary shall have a right to make use of theland and the materials” (Art. 607, par. 1,
NCC). In this regard, Manresa says:
“Si el usufructo estuviera constituido sobre una fina de la que forma parte un edificio, y este llegare a perecer,
de cualquier modo que sea, el usufructuario tendra derecho a disfrutar del suelo u de los materialies. “Si se
tratese de un edificio construido en suelo ajeno, aun cabria hablar de la utilizacion de los materiales. El
derrumbamiento de un edificio no produce, pues, nunca formalmente la extincion del usufructo. El titulo
constuido puede determinar distintas reglas.” (Manresa, Tomo IV, pp. 476-477).
“The usufruct that wassaid to have been created byCamila Ramos, plaintiff’s predecessor-in-
interest, and after her death bythemselves, was not sufficiently proved. There was no
writing of any sort to show such fact whichplaintiffs tried to prove bywords of mouth when they
presented a certain Atty. Domingo Goce who
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is the father of their counsel. But the rule is quite stringent and itrequires more than mere parol
evidence, considering that a usufruct is an interest affecting realty. Thus, it has been said that—
“It is not only every agreement relating to thesale of lands that is within the statute of frauds,
but also such agreements as are intended to create interest in lands.” (Byres vs. Locke, 29 Pac.
Reporter, p. 119). (Goce vs. Rosales, CA-G.R. No. 23581-R, May 11, 1976, 23 Velayo’s Digest, p. 96).