DESTAJO, Leslie Ann F.

LLB II
PROPERTY
Atty. Ocampo

POSSESSION:

Ortiz v. Cayanan, 92 SCRA 146, 1979S

- FACTS:
The lot in controversy was formerly the subject of Homestead Application No. 122417 of Martin Dolorico II,
plaintiff's ward who died on August 20, 1931; that since then it was plaintiff who continued the cultivation and
possession of the property, without however filing any application to acquire title thereon; that in the
Homestead Application No. 122417, Martin Dolorico II named his uncle, Martin Dolorico I as his heir and
successor in interest, so that in 1951 Martin Dolorico I executed an affidavit relinquishing his rights over the
property in favor of defendants Quirino Comintan and Eleuterio Zamora, his grandson and son-in-law,
respectively, and requested the Director of Lands to cancel the homestead application; that on the strength of the
affidavit, Homestead Application No. 122417 was cancelled and thereafter, defendants Comintan and Zamora filed
their respective sales applications Nos. 8433 and 9258; that plaintiff filed his protest on November 26, 1951
alleging that he should be given preference to purchase the lot inasmuch as he is the actual occupant and
has been in continuous possession of the same since 1931;
On June 8, 1957, investigation was conducted on plaintiff's protest by Assistant Public Lands Inspector Serapion
Bauzon who submitted his report to the Regional Land Officer, and who in turn rendered a decision on April 9,
1958, dismissing plaintiff's claim and giving due course to defendants' sales applications on the ground that
the relinquishment of the homestead rights of Martin Dolorico I in favor of Comintan and Zamora is proper,
- On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case, the dispositive portion of which
reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered awarding Lot No. 5785-A of PLS-
45, (Calauag Public Land Subdivision) one-half portion of the property in litigation located at Bo. Cabuluan,
Calauag, Quezon, in favor of defendant QUIRINO COMINTAN, being the successful bidder in the public
auction conducted by the bureau of Lands on April 18, 1955, and hereby giving due course to the Sales
Application No. 9258 of defendant Eleuterio Zamora over the other half, Lot No. 5785-B of PLS-45, Calauag,
without prejudice to the right of plaintiff BARTOLOME ORTIZ to participate in the public bidding of the same to
be announced by the Bureau of Lands, Manila. However, should plaintiff Bartolome Ortiz be not declared the
successful bidder thereof, defendants Quirino Comintan and Eleuterio Zamora are ordered to reimburse
jointly said plaintiff the improvements he has introduced on the whole property in the amount of THIRTEEN
THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS, the latter having the right to retain the
property until after he has been fully paid therefor, without interest since he enjoys the fruits of the property
in question, with prejudice and with costs again the plaintiff.2
- Plaintiff appealed the decision to the Court of Appeals, which affirmed the decision of the trial court.
- Acting upon the foregoing motion, respondent Judge issued an Order, dated September 23, 1970, stating, among others, the
following:
The records further disclosed that from March 1967 to December 31, 1968, piaintiff Bartolome Ortiz collected
tolls on a portion of the propertv in question wherein he has not introduced anv improvement particularlv on
Lot No. 5785-A; PLS-45 awarded to defendant Quirino Comintan, thru which vehicular traffic was detoured or
diverted, and again from September 1969 to March 31, 1970, the plaintiff resumed the collection of tools on the
same portion without rendering any accounting on said tolls to the Receiver, who, was reappointed after
submitting the required bond and specifically authorized only to collect tolls leaving the harvesting of the
improvements to the plaintiff.
- On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order and Writ of Execution, alleging:
(a) That the respondent judge has no authority to place respondents in possession of the property;
- The foregoing Motion for Reconsideration was denied by respondent Judge:
It goes without saying that defendant Comintan is entitled to be placed in possession of lot No. 5785-A of PLS-45
(Calauag Public Land Subdivision) and enjoyment of the tolls from March, 1967 to March, 1968 and from September,
1969 to March 31, l970 which were received by plaintiff Bartolome Ortiz, collected from the property by reason of the
diversion road where vehicular traffic was detoured. To defendant Comintan belongs the tolls thus collected from a
portion of the land awarded to him used as a diversionary road by the doctrine of accretion and his right over the
same is ipso jure, there being no need of any action to possess said addition.
- Petitioner thus filed the instant petition,
- It is the position of petitioner that all the fruits of the property, including the tolls collected by him from the passing vehicles,
which according to the trial court amounts to P25,000.00, belongs to petitioner and not to defendant/private respondent Quirino
Comintan, in accordance with the decision itself, which decreed that the fruits of the property shall be in lieu of interest on the
amount to be paid to petitioner as reimbursement for improvements. Any contrary opinion, in his view, would be tantamount to
an amendment of a decision which has long become final and executory and, therefore, cannot be lawfully done.
- ISSUE:
The issue decisive of the controvery isafter the rendition by the trial court of its judgment in Civil Case No. C-90 on
March 22, 1966 confirming the award of one-half of the property to Quirino Comintanwhether or not petitioner is
still entitled to retain for his own exclusive benefit all the fruits of the property, such as the tolls collected by
him from March 1967 to December 1968, and September 1969 to March 31, 1970, amounting to about
P25,000.00. In other words, petitioner contends that so long as the aforesaid amount of P13,632,00 decreed in the
judgment representing the expenses for clearing the land and the value of the coconuts and fruit trees
planted by him remains unpaid, he can appropriate for his exclusive benefit all the fruits which he may
derive from the property, without any obligation to apply any portion thereof to the payment of the interest and the
principal of the debt.
- SCs RULING:
Page 1 of 7
 We find this contention untenable.
There is no question that a possessor in good faith is entitled to the fruits received before the possession is
legally interrupted. 11 Possession in good faith ceases or is legally interrupted from the moment defects in the
title are made known to the possessor, by extraneous evidence or by the filing of an action in court by the true
owner for the recovery of the property.12 Hence, all the fruits that the possessor may receive from the time he is
summoned in court, or when he answers the complaint, must be delivered and paid by him to the owner or
lawful possessor. 13
However, even after his good faith ceases, the possessor in fact can still retain the property, pursuant to
Article 546 of the New Civil Code, until he has been fully reimbursed for all the necessary and useful
expenses made by him on the property. This right of retention has been considered as one of the conglomerate
of measures devised by the law for the protection of the possessor in good faith. Its object is to guarantee the
reimbursement of the expenses, such as those for the preservation of the property, 14 or for the enhancement
of its utility or productivity.15 It permits the actual possessor to remain in possession while he has not been
reimbursed by the person who defeated him in the possession for those necessary expenses and useful
improvements made by him on the thing possessed. The principal characteristic of the right of retention is its
accessory character. It is accessory to a principal obligation. Considering that the right of the possessor to
receive the fruits terminates when his good faith ceases, it is necessary, in order that this right to retain may
be useful, to concede to the creditor the right to secure reimbursement from the fruits of the property by
utilizing its proceeds for the payment of the interest as well as the principal of the debt while he remains in
possession. This right of retention of the property by the creditor, according to Scaevola, in the light of the
provisions of Article 502 of the Spanish Civil Code, 16 is considered not a coercive measure to oblige the debtor to
pay, depriving him temporarily of the enjoyment of the fruits of his property, but as a means of obtainitig
compensation for the debt. The right of retention in this case is analogous to a contract of antichresis and it cati be
considered as a means of extinguishing the obligation, inasmuch as the right to retain the thing lasts only for the
period necessary to enable the creditor to be reimbursed from the fruits for the necessary and useful expenses. 17
Thus, under Article 1731 of the New Civil Code, any person who has performed work upon a movable has a
right to retain it by way of pledge until he is paid. Similarly, under Article 1914 of the same Code, the agent may
retain in pledge the things which are the object of the agency until the principal effects reimbursement of the funds
advanced by the former for the execution of the agency, or he is indemnified for all damages which he may have
suffered as a consequence of the execution of the agency, provided he is free from fault.
Applying the afore-cited principles to the case at bar, petitioner cannot appropriate for his own exclusive benefit
the tolls which he collected from the property retained by him. It was his duty under the law, after deducting
the necessary expenses for his administration, to apply such amount collected to the payment of the
interest, and the balance to the payment of the obligation.
We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for administration, belong to
Quirino Comintan, owner of the land through which the toll road passed, further considering that the same was
on portions of the property on which petitioner had not introduced any improvement. The trial court itself clarified this
matter when it placed the toll road under receivership. The omission of any mention of the tolls in the decision itself
may be attributed to the fact that the tolls appear to have been collected after the rendition of the judgment of the trial
court.

Escritor Jr. v. IAC, 155 SCRA 577, 1987

- FACTS:

Lot No. 2749, located at Atimonan, Quezon, was the subject of cadastral proceedings in the Court of First
Instance of Quezon, Gumaca Branch, Miguel Escritor, as claimant, filed an answer thereto declaring his
ownership over the lot alleging that he acquired it by inheritance from his deceased father. 1 As required, a
notice of hearing was duly published, after which an order of general default was entered. 2 The lot having become
uncontested, only Miguel Escritor appeared in order to adduce his evidence of ownership.
On May 15, 1958, the Court rendered a decision in the abovementioned case, Cadastral Case No. 72,
adjudicating the lot with its improvements in favor of claimant Escritor and confirming his title
thereto. 3 Immediately thereafter, Escritor took possession of the property. On July 15, 1958, the Court, in an
Order, directed the Chief of the General Land Registration Office to issue the corresponding decree of
registration in favor of Escritor, the decision in Cadastral Case No. 72 having become final. 4
On August 2, 1958, Simeon S. Acuna, the herein respondent, filed a petition for review of the above-mentioned
decision contending that it was obtained by claimant Escritor through fraud and misrepresentation. 5
While the proceedings were going on, claimant Escritor died. His heirs, the petitioners in this case, took
possession of the property.
On February 16, 1971 or thirteen years after the disputed decision was rendered, the Court adjudicated Lot No.
2749 in favor of respondent Acuna, ordering petitioners to vacate the land. 7 A writ of possession was later
issued and petitioners voluntarily gave up their possession. 8
More than four years later, or on October 13, 1975 respondent Acuna filed with the same Court in Civil Case No.
1138-G, a complaint for recovery of damages against petitioners for the fruits of lot No. 2749 which was
allegedly possessed by the latter unlawfully for thirteen years. According to respondent Acua, the registration
of the said lot was effectuated by the deceased claimant Escritor through fraud, malice, and misrepresentation. The
lower court, however, rendered a decision dismissing Acua's complaint for damages, finding that though
petitioners enjoyed the fruits of the property, they were in good faith possessing under a just title, and the
cause of action, if there was any, has already prescribed. 9
On Appeal to the Intermediate Appellate Court, the judgment of the lower court was reversed in a decision.
Hence this petition.

- ISSUE:

Page 2 of 7
 The main issue that has to be resolved in this case is whether or not petitioners should be held liable for
damages.

- SCs RULING:
Contrary to the finding of the trial court, the Intermediate Appellate Court made the pronouncement that petitioners
were possessors in bad faith from 1958 up to 1971 and should be held accountable for damages.
We cannot affirm the position of the Intermediate Appellate Court. It should be remembered that in the first
decision of the cadastral court dated May 15, 1958, Lot No. 2749 was adjudicated in favor of claimant Escritor,
petitioners' predecessor-in-interest. In this decision, the said court found to its satisfaction that claimant Escritor
acquired the land by inheritance from his father who in turn acquired it by purchase, and that his open,
public, continuous, adverse, exclusive and notorious possession dated back to the Filipino-Spanish
Revolution. 13 It must also be recalled that in its Order for the issuance of decrees dated July 15, 1958, the same
Court declared that the above-mentioned decision had become final. Significantly, nowhere during the entire
cadastral proceeding did anything come up to suggest that the land belonged to any person other than
Escritor.
On the basis of the aforementioned favorable judgment which was rendered by a court of competent jurisdiction,
Escritor honestly believed that he is the legal owner of the land. With this well-grounded belief of ownership,
he continued in his possession of Lot No. 2749. This cannot be categorized as possession in bad faith.
As defined in the law, a possessor in bad faith is one in possession of property knowing that his title thereto
is defective. 14 Here, there is no showing that Escritor knew of any flaw in his title. Nor was it proved that
petitioners were aware that the title of their predecessor had any defect.
Nevertheless, assuming that claimant Escritor was a possessor in bad faith, this should not prejudice his
successors-in-interest, petitioners herein, as the rule is that only personal knowledge of the flaw in one's title
or mode of acquisition can make him a possessor in bad faith, for bad faith is not transmissible from one
person to another, not even to an heir. 15 As Article 534 of the Civil Code explicitly provides, "one who
succeeds by hereditary title shall not suffer the consequences of the wrongful possession of the decedent, if
it is not shown that he was aware of the flaws affecting it; ..." The reason for this article is that bad faith is
personal and intransmissible. Its effects must, therefore, be suffered only by the person who acted in bad
faith; his heir should not be saddled with such consequences. 16
Lot No. 2749 was not awarded to Escritor on the basis of his machinations. What is clear is that in the hearing of
January 22, 1958, the Court permitted Escritor to adduce his evidence of ownership without opposing evidence as
the lot had become uncontested. 17
On the contrary, all the requirements of publication were followed. Notice of hearing was duly published. Clearly
then, the allegation of fraud is without basis.
Respondent having failed to prove fraud and bad faith on the part of petitioners, We sustain the trial court's
finding that petitioners were possessors in good faith and should, therefore, not be held liable for damages.

USUFRUCT:

Moralidad v. Sps. Pernes

- FACTS:

At the heart of this controversy is a parcel of land located in Davao City and registered in the name of petitioner
Mercedes Moralidad under Transfer Certificate of Title (TCT) No. T-123125 of the Registry of Deeds of Davao
City.
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. 3
Following her retirement in 1993, 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 because
members of the Pernes family were impervious to her suggestions and attempts to change certain practices
concerning matters of health and sanitation within their compound.
Arlene had a misunderstanding with Myco Pernes, eldest son of Arlene, to whom she alleged would answer
petitioner back with clenched fist and at one time hurled profanities when she corrected him.
Arlene herself followed suit. Petitioner brought the matter to the local barangay lupon where she lodged a complaint
for slander, harassment, threat and defamation against the Pernes Family. Deciding for petitioner, the lupon
apparently ordered the Pernes family to vacate petitioners property but not after they are reimbursed for the
value of the house they built thereon. Unfortunately, the parties could not agree on the amount, thus prolonging
the impasse between them.

Page 3 of 7
 On August 3, 1998, petitioner filed with the MTCC of Davao City an unlawful detainer suit against the
respondent spouses. Petitioner alleged that she is the registered owner of the land on which the respondents built
their house; that through her counsel, she sent the respondent spouses a letter demanding them to vacate the
premises and to pay rentals therefor, which the respondents refused to heed.
The MTCC, resolving the ejectment suit in petitioners favor, declared that the respondent spouses, although
builders in good faith vis--vis the house they built on her property, cannot invoke their bona fides as a valid
excuse for not complying with the demand to vacate. To the MTCC, respondents continued possession of the
premises turned unlawful upon their receipt of the demand to vacate, such possession being merely at petitioners
tolerance, and sans any rental. Accordingly, in its decision dated November 17, 1999, 4 the MTCC rendered
judgment for the petitioner,
Dissatisfied, the respondent spouses appealed to the RTC of Davao City.
Eventually, in a decision 7 dated September 30, 2000, the RTC reversed that of the MTCC, holding that
respondents possession of the property in question was not, as ruled by the latter court, 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, explaining thus:
Since the defendants-appellees [respondents] are admittedly possessors of the property by
permission from plaintiff [petitioner], and builders in good faith, they have the right to retain
possession of the property subject of this case until they have been reimbursed the cost of the
improvements they have introduced on the property.
Therefrom, petitioner went to the CA. The appellate court thus affirmed the appealed RTC decision.
- ISSUE:

With the CAs denial of her motion for reconsideration in its Resolution of February 28, 2002, petitioner is now
before this Court raising the following issues:
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.
- SCs RULING:
The Court rules for the petitioner.
The Court is inclined to agree with the CA that what was constituted between the parties herein is one of
usufruct over a piece of land, with the petitioner being the owner of the property upon whom the naked title
thereto remained and the respondents being two (2) among other unnamed usufructuaries who were simply
referred to as petitioners kin. The Court, however, cannot go along with the CAs holding that the action for
unlawful detainer must be dismissed on ground of prematurity.
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. 9 It is also defined as
the right to enjoy the property of another temporarily, including both the jus utendi (right to use) and the jus
fruendi, (right to enjoy) 10 with the owner retaining the jus disponendi (right to dispose) or the power to
alienate the same. 11
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.
The CA ruled that the petitioner cannot eject the respondents. We disagree with the CAs conclusion of law on
the matter. The term or period of the usufruct originally specified provides only one of the bases for the right of a
usufructuary to hold and retain possession of the thing given in usufruct. There are other modes or instances
whereby the usufruct shall be considered terminated or extinguished as provided in Art. 603 of the Civil
Code:
xxx
(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;
From the 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.

Page 4 of 7
 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.

Hermedes v. Court of Appeals

- FACTS:
The instant controversy involves a question of ownership over an unregistered parcel of land,
It was originally owned by the late Jose Hemedes, father of Maxima Hemedes and Enrique D. Hemedes. On
March 22, 1947 Jose Hemedes executed a document entitled Donation Inter Vivos With Resolutory
Conditions[3] 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 abovementioned, Justa Kausapin executed on September 27, 1960 a Deed of
Conveyance of Unregistered Real Property by Reversion[4] conveying to Maxima Hemedes the subject
property under the following terms (same as previous)

Maxima Hemedes, through her counsel, filed an application for registration and confirmation of title over the
subject unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-941) 0-198[5] was issued in the
name of Maxima Hemedes married to Raul Rodriguez by the Registry of Deeds of Laguna on June 8, 1962, with the
annotation that Justa Kausapin shall have the usufructuary rights over the parcel of land herein described
during her lifetime or widowhood.

It is claimed by R & B Insurance that on June 2, 1964, 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. On February 22, 1968, R & B Insurance extrajudicially foreclosed the
mortgage since Maxima Hemedes failed to pay the loan even after it became due on August 2, 1964. The land was
sold at a public auction on May 3, 1968 with R & B Insurance as the highest bidder and a certificate of sale was
issued by the sheriff in its favor. Since Maxima Hemedes failed to redeem the property within the redemption period,
R & B Insurance executed an Affidavit of Consolidation dated March 29, 1974 and on May 21, 1975 the Register of
Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of Title (TCT) No. 41985 in
the name of R & B Insurance. The annotation of usufruct in favor of Justa Kausapin was maintained in the
new title.[6]

Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin executed a
Kasunduan on May 27, 1971 whereby she transferred the same land to her stepson Enrique D. Hemedes,
pursuant to the resolutory condition in the deed of donation executed in her favor by her late husband Jose
Hemedes.
Enrique Hemedes is also the named owner of the property in the records of the Ministry of Agrarian Reform office at
Calamba, Laguna.

On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and Construction
Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit affirming the conveyance of
the subject property in favor of Enrique D. Hemedes as embodied in the Kasunduan dated May 27, 1971, and at
the same time denying the conveyance made to Maxima Hemedes.

On May 14, 1981, 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 on March 16, 1981 informing the former of its ownership of the
Page 5 of 7
 property as evidenced by TCT No. 41985 issued in its favor and of its right to appropriate the constructions since
Asia Brewery is a builder in bad faith. On March 27, 1981, a conference was held between R & B Insurance and Asia
Brewery but they failed to arrive at an amicable settlement.

On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she asserted that
she is the rightful owner of the subject property by virtue of OCT No. (0-941) 0-198 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.

On August 27, 1981, Dominium and Enrique D. Hemedes filed a complaint [7] with the Court of First Instance of Binan,
Laguna for the annulment of TCT No. 41985 issued in favor of R & B Insurance and/or the reconveyance to
Dominium of the subject property.
After considering the merits of the case, the trial court rendered judgment on February 22, 1989 in favor of
plaintiffs Dominium and Enrique D. Hemedes,
Both R & B Insurance and Maxima Hemedes appealed from the trial courts decision. On September 11, 1992 the
Court of Appeals affirmed the assailed decision in toto and on December 29, 1992, it denied R & B Insurances
motion for reconsideration. Thus, Maxima Hemedes and R & B Insurance filed their respective petitions for
review with this Court.

- ISSUE:

The primary issue to be resolved in these consolidated petitions is which of the two conveyances by Justa
Kausapin, the first in favor of Maxima Hemedes and the second in favor of Enrique D. Hemedes, effectively
transferred ownership over the subject land.

- SCs RULING:
It is a legal presumption that evidence willfully suppressed would be adverse if produced. [17] The failure of private
respondents to refute the due execution of the deed of conveyance by making a comparison with Justa
Kausapins thumbmark necessarily leads one to conclude that she did in fact affix her thumbmark upon the
deed of donation in favor of her stepdaughter.

- In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly rule that 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.[30] 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.

- R & B Insurance alleges that, contrary to public respondents ruling, the presence of an encumbrance on the certificate of title is
not reason for the purchaser or a prospective mortgagee to look beyond the face of the certificate of title. The owner of a
parcel of land may still sell the same even though such land is subject to a usufruct; the buyers title over the property
will simply be restricted by the rights of the usufructuary. Thus, R & B Insurance accepted the mortgage subject to the
usufructuary rights of Justa Kausapin. Furthermore, even assuming that R & B Insurance was legally obliged to go beyond the
title and search for any hidden defect or inchoate right which could defeat its right thereto, it would not have discovered
anything since the mortgage was entered into in 1964, while the Kasunduan conveying the land to Enrique D. Hemedes was
only entered into in 1971 and the affidavit repudiating the deed of conveyance in favor of Maxima Hemedes was executed by
Justa Kausapin in 1981.[35]

- We sustain petitioner R & B Insurances claim that it is entitled to the protection of a mortgagee in good faith.

- The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes OCT does 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.[39] The usufructuary is entitled to all the natural,
industrial and civil fruits of the property[40]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.[41]

- 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.[45]

- 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.

- WHEREFORE, the assailed decision of public respondent and its resolution dated February 22, 1989 are
REVERSED. We uphold petitioner R & B Insurances assertion of ownership over the property in dispute, as evidenced
by TCT No. 41985, subject to the usufructuary rights of Justa Kausapin, which encumbrance has been properly
annotated upon the said certificate of title. No pronouncement as to costs.
Page 6 of 7
 Board of Assessment Appeals of Zamboanga del Sur v. Samar Mining
- FACTS:
Samar is a domestic corporation engaged in the mining industry. As the mining claims and the mill of Samar
are located inland and at a great distance from the loading point or pier site, it decided to construct a gravel road
as a convenient means of hauling its ores from the mine site at Buug to the pier area at Pamintayan,
Zamboanga del Sur; that as an initial step in the construction of a 42-kilometer road which would traverse
public lands. Samar, in 1958 and 1959, filed with the Bureau of Lands and the Bureau of Forestry
miscellaneous lease applications for a road right of way on lands under the jurisdiction of said bureaus
where the proposed road would traverse; that having been given temporary permit to occupy and use the lands
applied for by it, said respondent constructed a road thereon, known as the Samico road; that although the gravel
road was finished in 1959, and had since then been used by the respondent in hauling its iron from its mine site to
the pier area, and that its lease applications were approved on October 7, 1965, the execution of the corresponding
lease contracts were held in abeyance even up to the time this case was brought to the Court of Tax Appeals. 1
On June 5, 1964, Samar received a letter from the Provincial Assessor of Zamboanga del Sur assessing the 13.8
kilometer road 2 constructed by it for real estate tax purposes in the total sum of P1,117,900.00. On July 14, 1964,
Samar appealed to the Board of Assessment Appeals of Zamboanga del Sur, (hereinafter referred to as Board, for
short), contesting the validity of the assessment upon the ground that the road having been constructed entirely on a
public land cannot be considered an improvement subject to tax within the meaning of section 2 of Commonwealth
Act 470,
The Court of Tax Appeals ruled that since the road is constructed on public lands such that it is an integral part of the
land and not an independent improvement thereon, and that upon the termination of the lease the road as an
improvement will automatically be owned by the national government, Samar should be exempt from paying the real
estate tax assessed against it. Dissatisfied with the decision of the Court of Tax Appeals, petitioners Board and
Placido L. Lumbay, as Provincial Assessor of Zamboanga del Sur, interposed the present petition for review before
this Court.

- ISSUE:
The issue to be resolved in the present appeal is whether or not respondent Samar should pay realty tax on the
assessed value of the road it constructed on alienable or disposable public lands that are leased to it by the
government.
- SCs RULING:
Petitioners maintain that the road is an improvement and, therefore, taxable under Section 2 of the Assessment Law
(Commonwealth Act No. 470)
There is no question that the road constructed by respondent Samar on the public lands leased to it by the
government is an improvement. But as to whether the same is taxable under the aforequoted provision of
the Assessment Law, this question has already been answered in the negative by this Court. In the case of
Bislig Bay Lumber Co., Inc. v. Provincial Government of Surigao, 100 Phil. 303, where a similar issue was
raised as to whether the timber concessionaire should be required to pay realty tax for the road it
constructed at its own expense within the territory of the lumber concession granted to it, this Court, after
citing Section 2 of Commonwealth Act 470, held:

"Note that said section authorizes the levy of real tax not only on lands, buildings, or machinery that may
be erected thereon, but also on any other improvements, and considering the road constructed by
appellee on the timber concession granted to it as an improvement, appellant assessed the tax now in
dispute upon the authority of the above provision of the law.
- "It is the theory of appellant that, inasmuch as the road was constructed by appellee for its own use and benefit it is subject to
real tax even if it was constructed on a public land. On the other hand, it is the theory of appellee that said road exempt
from real tax because (1) the road belongs to the national government by right of accession, (2) the road belongs to
the be removed or separated from the land on which it is constructed and so it is part and parcel of the public land,
and (3), according to the evidence, the road was built not only for the use and benefit of appellee but also of the public
in general.
- "We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road
that was constructed by appellee belongs to the government by right of accession not only because it is inherently
incorporated or attached to the timber land leased to appellee but also because upon the expiration of the
concession, said road would ultimately pass to the national government (Articles 440 and 445, new Civil Code; Tobatabo v.
Molero, 22 Phil., 418). In the second place, while the road was constructed by appellee primarily for its use and benefit,
the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government, its use
can also be availed of by the employees of the government and by the public in general. . . . In other words, the
government has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the road
in question cannot be considered as an improvement which belongs to appellee, although in part is for its benefit, it is
clear that the same cannot be the subject of assessment within the meaning of section 2 of Commonwealth Act No.
470.

- Again, in the case of Municipality of Cotabato, Et. Al. v. Santos, Et Al., 105 Phil. 963, this Court ruled that the lessee who
introduced improvements consisting of dikes, gates and guard-houses on swamp lands leased to him by the Bureau
of Fisheries, in converting the swamps into fishponds, is exempt from payment of realty taxes on those
improvements.
IN VIEW OF THE FOREGOING, the decision of the Court of Tax Appeals, appealed from, is affirmed, without
pronouncement as to costs. It is so ordered.
Page 7 of 7