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G.R. No. 152809 August 3, 2006 MERCEDES MORALIDAD,

Petitioner,vs.SPS. DIOSDADO PERNES and ARLENE PERNES,
Respondents.
Facts:In her younger days, petitioner taught in Davao City,
Quezon City and Manila. While teaching in Manila, she had
the good fortune of furthering her studies at the University
of Pennsylvania, U.S.A. While schooling, she was offered to
teach at the Philadelphia Catholic Archdiocese, which she
did for seven (7) years. Thereafter, she worked at the
Mental Health Department of said University for the next
seventeen (17) years.During those years, she would come
home to the Philippines to spend her two-month summer
vacation in her hometown in Davao City. Being single, she
would usually stay in Mandug, Davao City, in the house of
her niece, respondent Arlene Pernes, a daughter of her
younger sister, Rosario.Back in the U.S.A. sometime in
1986, she received news from Arlene that Mandug at the
outskirts of Davao City was infested by NPA rebels and
many women and children were victims of crossfire
between government troops and the insurgents. Shocked
and saddened about this development, she immediately
sent money to Araceli, Arlenes older sister, with
instructions to look for a lot in Davao City where Arlene and
her family could transfer and settle down. This was why she
bought the parcel of land covered by TCT No. T-
123125.Petitioner acquired the lot property initially for the
purpose of letting Arlene move from Mandug to Davao City
proper but later she wanted the property to be also
available to any of her kins wishing to live and settle in
Davao City. Petitioner made known this intention in a
document she executed on July 21, 1986.
Issue:I. WHETHER OR NOT THE COURT OF APPEALS ERRED
IN DISMISSING THE UNLAWFUL DETAINER CASE FOR BEING
PREMATURE WHICH DECISION IS NOT IN ACCORDANCE
WITH LAW AND JURISPRUDENCE.
II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN
APPLYING ARTICLES 448 AND 546 AND THE PROVISIONS OF
THE CODE ON USUFRUCT INSTEAD OF ARTICLE 1678 OF THE
CIVIL CODE.
Ruling:The Court rules for the petitioner.Usufruct, in
essence, is nothing else but simply allowing one to enjoy
anothers property. 9 It is also defined as the right to enjoy
the property of another temporarily, including both the jus
utendi and the jus fruendi, 10 with the owner retaining the
jus disponendi or the power to alienate the same. It is
undisputed that petitioner, in a document dated July 21,
1986, supra, made known her intention to give respondents
and her other kins the right to use and to enjoy the fruits of
her property. There can also be no quibbling about the
respondents 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 (sic) 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. We have no
quarrel, therefore, with the CAs ruling that usufruct was
constituted between petitioner and respondents. It is thus
pointless to discuss why there was no lease contract
between the parties.There are other modes or instances
whereby the usufruct shall be considered terminated or
extinguished. For sure, the CivilCode enumerates such
other modes of extinguishment:
ART. 603. Usufruct is extinguished:
(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. (Emphasis supplied.)
The document executed by the petitioner dated July 21,
1986 constitutes the title creating, and sets forth the
conditions of, the usufruct. Paragraph #3 thereof states
"[T]hat 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"
(Emphasis supplied). 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 "[T]hat
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 kin
constitutes a resolutory condition which, by express wish of
the petitioner, extinguishes the usufruct. From the
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pleadings submitted by the parties, it is indubitable that
there were indeed facts and circumstances whereby the
subject usufruct may be deemed terminated or
extinguished by the occurrence of the resolutory conditions
provided for in the title creating the usufruct, namely, the
document adverted to which the petitioner executed on
July 21, 1986. 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.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. (Emphasis supplied.)Art. 580. The
usufructuary may set off the improvements he may have
made on the property against any damage to the
same.Given the foregoing perspective, respondents will
have to be ordered to vacate the premises without any
right of reimbursement. If the rule on reimbursement or
indemnity were otherwise, then the usufructuary might, as
an author pointed out, improve the owner out of his
property. 15 The respondents may, however, remove or
destroy the improvements they may have introduced
thereon without damaging the petitioners property.
G.R. No. L-2659 October 12, 1950
In the matter of the testate estate of Emil Maurice
Bachrach, deceased. MARY McDONALD
BACHRACH,petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-
appellants.
Is a stock dividend fruit or income, which belongs to
the usufructuary, or is it capital or part of the corpus of the
estate, which pertains to the remainderman? That is the
question raised in the appeal. The deceased E. M.
Bachrach, who left no forced heir except his widow Mary
McDonald Bachrach, in his last will and testament made
various legacies in cash and willed the remainder of his
estate as follows:
Sixth: It is my will and do herewith bequeath and
devise to my beloved wife Mary McDonald
Bachrach for life all the fruits and usufruct of the
remainder of all my estate after payment of the
legacies, bequests, and gifts provided for above;
and she may enjoy said usufruct and use or spend
such fruits as she may in any manner wish.
The will further provided that upon the death of Mary
McDonald Bachrach, one-half of the all his estate "shall be
divided share and share alike by and between my legal
heirs, to the exclusion of my brothers."
The estate of E. M. Bachrach, as owner of 108,000
shares of stock of the Atok-Big Wedge Mining Co., Inc.,
received from the latter 54,000 shares representing 50 per
cent stock dividend on the said 108,000 shares. On June 10,
1948, Mary McDonald Bachrach, as usufructuary or life
tenant of the estate, petitioned the lower court to
authorize the Peoples Bank and Trust Company as
administrator of the estate of E. M. Bachrach, to her the
said 54,000 share of stock dividend by endorsing and
delivering to her the corresponding certificate of stock,
claiming that said dividend, although paid out in the form
of stock, is fruit or income and therefore belonged to her as
usufructuary or life tenant. Sophie Siefert and Elisa Elianoff,
legal heirs of the deceased, opposed said petition on the
ground that the stock dividend in question was not income
but formed part of the capital and therefore belonged not
to the usufructuary but to the remainderman. And they
have appealed from the order granting the petition and
overruling their objection.
While appellants admits 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, which prevails 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.) It holds
that a stock dividend is not in any true sense any true sense
any dividend at all since it involves no division or severance
from the corporate assets 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
of the corporation, and nothing to the interests of the
shareholders.
On the other hand, so called Pennsylvania rule, which
prevails in various other jurisdictions in the United States,
supports appellee's contention. This rule declares that all
earnings of the corporation made prior to the death of the
testator stockholder belong to the corpus of the estate, and
that all earnings, when declared as dividends in whatever
form, made during the lifetime of the usufructuary or life
tenant. (Earp's Appeal, 28 Pa., 368.)
. . . It is clear that testator intent the
remaindermen should have only the corpus of the
estate he left in trust, and that all dividends should
go the life tenants. It is true that profits realized
are not dividends until declared by the proper
officials of the corporation, but distribution of
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profits, however made, in dividends, and the form
of the distribution 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:
. . . Where a dividend, although declared in
stock, is based upon the earnings of the company,
it is in reality, whether called by one name or
another, the income of the capital 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 the life tenant. If it be
really profit, then he should have it, whether paid
in stock or money. A stock dividend proper is the
issue of new shares paid for by the transfer of a
sum equal to their par value from the profits and
loss account to that representing capital stock; and
really a corporation has no right to 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 of that of the testator,
and favor the life tenants or the remainder-men,
as it may desire. It cannot, in reason, be
considered that the testator contemplated such a
result. The law regards substance, and not form,
and such a rule might result not only in a violation
of the testator's intention, but it would give the
power to the corporation to beggar the life
tenants, who, in this case, are the wife and
children of the testator, for the benefit of the
remainder-men, who may perhaps be unknown to
the testator, being unborn when the will was
executed. We are unwilling to adopt a rule which
to us seems so arbitrary, and devoid of reason and
justice. If the dividend be in fact a profit, although
declared in stock, it should be held to be income. It
has been so held in Pennsylvania and many other
states, and we think it the correct rule. Earp's
Appeal, 28 Pa. St. 368; Cook, Stocks & S. sec. 554. .
. .
We think the Pennsylvania rule is more in accord with
our statutory laws than the Massachusetts rule. Under
section 16 of our Corporation Law, no corporation may
make or declare any dividend except from the surplus
profits arising from its business. Any dividend, therefore,
whether cash or stock, represents surplus profits. Article
471 of the Civil Code provides that the usufructuary shall be
entitled to receive all the natural, industrial, and civil fruits
of the property in usufruct. And articles 474 and 475
provide as follows:
ART. 474. Civil fruits are deemed to accrue
day by day, and belong to the usufructuary in
proportion to the time the usufruct may last.
ART. 475. When a usufruct is created on the
right to receive an income or periodical revenue,
either in money or fruits, or the interest on bonds
or securities payable to bearer, each matured
payment shall be considered as the proceeds or
fruits such right.
When it consists of the enjoyment of the
benefits arising from an interest in an industrial or
commercial enterprise, the profits of which are
not distributed at fixed periods, such profits shall
have the same consideration.lawphil.net
In either case they shall be distributed as civil
fruits, and shall be applied in accordance with the
rules prescribed by the next 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 of the certificate of stock covering said
dividend is equivalent to the payment of said profits. Said
shares may be sold independently of the original shares,
just as the offspring of a domestic animal may be sold
independently of its mother.
The order appealed from, being in accordance with
the above-quoted provisions of the Civil Code, his hereby
affirmed, with costs against the appellants.
There are two (2) petitions for review before us: (1) G.R.
No. 51333 which asks for review of the decision of the then
Court of First Instance CFI of Negros Occidental, Branch 3,
in Civil Case No. 13823; and (2) G.R. No. 52289 which seeks
review of the decision of the then Court of Agrarian
Relations ("CAR"), 11th Judicial District, in CAR Case No. 76.
Both the CFI of Negros Occidental and the CAR dismissed
petitioners' complaint for lack of jurisdiction. The Supreme
Court, in a Resolution dated 16 June 1982, consolidated
G.R. Nos. 51333 and 52289.
In a Resolution
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dated 18 May 1989, the Court partly
resolved the consolidated petitions by declaring that the
appropriate Regional Trial Court had jurisdiction over the
two (2) cases.
The facts relevant for resolution of the remaining
substantive aspects of the CFI case and the CAR case, may
be summarized from the Court's Resolution of 18 May 1989

Petitioner Ramona R. Locsin, Teresita
Guanzon, Celia R. Sibug, Maria Rosa R.
Perez, Editha Ylanan and Ana Marie R.
Benedicto were co-owners of a large tract
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of agricultural land known as "Hacienda
Villa Regalado" located in Barrio
Panubigan Canlaon City, Negros
Occidental. The tract of land was covered
by Transfer Certificate of Title No. T-494
and there more particularly described in
the following terms:
TRANSFER CERTIFICATE OF TITLE NO. T-
494
A parcel of land . . .
containing an area of
THREE MILLION THIRTY-
THREE THOUSAND AND
FORTY-EIGHT
(3,033,048) square
meters, more or less.
(Rollo, of G.R. No.
52289, p. 31.)
A portion of this land, known as Lot No. 2-
C-A-3 and consisting of an area of
60.07464 hectares, was subject to the
lifetime usufructuary rights of respondent
Helen Schon. The bulk of this lot was
cultivated by the following lessees-
tenants who customarily delivered the
rentals to Helen Schon:
(Rollo, of G.R. No. 51333, p. 4.)
On 22 October 1972, after the onset of
the martial law administration of former
President Marcos, Presidential Decree No.
27 was promulgated, decreeing the
"Emancipation of Tenants." The tract of
land owned in common by petitioners,
including the portion thereof subject to
Helen Schon's usufructuary rights, fell
within the scope of the "Operation Land
Transfer". In consequence, staff members
of the Department of Agrarian Relations
advised the tenants-tillers of said land,
and the necessary parcellary map sketch
was made and submitted to the Bureau of
Land Office in Dumaguete City. (Rollo, of
G.R. No. 51333, Annex "A" of Petition, pp.
19-20) Petitioners through counsel sought
the opinion of the DAR as to who
(petitioners or respondent Helen Schon)
should be entitled to receive the rental
payments which continued to be made by
the respondent tenants to Helen Schon.
The DAR District Officer rendered an
opinion on 13 May 1977 that the rental
payments as of October 1972 were
properly considered as amortization
payments for the land and as such should
pertain to the landowners and not to the
usufructuary. (Id., p. 5)
1. Civil Case No. 13828, Court of First
Instance, Negros Occidental.
On 22 May 1978, petitioners filed against
spouses Joseph and Helen Schon Civil
Case No. 13828 . . ., for collection of
rentals plus damages with prayer for
preliminary injunction. There petitioners
claimed that since the land subject to
Helen Schon's usufructuary rights was
among the parcels of land which
collectively had been declared by the DAR
as a land reform area pursuant to
Presidential Decree No. 27, the rental
payments which the respondent spouses
had been collecting from the tenants
really pertained and should be delivered
to the petitioners, beginning from 21
October 1972, as constituting or forming
part of the amortization payments for the
land to be made by the tenants.
Petitioners sought in that case to recover
from the Schons all such rentals or the
money value thereof, and prayed for
injunction to prevent respondents from
collecting any further rental payments
from the tenants of the land involved.
Upon the other hand, in the Answer filed on 12 July 1978,
the respondents Schon contended that . . ., upon the
assumption arguendo that the Court of First Instance did
have jurisdiction, Article 609 of the Civil Code must in any
case be applied by that court in resolving the case.
2. CAR Case No. 76, Court of agrarian Relations
Approximately five (5) months after filing their complaint
before the Negros Occidental Court of First Instance,
petitioners filed a second complaint on 13 October 1978,
this time with the Court of Agrarian Relations, 11th Judicial
District, San Carlos City. In this complaint before the
Agrarian Court, petitioners impleaded as corespondents of
the spouses Schon the tenants who were cultivating the
land burdened with the usufruct of Helen Schon.
Petitioners prayed that the respondent tenants be required
to pay to petitioners (rather than to the spouses Schon) all
future rentals beginning with the crop year of 1978 and
every year thereafter, until full payment of the
amortization payment computed by the DAR. In their
Answer, the respondents Schon once again asserted lack of
jurisdiction over the subject matter of the case, this time on
the part of the Court of Agrarian Relations. . . .
The respondent tenants, for their part, agreed with the
Schons that there was no tenancy relationship existing in
respect of the land cultivated by them, since such land had
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already been brought within the ambit of "Operation Land
Transfer", and prayed that the petitioners and the
usufructuary be required to litigate among themselves their
respective rights before the proper court.
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As noted earlier, the Agrarian Court rendered a decision
dismissing petitioners' complaint in CAR Case No. 76,
declaring itself as bereft of jurisdiction to decide that case.
On appeal by petitioners, the Court of Appeals
ruled that since the only issue presented in the
appeal was whether or not the CAR had subject
matter jurisdiction over the case, the appeal raised
"a pure question of law" and certified the case to
this Court for disposition.
On 16 March 1979, the CFI of Negros Occidental
dismissed petitioners' complaint upon the ground
that jurisdiction to hear and decide that case was
vested in the CAR. This order was brought directly
to this Court by petitioners.
In our Resolution dated 18 May 1989, the Court,
after declaring that jurisdiction over the two (2)
cases was lodged in the appropriate Regional Trial
Court by virtue of the provisions of Section 19 (7)
of Batas Pambansa Blg. 129, required the
petitioners and private respondents in G.R. Nos.
51333 and 52289 to file simultaneous memoranda
on the remaining non-jurisdiction issues. At the
same time, the Court directed the Solicitor General
to file a motion for intervention on behalf of the
Government and to submit a memorandum on the
same issues. Both parties and the Solicitor-General
complied.
The substantive issues to be resolved here are the
following:
(1) As between the naked owners and the
usufructuary, who should be entitled to
the amounts paid by the tenants
beginning 21 October 1972? and
(2) What is the legal character of the
payments made by the tenants beginning
21 October 1972 payments on the
price of the land itself or civil fruits of the
land?
The two (2) above issues are obviously interrelated
and the Court will discuss them together.
Petitioners insist that the payments made by private
respondent tenants to private respondent Helen Schon
beginning on 21 October 1972 should be considered as
amortization payments for the price of the land and as such
should belong to the landowners and not to the
usufructuary. Upon the other hand, private respondent
Helen Schon urges that those amounts should pertain to
her considering that her rights as usufructuary persist
during her lifetime and have not been extinguished by
operation of the Land Reform Law. the further argues that
assuming her usufructuary rights had been extinguished,
the provisions of Article 609 of the Civil Code should be
applied, and that thereunder she would be entitled either
to replacement of the land burdened with her usufruct (the
fruits of which would then be payable to her) or payment of
legal interest on the amount of the purchase price of the
land.
Presidential Decree No. 27, issued on 21 October 1972,
declared the "emancipation of tenants" tilling agricultural
lands primarily devoted to rice and corn. It stated that:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Philippines, by virtue of the powers in me vested by the
Constitution as Commander-in-Chief of the Armed Forces
of the Philippines, and pursuant to Proclamation No. 1081,
dated September 21, 1972, and General Order No. 1 dated
September 22, 1972 as amended do hereby decree and
order the emancipation of all tenant farmers as of this day,
October 21, 1972;
This shall apply to tenant farmers of
private agricultural lands primarily
devoted to rice and corn under a system
of sharecrop or lease-tenancy, whether
classified as landed estate or not;
The tenant-farmer, whether in land
classified, as landed estate or not, shall be
deemed owner of a portion constituting a
family size farm of five (5) hectares if not
irrigated and three (3) hectares if
irrigated;
In all cases, the landowner may retain an
area of not more than seven (7) hectares
if such landowner is cultivating such area
or will now cultivate it;
For the purpose of determining the cost
of the land to be transferred to the
tenant-farmer pursuant to this Decree,
the value of the land shall be equivalent
to two and one-half (2 1/2) times the
average harvest of three normal crop
years immediately preceding the
promulgation of this Decree;
The total cost of the land, including
interest at the rate of six (6) percentum
per annum, shall be paid by the tenant in
fifteen (15) years [in] fifteen equal annual
amortizations;
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Presidential Decree No. 57, dated 19 November 1972,
amended Presidential Decree No. 27 and prescribed in part
as follows:
P.D. No. 57.SECTION 1. To further
accelerate the attainment of objectives
set forth in Presidential Decree No. 27,
the following provisions are hereby
corporated, to wit:
1. Landowner shall be exempt from the
capital gains tax on the proceeds of the
amortization paid him by the tenant-
purchaser and likewise from income tax
due on the accruing interests paid as an
addition to the total cost of the land.
It is also important to adduce Department Circular No. 8,
dated 1 April 1975, issued by the Department of Agrarian
Reform pursuant to Presidential Decree No. 27 and which
constitutes contemporaneous administrative construction
of Presidential Decrees Nos. 27 and 57. Department
Circular No. 8 stated that:
3. Tenant-farmers are deemed owners of the land they till
as of October 21, 1972, subject to the rules and regulations
to be hereafter promulgated. On lands already covered by
Operation Land Transfer,the leasehold system shall be
provisionally maintained and the lease rentals paid by the
tenant-farmers to the landowner [shall] be credited as
amortization payments. Payment of rentals shall be
stopped when the Land Bank shall have paid the cost of
land. On lands not yet covered by Operation Land Transfer,
leasehold shall continue to govern the relationship
between the landowner and his tenant-tillers. (Emphasis
supplied)
Finally, after the effective date of the 1987 Constitution,
Executive Order No. 228 dated 17 July 1987 was
promulgated and provided in part as follows:
SECTION 1. All qualified farmer
beneficiaries are now deemed full owners
as of October 21, 1972 of the land they
acquired by virtue of Presidential Decree
No. 27 (hereinafter referred to as P.D. No.
27).
SECTION 2. Henceforth, the valuation of
rice and corn lands covered by P.D. No. 27
shall be based on the average gross
production determined by the Barangay
Committee on Land Production in
accordance with Department
Memorandum Circular No. 26, series of
1973, and related issuances and
regulations of the Department of Agrarian
Reform. The average gross production per
hectare shall be multiplied by two and a
half (2.5), the product of which shall be
multiplied by Thirty Five Pesos (P35.00),
the government support price for one
cavan of 50 Kilos of palay on October 21,
1972, or Thirty One Pesos (P31.00), the
government support price for one cavan
of 50 kilos of corn on October 21, 1972,
and the amount arrived at shall be the
value of the rice and corn land, as the
case may be, for the purpose of
determining its cost to the farmer and
compensation to the landowner, pursuant
to Department of Agrarian Reform
Memorandum Circular No. 26, series of
1973, and other pertinent issuances. In
the event a party questions in court the
resolution of the dispute, the landowner's
compensation claim shall still be
processed for payment and the proceeds
shall be held in trust by the Trust
Department of the Land Bank in
accordance with the provisions of Section
5 hereof, pending the resolution of the
dispute before the court. (Emphasis
supplied)
Reading the foregoing provisions together, we observe that
under Presidential Decree No. 2, the basic statute, the
tenant-farmer became owner of a family-size farm of five
(5) hectares or, if the land was irrigated, three (3) hectares,
and that the tenant-owner had to pay for the cost of the
land within fifteen (15) years by paying fifteen (15) equal
annual amortization payments. Thus, it appears clear that
ownership over lands (like Lot No. 2-C-A-3) subjected to
Operation Land Transfer moved from the registered owner
(the old landowner) to the tenants (the new landowners).
The fifteen (15) annual amortizations to be paid by the
tenants-owners were intended to replace the landholdings
which the old landowners gave up in favor of the new
landowners, the tenants-owners.
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It follows that in respect
of land subjected to Operation Land Transfer, the tenants-
farmers became owners of the land they tilled as of the
effective date of Presidential Decree No. 27, i.e., 21 October
1972. Pending full payment of the cost of the land to the
old landowner by the Land Bank of the Philippines, the
leasehold system was "provisionally maintained" but the
"lease rentals" paid by the tenants-farmers prior to such
full payment by the Land Bank to the old landowner, would
be credited no longer as rentals but rather as "amortization
payments" of the price of the land, the un-amortized
portion being payable by the Land Bank. In respect of lands
brought within the coverage of Operation Land Transfer,
the leasehold system was legally and effectively terminated
immediately on 21 October 1972 (notwithstanding the
curious statement in Department Circular No. 8 that it was
"provisionally maintained"). It was in respect of lands not
yet subjected to the terms and effects of Operation Land
Transfer that the leasehold system did continue to govern
the relationship between the "landowner and his tenant-
tillers". The exemption of the old landowner from the
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capital gains tax on the amortization payments made to
him by the tenants-purchasers, under Presidential Decree
No. 57 (supra), underscores the fact, referred to above,
that ownership or dominion over the land moved
immediately from landowner to tenant-farmer, rather than
upon completion of payment of the price of the land. In
general, capital gains are realized only when the owner
disposes of his property. We believe and so hold that Lot
No. 2-C-A-3 having been declared part of the land reform
area and subjected to Operation Land Transfer, the
payments made on and after 21 October 1972 by the
private respondent tenants-farmers constituted
amortization payments on the cost of the land that they
were required to pay under Presidential Decree No. 27.
These payments, therefore, legally pertain to petitioners,
the former landowners as part of the compensation for the
dominion over land of which they were deprived by
operation of Presidential Decree No. 27. Those
payments can not be characterized as rentals like those
which had been paid to Helen Schon as usufructuary prior
to the promulgation of Presidential Decree No. 27 and prior
to the effectivity of Operation Land Transfer.
We turn to the question of what rights, if any, were
retained by Helen Schon as a usufructuary, after the
effectivity of Presidential Decree No. 27. We believe that
the usufruct which had therefore existed as a jus in re
aliena in favor of Helen Schon was effectively extinguished
by Presidential Decree No. 27. To hold, as private
respondent Helen Schon apparently urges, that her
usufruct was not extinguished but rather remained
impressed upon the land passing on to the new owners,
would obviously defeat the very purpose of the land reform
statute. Presidential Decree No. 27 was enacted to
"emancipate" the tenants from the "bondage of the soil" by
giving to tenants-farmers ownership of the land which they
were cultivating upon the assumption that they would work
harder to improve their lot in life if they became
landowners rather than mere tillers of somebody else's
land. To hold Helen Schon as entitled to continue enjoying,
as usufructuary, the natural or civil fruits of Lot No. 2-C-A-3,
would be to set at naught the major purpose projected by
Presidential Decree No. 27 and maintained by Executive
Order No. 228.
This is not to say that respondent Helen Schon lost any and
all rights upon the promulgation of Presidential Decree No.
27. In a legal, technical sense, it may be difficult to hold
that Presidential Decree No. 27 resulted in the lands
brought within the scope of Operation Land Transfer being
"expropriated for public use", as this term is used in Article
609 of the Civil Code, which reads thus:
Art. 609. Should the thing in usufruct be
expropriated for public use, the owner
shall be obliged either to replace it with
another thing of the same value and of
similar conditions, or to pay the
usufructuary the legal interest on the
amount of the indemnity for the whole
period of the usufruct. If the owner
chooses the latter alternative, he shall
give security for the payment of the
interest.
For it was not the Government or any of its
agencies which took over ownership of the land
nor was such land devoted subsequently to "public
use", since ownership was transferred directly
from former landowner to the tenant-tiller as new
landowner, for the use and benefit exclusively of
the new landowner. While, however, Article 609 of
the Civil Code may not be strictly applicable, we
believe that the situation contemplated in Article
609 is sufficiently close to that which resulted from
application of Presidential Decree No. 27 to the
land here involved. Bearing in mind that refusal to
decide an otherwise unavoidable issue upon the
ground of non liquet ("it is not clear") is not a
permissible response by a court where there is no
provision of law clearly and specifically applicable
to the facts at hand,
4
we believe that Article 609
should be applied to the present set of facts by
analogy.
It follows that respondent Helen Schon, so long as her
rights as usufructuary persist under the instrument which
gave birth to such rights, would be entitled to a
replacement reasonably equivalent to the land previously
burdened with her usufructuary right, or to legal interest
on the amount of the indemnity or cost of the land paid by
private respondent tenants-farmers and the Land Bank.
While the option or choice belongs to petitioners,
considering that Helen Schon had already received part of
the purchase price of the land previously owned by
petitioners from private respondent tenants-farmers, and
in the interest of expeditious justice, we consider it the
second alternative that should be given effect. Thus, from
the monies that she actually received from private
respondent tenants-farmers on and after 21 October 1972,
respondent Helen Schon is entitled to retain an amount
equivalent to the legal interest on said amounts for every
year that the usufruct would by its own terms have
continued to exist had it not been extinguished by
operation of Presidential Decree No. 27; the balance of
such amounts received by her shall be turned over to
petitioners. She is also entitled to the same right in respect
of the balance of the price of the land petitioners
presumably received from the Land Bank. WHEREFORE, for
all the foregoing, private respondent spouses Joseph and
Helen Schon are hereby DIRECTED to deliver to petitioners
the amounts paid to them by private respondent tenants-
farmers beginning on 21 October 1972, after deducting
therefrom an amount equivalent to simple legal interest
thereon computed at six (6%) percent per annum on the
amount received each year. No pronouncement as to costs.


8

G.R. No. L-51333 May 18, 1989
RAMONA R. LOCSIN, accompanied by her husband
RENATO L. LOCSIN; TERESITA R. GUANZON, accompanied
by her husband ROMEO G. GUANZON; CELINA R. SIBUG;
accompanied by her husband CARLOS V. SIBUG; MA.
LUISA R. PEREZ, accompanied by her husband JOSE V.
PEREZ; EDITHA R. YLANAN, accompanied by her husband
CARLOS W. YLANAN; and ANA MARIE R. BENEDICTO,
accompanied by her husband JOSE LUIS U.
BENEDICTO, petitioners,
vs.
HONORABLE JUDGE VICENTE P. VALENZUELA, Judge of the
Court of First Instance of Negros Occidental, Branch III and
SPOUSES JOSEPH SCHON, and HELEN BENNETT
SCHON, respondents.
G.R. No. 52289 May 19, 1989
RAMONA R. LOCSIN, accompanied by her husband
RENATO L. LOCSIN; TERESITA R. GUANZON, accompanied
by her husband ROMEO G. GUANZON; CELINA R. SIBUG;
accompanied by her husband CARLOS V. SIBUG; MA.
LUISA R. PEREZ, accompanied by her husband JOSE V.
PEREZ; EDITHA R. YLANAN, accompanied by her husband
CARLOS W. YLANAN; and ANA MARIE R. BENEDICTO,
accompanied by her husband JOSE LUIS U.
BENEDICTO, petitioners,
vs.
CARLOS PANALIGAN, AMADO MARQUEZ, HERBERT
PEDROS, ANTONIO FELICIANO, JR., HUGO AGUILOS,
ALBERTO GUBATON, JULIA VDA. DE ESQUELITO, SERAFIN
JANDOQUELE, SEFERIAS ESQUESIDA, CARLOS DELA CRUZ,
ELISEO GELONGOS, ESPINDION JOCSON, SALVADOR
MUNUN, ULFIANO ALEGRIA, and IRENEO BALERA, and
Spouses JOSEPH SCHON, and HELEN BENNETTE
SCHON, respondents.
G.R. No. L-51333 May 18, 1989
RAMONA R. LOCSIN, accompanied by her husband
RENATO L. LOCSIN; TERESITA R. GUANZON, accompanied
by her husband ROMEO G. GUANZON; CELINA R. SIBUG;
accompanied by her husband CARLOS V. SIBUG; MA.
LUISA R. PEREZ, accompanied by her husband JOSE V.
PEREZ; EDITHA R. YLANAN, accompanied by her husband
CARLOS W. YLANAN; and ANA MARIE R. BENEDICTO,
accompanied by her husband JOSE LUIS U.
BENEDICTO, petitioners,
vs.
HONORABLE JUDGE VICENTE P. VALENZUELA, Judge of the
Court of First Instance of Negros Occidental, Branch III and
SPOUSES JOSEPH SCHON, and HELEN BENNETT
SCHON, respondents.
Mirano, Mirano & Associates for petitioners in both cases.
Jose V. Valmayor & Samuel SM. Lezama for private
respondents in G.R. No. 51333. Bonifacio R. Cruz for private
respondents in G.R. No. 52289.
RESOLUTION

FELICIANO, J.:
There are before us for review the following: (1) the
decision of the Court of First Instance of Negros Occidental,
Branch 3, in Civil Case No. 13823; and (2) the decision of
the Court of Agrarian Relations, 11th Judicial District, in CAR
Case No. 76. Both of these decisions dismissed the
petitioners' complaints for lack of jurisdiction.
Petitioners Ramona R. Locsin, Teresita R. Guanzon, Celina R.
Sibug, Ma. Lusia R. Perez, Editha R. Ylanan and Ana Marie R.
Benedicto were co-owners of a large tract of agricultural
land known as "Hacienda Villa Regalado" located in Barrio
Panubigan, Canlaon City, Negros Occidental. The tract of
land was covered by Transfer Certificate of Title No. T-494
and there more particularly described in the following
terms:
TRANSFER CERTIFICATE OF TITLE
NO. T-494
A parcel of land (Lot 2-G) of the
subdivision plan Psd-28446, Sheet 2,
being a portion of Lot 2 (remaining
portion) described in plan II-6992,
G.L.R.O. Record No. 133), situated in the
Barrio of Panubigan, Municipality of
Canlaon Province of Negros Occidental,
Bounded on the N., by Lot 2-A of the
subdivision plan; on the E., and S., by
Binalbagan River; on the W., by Lot 2-E of
the subdivision plan; on the NW., by Lots
2-F and 2-A of the subdivision plan.
...containing an area of THREE MILLION
THIRTY-THREE THOUSAND AND FORTY
EIGHT (3,033,048) square meters, more
or less.
1

A portion of this land, known as Lot No. 2-C-A-3 and
consisting of an area of 60.07464 hectares, was subject to
the lifetime usufructuary rights of respondent Helen
Schon:. The bulk of this lot was cultivated by the following
lessees-tenants who customarily delivered the rental to
Helen Schon:
TENANTS
1. Carlos Panaligan 2.00 Ha.
9

2. Amado Marquez 1.50 Ha.
3. Herbert Pedros 1.50 Ha.
4. Antonio Feliciano, Jr. 2.00 Ha.
5. Hugo Aguilos 3.50 Ha.
6. Alberto Gubaton 8.90 Ha.
7. Hulo Aguilos 1.32 Ha.
8. Julia Vda. de Esquelito 2.25 Ha.
9. Carlos Panaligan 1.25 Ha.
10. Serafin Jandoquele 5.35 Ha.
11. Seferias Esquesida 2.00 Ha.
12. Carlos de la Cruz 4.70 Ha.
13 Eliseo Gelongos 3.00 Ha.
14. Espindion Jocson 5.55 Ha.
15. Salvador Munon 1.5884 Ha.
16. Ulfiano Alegria 1.85 Ha.
17. Ireneo Balera 8.30 Ha.
TOTAL 56.555 Ha.
2


On 22 October 1972, after the onset of the martial law
administration of former President Marcos, Presidential
Decree No. 27 was promulgated, decreeing the
"Emancipation of Tenants." The tract of land owned in
common by the petitioners, including the portion thereof
subject to Helen Schon's usufructuary rights, fell within the
scope of "Operation Land Transfer." In consequence, staff
members of the Department of Agrarian Relations
Identified the tenant-tillers of said land, and the necessary
parcellary map sketch was made and submitted to the
Bureau of Lands Office in Dumaguete City.
3
Petitioners
through counsel sought the opinion of the DAR as to who
(petitioners or respondent Helen Schon) should be entitled
to receive the rental payments which continued to be made
by the respondent tenants to Helen Schon. The DAR District
Officer rendered an opinion on 30 May 1977 that the rental
payments as of 22 October 1972 were properly considered
as amortization payments for the land and as such should
pertain to the land- owners and not to the usufructuary.
4

1. Civil Case No. 13828, Court of First
Instance of Negros Occidental
On 22 May 1978, petitioners filed against the spouses
Joseph and Helen Schon Civil Case No. 13828 in the then
Court of First Instance of Negros Occidental, for collection
of rentals plus damages with prayer for preliminary
injunction. There petitioners claimed that since the land
subject to Helen Schon's usufructuary rights was among the
parcels of land which colectively had been declared by the
DAR as a land reform area pursuant to Presidential Decree
No. 27, the rental payments which the respondent spouses
had been colecting from the tenants really pertained and
should be delivered to petitioners, beginning from 21
October 1972, as constituting or forming part of the
amortization payments for the land to be made by the
tenants. Petitioners sought in that case to recover from the
Schons all such previous rentals or the money value
thereof, and prayed for injunction to prevent the
respondents from collecting any further rental payments
from the tenants of the land involved.
Upon the other hand, in their Answer filed on 12 July 1978,
the respondents Schon contended that under the
provisions of Section 12 of Presidential Decree No. 946
dated 17 June 1976, and given the facts involved in Civil
Case No. 13823, the Court of First Instance was bereft of
jurisdiction over the subject matter of the case. That
jurisdiction, the Schon spouses urged, was vested in the
CAR instead. Respondents further argued that, upon the
assumption arguendo that the Court of First Instance did
have jurisdiction, Article 609 of the Civil Code must in any
case be applied by that court in resolving the case .
5

2. CAR Case No. 76, Court of Agrarian
Relations
Approximately five (5) months after filing their complaint
before the Negros Occidental Court of First Instance,
petitioners filed a second complaint on 13 October 1978,
this time with the Court of Agrarian Relations, 11th Judicial
District, San Carlos City. In this complaint before the
Agrarian Court, petitioners impleaded as co-respondents of
the spouses Schon the tenants who were cultivating the
land burdened with the usufruct of Helen Schon.
Petitioners prayed that the respondent tenants be required
to pay to petitioners (rather than to the spouses Schon) all
future rentals beginning with the crop year of 1978 and
every year thereafter, until full payment of the
amortization payments computed by the DAR. In their
Answer, the respondents Schon once again asserted lack of
jurisdiction over the subject matter of the case, this time on
the part of the Court of Agrarian Relations. Respondents
contended that the dispute between petitioners and
respondents Schon related to the continued existence or
termination of the usufructuary rights of Helen Schon,
which issue did not constitute an agrarian dispute and
therefore had to be litigated elsewhere, i.e., before the
regular courts of first instance.
The respondent tenants, for their part, agreed with the
Schons that there was no tenancy relationship existing in
respect of the land cultivated by them, since such land had
already been brought within the ambit of "Operation Land
Transfer", and prayed that the petitioners and the
10

usufructuary be required to litigate among themselves their
respective rights before the proper court.
3. Dismissal of Civil Case No. 13823 and
CAR Case No. 76
On 15 February 1979, the Agrarian Court rendered a
decision dismissing petitioners' complaint in CAR Case No.
76. The Court of Agrarian Relations held that it had no
jurisdiction to decide the case:
... it is crystal clear that the contending
parties are actually Ramona R. Locsin, et
al., and the naked owners of 101 hectares
of subject agricultural land, on one hand,
and Helen Bennett-Schon, who is the
usufructuary of the same land, on the
other.
For all legal intents and purposes, Helen
Bennett-Schon belongs to the category of
a landowner, since she is the recipient of
any and all fruit derived from the land of
which the plaintiffs are the naked owners.
The usufruct lasts for as long as Helen
Bennett-Schon lives. Therefore, this case
actually is a dispute between two
landowners one, the naked owners, the
other, the beneficial owner hose
controversy revolves on who of them
should receive the rentals being paid by
the tenants or lessees on the land in
question. Consequently, there is as
between the two contending parties, no
agrarian dispute which this Court may
take cognizance of. Under the
circumstances, it is the considered stand
of this Court that it is not the proper
forum both with respect to the second
amended complaint and with respect to
the petition for appointment of a
receiver.
WHEREFORE, RESOLVING BOTH THE
SECOND AMENDED COMPLAINT AND THE
PETITION FOR APPOINTMENT OF A
RECEIVER, THE LATTER BEING ONLY A
REPLAY OF THE FORMER, BOTH ARE
DISMISSED FOR LACK OF JURISDICTION
(pp. 7-8 Decision)
6

Petitioners appealed the decision of the Agrarian Court to
the Court of Appeals, the appeal being there docketed as
C.A.-G.R. SP No. 09-440. In a Decision dated 27 November
1979, however, the Court of Appeals ruled that since the
only issue presented in the appeal was whether or not the
Court of Agrarian Relations had jurisdiction to try and
decide CAR Case No. 76, the appeal raised "a pure question
of law" and certified the case to the Supreme Court for the
latter's disposition.
We turn to Civil Case No. 13823. On 16 March 1979, the
then Court of First Instance of Negros Occidental issued an
order also dismissing the complaint of petitioners on the
same ground of lack of jurisdiction to hear and decide that
case. The Court of First Instance held that it was the Court
of Agrarian Relations that had jurisdiction over the case,
and rationalized this position in the following manner:
In determining whether this Court has
jurisdiction, necessarily, a determination
should first be made as to the nature of
the lease rentals that were being paid to
the defendants by the tenants-lessees.
There is no question that on May 30,
1977, the Provincial Chairman of
Operation Land Transfer rendered an
opinion that the rentals as of October 21,
1972 was to be considered as
amortization payment to the land and as
such should pertain to the land owners
and not to the usufructuary, the
defendants herein (Annex 'B' of the
Complaint). Section 12 of Presidential
Decree No. 946 enumerates the case that
falls under the original and exclusive
jurisdiction of the Court of Agrarian
Relations, as follows:
(a) Cases involving the rights and
obligation of persons in cultivation and
use of agricultural land ...;
(b) Questions involving rights granted and
obligations im posed by law, presidential
decrees, orders, instructions, rules and
regulations issued and promulgations in
relation to the agrarian reform program
...;
(c) Cases involving the collection of
amortization on payment for lands
acquired under Presidential Decree No.
27 as amended ...
It could be seen from the above that the
jurisdiction given to the Court of Agrarian
Relations is so broad and sweeping as to
cover the issue involved in the present
case. ... the agricultural leasehold relation
is not limited to that of a purely landlord
and tenant relationship. The agricultural
leasehold relationship is established also
with respect to the person who furnished
the landholding either as owner, civil
lessee, usufructuary or legal
possessor and the person who cultivates
11

the same. It might as well be asked
whether the opinion of the Provincial
Chairman of Operation Land Transfer
previously adverted to and which is now
one of the issues in this incident would
involve the determination of the rights
granted and obligations imposed in
relation to the agrarian reform program.
The search for an answer need not be
deferred as reference to Par. (b) of
Presidential Decree No. 49 provides such
answer-
x x x x x x x x x
Questions involving rights granted and
obligations imposed by the law,
presidential decrees, orders, instructions,
rules and regulations issued and
promulgations in relation to the agrarian
reform program.
Clearly, the determination of the nature of
the payment made by the tenants to the
defendants herein is a question which
involved the right of the tenants in
relation to the land reform program of the
government.
7

The above order of the Negros Occidental Court of First
Instance was brought directly to us by petitioners on a
Petition for Review in G.R. No. 51333.
G.R. No. 51333 and G.R. No. 52289 were consolidated by a
Resolution of this Court dated 16 June 1982.
The consolidated cases present the question of which court
had jurisdiction to decide one and the other case. Both the
Court of First Instance and the agrarian Court were
persuaded by the adroit and disingenuous pleading of
respondent Schon's counsel. Beyond the question of
jurisdiction over the subject matter, is, of course, the
substantive question of twhether the peitioner as naked
owners of the land subjected to the beneficial owner's right
of Helen Schon, became entitled to the payment's made by
the tenants or lessees of such land from and after the
property was declared part of a land reform area.
The issue of which court is vested with jurisdiction over
Civil Case no. 13823 and CAR Case No. 76 is, happily, no
longer a live one. Jurisdiction over both cases is clearly
vested in the appropiate Regional Trial Court in view of the
provisions of Section 19(7) of Batas Pambansa Blg. 129
which was enacted by the Batasang Pambansa on 10
August 1981 and fully implemented on 14 February 1983.
8

Section 19. Jurisdiction in Civil Cases.
Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx xxx xxx
(7) In all civil actions and special
proceedings falling within the exclusive
origin al jurisdiction of juvenile and
domestic relations courts and of the
courts of agrarian relations as now
provided by law;
xxx xxx xxx
(Emphasis supplied)
The Regional Trial Courts have full authority and jurisdiction
to interpret and apply both the mass of statutes and rules
and regulations relating to land reform and the general civil
law, including the law on usufruct. Unlike a regional trial
court sitting as a probate court, a region al trial court seized
of an agrarian dispute and interpreting and applying
statutes and administrative rules and regulations
concerning land reform and the sliminations of agricultural
tenancy relationships, continues to act as a court of general
and plenary jurisdiction. Section 44 of b.P. Blg. 129
abolished the Courts of Agrarian Relations and did not re-
create them.
We note that resolution of the underlying substantive
issues here raised requires examination of both land reform
statutes and related rules and regulations (and as well the
practice of the relevant administrative agency or executive
department) and the Civil Code provisions on usufruct.
Mindful of the length of timewhich has gone by since the first of
the consolidated cases reched this Court, and in the effort to
render expeditious justice, we have considered whether we
should now confront and resolve the issue relating to the legal
character of the payments made by the respondents tenants-
lessees since 21 October 1972 to respondent Helen Schon, as well
as the issue relating to the possible application of Article 609 of
the Civil Code. Because, however, of the nature and importance of
the first issue, and considering that the pleadings and the records
of theses two (2) cases are bare of any substantial discussion by
the parties on both issues, the Court feels it would not be prudent
to resolve those issues without further proceedings. We are
convinced, however, that those issues are primarily, if not wholly,
issues of law rather than of fact and that hence there appears no
need to remand these cases to the Regional Trial Court for further
proceedings there. Instead, we shall require the parties to file
memoranda on the issues above indicated, and the direct the
Solicitor General to intervene in these cases and to file a
memorandum addressing the same issues.
ACCORDINGLY, the Court Resolved to: (1) REQUIRE the petition
and private respondents in G.R. Nos. 51333 and 52289 to file
simultaneous memoranda addressing the substantive issues
identified above, within thirty (30) days from notice hereof, and to
FURNISH the Solicitor General a copy of their respective
memoranda; and (2) to DIRECT the Solicitor General to file a
motion for intervention on behalf of the government and a
memorandum on the same substantive questions within thirty
(30) days from receipt of petitioners' and private respondents'
memoranda.SO ORDERED.
12