Arts. 562-602 Usufruct (1).docx

Chapter 1 USUFRUCT IN GENERAL

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. Define the concept of usufruct as a RIGHT and an OBLIGATION: As a Right:  “Usufruct is a real right (since it is a property) of a temporary nature,  which authorizes its holder to enjoy all the benefits  which result from the normal enjoyment (or exploitation) of another´s property, As an Obligation:  usufructuary has obligation to return at the designated time,  either the same thing, or in special cases, its equivalent.” (Source: De Buen, Derecho Comun, p.225; Eleizegui v. Manila Lawn Tennis Club, 2 Phil. 309) USUFRUCT comes from the Latin term “USUFRUCTUS” = using the fruit  It is a combination of the rights of ownership: jus utendi (use) & jus fruendi (fruits) 

Two out of the 3 Fundamental Rights of Ownership: 1. jus disponendi (right to dispose; naked ownership) 2. jus utendi (right to use) 3. jus fruendi (right to the fruits)

Q. What are the Characteristics or Elements of Usufruct? a.) ESSENTIAL Characteristics (those without which it cannot be termed Usufruct): 1. It is a real right (whether registered in the Registry of Property or not) 2. It is of a temporary nature or duration (not perpetual) 3. Its purpose is to enjoy the benefits and derive all advantages from the object as a consequence of normal use or exploitation.

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b.) NATURAL Characteristic or Element – o that which ordinarily is present, but a contrary stipulation can eliminate it because it is not essential. o the obligation of conserving or preserving the form and substance (value) of the thing. (Ex: a swimming pool must be preserved as a swm. pool) Reason: to prevent extraordinary exploitation, abuse and impairment o this obligation being merely natural requisite, the title or the law may provide otherwise (Art. 562) c.)

ACCIDENTAL characteristics or elements (those which may be present or absent depending upon the stipulation of the parties) Examples: see Art. 564 1. whether it be pure or conditional usufruct, 2. the number of years it will exist 3. whether it is in favor of one person or several etc.

Object of Usufruct may be: a.) Real or Personal property b.) Sterile or Productive things. c.) Created over a Right (as long as it is not strictly personal or intransmissible, and as long as it has independent existence). The Usufructuary has the right of action: a.) to protect the usufruct itself, and; b.) to the exercise of the usufruct Distinguish Usufruct from Easement and from Lease – See pp. 573-575, Paras, Vol. 2, Civil Code annotated. USUFRUCT The object here may be real or personal What can be enjoyed here are ALL uses and fruits of the property A usufruct cannot be constituted on an easement; but it may be constituted on the land burdened by an easement Usually extinguished by death of usufructuary

EASEMENT This involves only real property Easement is limited to a particular use (like right of way) An easement may be constituted in favor of or burdening a piece of land held in usufruct Not extinguished by the death of the owner of the dominant estate

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SIMILARITIES BETWEEN USUFRUCT AND EASEMENT:  Both are real rights, whether registered or not  Both rights may be registered, provided that the usufruct involves real property. All easements of course concern real property. (Thus, a usufruct over personal property though a real right, cannot be registered because it is a real right over personal property)  Both may ordinarily be alienated or transmitted in accordance with the formalities set by law. USUFRUCT vs. LEASE: BASIS As to Extent

USUFRUCT LEASE Covers all fruits and uses Covers only a particular or as a rule specific use As to nature of the right Always a real right It is real right only if, as in the case of a lease over real property, the lease is registered or if for more than one year, otherwise, it is only a personal right As to the creator of the Can be created only by The lessor may or may not right the owner, or by a duly be the owner (as when authorized agent, acting in there is a sublease or behalf of the owner when the lessor is only a usufructuary) As to origin May be created by law, May be created as a rule contract last will or only by contract prescription (art. 563) XPN: by law (in case of an implied new lease) As to cause The owner is more or less The owner or lessor is passive and he allows the more or less active and he usufructuary to enjoy the makes the lessee enjoy – thing given in usufruct – hace gozar deja gozar As to repairs The usufructuary has the The lessee generally has duty to make the ordinary no duty to pay for the repairs repairs As to taxes The usufructuary pays for The lessee generally pays the annual charges and no taxes taxes on the fruits As to other things A usufructuary may lease The lessee cannot the property itself to constitute a usufruct on another. (Art. 572) the property leased.

Art. 563. Usufruct is constituted by law, by will of private persons expressed in acts inter vivos or in a last will and testament, and by prescription. 3

Classify Usufruct according to its Origin or Source: 1. LEGAL – created by Law (example: Article 226, par. 2, Family Code) Art. 226, par. 2. The right of the parents over the fruits and income of the child's property shall be limited primarily to the child's support and secondarily to the collective daily needs of the family. 2. VOLUNTARY OR CONVENTIONAL – created by will of private persons thru: i. Donation inter vivos ii. Last Will and Testament iii. Contract or agreement 3. PRESCRIPTION – acquisitive prescription

NOTA BENE: 1. To constitute a valid usufruct, all the requirements of the law must be complied. 2. A usufruct over real property, being a real right, it must be duly registered in order to bind innocent third parties. (Art. 709)

Art. 564. Usufruct may be constituted on the whole or a part of the fruits of the thing, in favor of one or more persons, simultaneously or successively, and in every case from or to a certain day, purely or conditionally. It be may also be constituted on a right, provided it is not strictly personal or intransmissible. Art. 564 Classifies Usufruct – 1. According to Extent or Quantity: a. Total – all of the fruits b. Partial – part of the fruits 2. According to Persons Enjoying the Right of Usufruct: a. Simple – only one usufructuary enjoys b. Multiple – several usufructuaries enjoy i. Simultaneous ii. Successive 3. According to the Terms of the Usufruct: a. Pure – no terms and conditions b. Conditional c. With a Term or Period 4

4. According to the Object of the Usufruct: a. Things (personal or real property) b. Rights o A usufruct may be constituted on a right provided that it is not strictly personal or intransmissible. Art. 565. The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct; in default of such title, or in case it is deficient, the provisions contained in the two following Chapters shall be observed. Q. What Rules Govern Usufruct? o 1st - the AGREEMENT of the parties or the title giving or constituting the usufruct. o 2nd - in case of deficiency, apply the CIVIL CODE. Q. What Rules will be applied in Case of Conflict between a Will and provisions of the Civil Code? A. In case of conflict between the rights granted a usufructuary by virtue of a will, and codal provisions, the Will shall prevail, unless repugnant to the mandatory provisions of the Civil Code. (read - Fabie v. Gutierrez David, 75 Phil. 536)

Chapter 2 RIGHTS OF THE USUFRUCTUARY What are the Rights of the Usufructuary? 1. Right to the Fruits (Arts. 560-570) 2. Right to increase in accession or servitudes (Art. 571) 3. Right to alienate the right of usufruct (Arts. 572 & 590) 4. Right to recover or bring action (Art. 578) 5. Right to make useful and ornamental expenses (Art. 579) 6. Right to demand from naked owner increase in value of immovable due to extraordinary repairs made (Art. 594) I. WHAT are the RIGHTS of the USUFRUCTUARY to the FRUITS of the PROPERTY IN USUFRUCT ? (see - Arts. 566-570): 5

1.) Usufructuary is entitled to all the Natural, Industrial and Civil fruits of the property in usufruct. Art. 566. The usufructuary shall be entitled to all the natural, industrial and civil fruits of the property in usufruct. With respect to hidden treasure which may be found on the land or tenement, he shall be considered a stranger. Q. What are the Fruits to which a Usufructuary is Entitled during existence of Usufruct? 1. Natural 2. Industrial 3. Civil Corporate Dividends – read: Bachrach v. Seifert & Elianoff, 87 Phil. 483 1. A DIVIDEND (whether in cash or stock) is INCOME or CIVIL FRUITS. This belongs to the Usufructuary, because dividends are declared out of corporate profits, not from the capital of the corporation. 2. Stocks dividends may be sold independently (but not the original capital/shares), just as the offspring of an animal may be alienated independently of the parent animal. Products which Diminish the Capitalo Generally, products which diminish the capital (like stones from stone quarries) cannot, for that reason, be considered fruits, unless a contrary intent between the parties is clear. Q. What is the Share of Usufructuary in Hidden Treasure? o NONE, as he is not the real property owner. Usufructuary is deemed a stranger to the hidden treasure, unless, he is also the finder who may be entitled to one half share. 2.) Rights of Usufructuary to Pending Natural & Industrial Fruits: Art. 567. Natural or industrial fruits growing at the time the usufruct begins, belong to the usufructuary. Those growing at the time the usufruct terminates, belong to the owner. In the preceding cases, the usufructuary, at the beginning of the usufruct, has no obligation to refund to the owner any expenses incurred; but the owner shall be obliged to reimburse at the termination of the usufruct, from the proceeds of the growing fruits, the ordinary expenses of cultivation, for seed and other similar expenses incurred by the usufructuary.

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The provisions of this article shall not prejudice the rights of third persons, acquired either at the beginning or at the termination of the usufruct. Article 567 refers to Rules regarding Pending Natural or Industrial fruits at the beginning and termination of Usufruct. o Note: There can be NO PENDING CIVIL FRUITS or rents for they accrue daily (Art. 569). Art. 567 - RULES: A. As to Fruits Pending at the Beginning of Usufruct: 1. These belong to the USUFRUCTUARY 2. No necessity of refunding naked owner for expenses incurred 3. But without prejudice to the right of third persons. o Thus, if the fruits had been planted by a possessor in good faith, the pending crop expenses and charges shall be pro-rated between said possessor and the usufructuary (Art. 545) B. As to Fruits Pending at the Termination of usufruct: 1. These belong to the naked OWNER 2. But the owner must reimburse the usufructuary for ordinary cultivation expenses and for the seeds and similar expenses from the proceeds of the fruits. o If the cultivation expenses exceeds, or, is more than the proceeds of the harvest of the growing fruits, the naked owner need not pay for the excess. 3. Also, rights of innocent third parties should not be prejudiced. (see - Arts. 545, 567) SUMMARY OF THE RULES IN ART. 567: Q. Who is entitled to Natural or industrial fruits growing at the time the usufruct begins and at those natural or industrial fruits growing at the time the usufruct terminates? 

Natural or industrial fruits growing at the time the usufruct begins, belong to the usufructuary. Those growing at the time the usufruct terminates belong to the owner.

Q. If expenses were made by owner for the pending natural or industrial fruits, must Usufructuary refund this? 

The usufructuary at the beginning of the usufruct, has no obligation to refund to the owner any expenses incurred.

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Q. If expenses were made by Usy. for the natural or industrial fruits which the owner harvested and sold which Usy planted or cultivated, must owner refund this cultivation expens es? 

The owner shall reimburse at the termination of the usufruct from the proceeds of the growing fruits, the ordinary expenses of cultivation incurred by the usufructuary

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Rights of innocent third parties acquired at the start or at the end of the usufruct should not be prejudiced

ILLUSTRATE: Facts: Jose, in his Will gave to - Ali the naked ownership of a 3 ha.Mango farm and 2 ha. Rice farm, and to Ben, the usufruct of these farms for 2 years. This became effective Jan. 20, 2010 when Jose died, and ended Jan. 20, 2012. On Jan. 20, 2010, the trees were already fully laden with mangoes about to ripen, and the rice were about to be harvested in Feb. 2010. Q. Who has the right to harvest and enjoy these mangoes and rice? A. The usufructuary-Ben has the right to harvest and enjoy the mangoes and rice. (Art. 567, par. 1)

Facts: On Jan. 20, 2012, when the term of usufruct ended, the trees were fully laden mangoes about to ripen, and the rice were about to be harvested in Feb. 2012. Q. Who has the right to harvest and enjoy these mangoes and rice? A. The naked owner Ali has the right to harvest and enjoy the mangoes and rice. They now belong to him. (Art. 567, par. 2). But naked owner-Ali must reimburse usuf.- Ben for the cultivation expenses, seeds and other similar expenses from the proceeds of the harvested mangoes and rice. (Art. 567, par. 3). Q. What about if there was a bad storm that wiped out the mangoes and rice that were about to be harvested in Feb. 2012, should Ali, the naked owner still be obliged to reimburse the usufructuary Ben for the cultivation expenses, seeds and other similar expenses? A. No. Par. 3, Art. 567 provides only that the reimbursement by the owner at the termination of the usufruct, for ordinary expenses of cultivation, for seed and other similar expenses incurred by the usufructuary, if any, shall be taken from the

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proceeds of the growing fruits. This not being possible due to the loss of the fruits caused by the storm, the obligation to reimburse expenses is extinguished.

Facts: Before Jose died, he allowed his driver/gardener Pedro on Aug. 2, 2009 to spray the mangoes, so he can earn enough money for the enrollement fees of Pedro’s son in June 2010, who is about to finish college. Q. Who has the right to harvest and enjoy these mangoes in Feb. 2010? A. Pedro, as he is a planter in good faith, and his right as a third person should not be prejudiced. Under Arts. 545 & 567, he has the right to finish the cultivation and gathering of the growing fruits as indemnity for his part of the cultivation expenses and the net proceeds. The cultivation expenses and charges and the harvest proceeds may be pro-rated between Pedro, the planter in good faith, and Ben, the usufructuary. (Art. 545) o The same rule applies the rights of third persons, acquired at the termination of the usufruct.

3.) Rights of Usufructuary to Civil Fruits (Arts. 568, 569, 570): Art. 568. If the usufructuary has leased the lands or tenements given in usufruct, and the usufruct should expire before the termination of the lease, he or his heirs and successors shall receive only the proportionate share of the rent that must be paid by the lessees. Art. 569. Civil fruits are deemed to accrue daily, and belong to the usufructuary in proportion to the time the usufruct may last.

Art. 570. Whenever a usufruct is constituted on the right to receive a rent or periodical pension, whether in money or in fruits, or in the interest on bonds or securities payable to bearer, each payment due shall be considered as the proceeds of fruits of such right. Whenever it consists in the enjoyment of benefits accruing from a participation in any industrial or commercial enterprise, the date of the distribution of which is not fixed, such benefits shall have the same character. In either case they shall be distributed as civil fruits, and shall be applied in the manner prescribed in the preceding article.

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Q. As a gen. rule - If a house subject of Usufruct is being leased, who has the right to choose the lessee, collect the rent or civil fruits and sue for unlawful detainer? o It is not the naked owner but the USUFRUCTUARY who has the right to choose the tenant and enjoy the civil fruits during the effectivity of the usufruct and this includes the right to sue for unlawful detainer. (Fabie v. David, 75 Phil. 536) o Rents derived from the lease of properties in usufruct are civil fruits and belong to the usufructuary in proportion to the time the usufruct may last. Q. When is the Usufructuary. entitled to receive the rent or civil fruits? o The usufructuary is entitled to receive such rents accruing from start of usufruct up to the time of its expiration. Q. If the lease still subsists after the termination of the usufruct, who will now collect or receive the rent? o If the lease still subsists after the termination of the usufruct, the rent will now belong to the naked owner. Example 1: Usufructuary A leased the farm land for 4 years (Jan. 1, 2000-Jan. 1, 2004) to B. But the usufruct of A terminates after the 2nd year (Jan. 1, 2002). o Q. Who will be entitled to the rent of the farm land from 1 Jan. 2000 - 1 Jan.2004? o The usufructuary A, (or his heir/s or successors in interest in case of predecease or transfer of the right to usufruct), shall be entitled to 2 years rent (Jan. 1, 2000 Jan.1, 2002) to be paid by lessee; o The rent for the last remaining 2 years (Jan. 2, 2002-Jan. 1, 2004) belongs to the naked owner. Example 2: Query – Apply Arts. 569, 570 par. 1. Facts: A has usufruct of 10,000 BPI shares of stocks from May 1, 2000- May 1, 2010. B is the naked owner of the same stocks. BPI issues cash or stocks dividends. On April 30, 2010, BPI issued cash dividends of P1/share, or P10,000 for the period Jan. 1, 2010 to March 2010. But the cash dividends was released only on May 30, 2010. Q. Who has the right to get the P10,000 cash dividends released on May 30, 2010? A. A, the usufructuary. Cash dividends are deemed civil fruits. Under Art. 569, civil fruits accrue daily, and belong to the usufructuary in proportion to the time the usufruct may last. The cash dividends were issued April 30, 2010 and have accrued for the period Jan. 1 2010 to March 30, 2010 - within the period still covered by the Usufruct of A. That it was physically released only on May 30, 2010 is immaterial.

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Read: sample cases of rent, pension, bonds or securities or stock or cash dividends and industrial or commercial profits. See also pp. 585-586 Paras, Vol. 2, Civil Code.

4. Right to Accessions, Servitudes and All Benefits (Articles 571): Art. 571. The usufructuary shall have the right to enjoy any increase which the thing in usufruct may acquire through accession, the servitudes established in its favor, and, in general, all the benefits inherent therein. The usufructuary as a rule is entitled to: 1. The Fruits (jus fruendi) 2. The Use or Enjoyment (jus utendi) of the thing subject of the usufruct. Q. Alluvium has attached to the land subject of Usufruct by A. Who has the right to cultivate the land and use the lagoon formed?  Consequent to Usufructuary’s right to Use, he can also enjoy the following: a.) Accessions (artificial or natural) to the property b.) Servitudes and easements in favor of the estate Example: Forest land with lagoon – who has the right to hunt and fish therein?  All benefits inherent in the property like the right to hunt and fish therein, the right to construct rain water receptacles, belong to the usufructuary. 5. Right to Alienate the Right of Usufruct; Obligation (Arts. 572, 590): Art. 572. The usufructuary may personally enjoy the thing in usufruct, lease it to another, or alienate this right of usufruct, even by gratuitous title; but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct, saving leases of rural lands, which shall be considered as subsisting during the agricultural year. Art. 590. A usufructuary who alienates or leases his right of usufruct shall answer for any damage which the things in usufruct may suffer through the fault or negligence of the person who substitutes him. Rights of Usufruct to the Thing itself: 1. He may personally enjoy the thing (possession and fruits). 2. He may lease the thing to another even without owner´s consent.

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But the lease must terminate upon expiry of usufruct, unless the owner consents, or unless it involves leases of rural lands which subsist during agricultural year. Rights of Usufruct to the Usufructuary Right Itself: 1. He may alienate (sell, donate, give) the usufructuary right. Exception - legal usufruct parents have of their unemancipated children, - Usufruct granted in consideration of his person - Usufruct acquired thru caucion juratoria, or promise under oath (Art. 587) 2. He may pledge or mortgage the usufructuary right. But he cannot mortgage the thing itself. (Art. 2085 [2]). Nor can he sell the thing itself, or future crops for crops pending at the termination of the usufruct belong to the naked owner. Rulings & Doctrines on Usufructuary Rights 1. A usufructuary of a house is entitled not only to collect the rent, but also to lease the property, select and oust its tenants for contractual violations. To permit the administrator of the estate under the Will to dictate the conditions and administration of the lease subject of usufruct would be to place the usufructuary at his mercy. (Fabie v. David, 75 Phil. 536) 2.

The usufructuary has the right to alienate even by gratuitous title, the RIGHT to the usufruct. The right to the usufruct may be donated, but not the properties themselves. If the donation was made knowingly and freely, the same can no longer be withdrawn. (Seifert v. Bachrach, 79 Phil. 748) Illustrate:

Facts: Donor D donated inter vivos naked ownership his house & Lot to O and to U the usufruct for 10 Years fr. Feb. 1, 2000- Feb. 1, 2010. Q. Can U instead of simply using the h/lot, leased it to L from 2005-2010. Valid? Q. U took out a 5/6 loan from S, with the house/lot as security mortgage, Valid? Q. If L, lessee of the house/lot happened to be a hoarder of animals, cats, birds and dogs. As a result, after her lease in Jan. 30, 2010, the house was severely damaged and stinks badly. Art. 590. A usufructuary who alienates or leases his right of usufruct shall answer for any damage which the things in usufruct may suffer through the FAULT OR NEGLIGENCE of the person who substitutes him. 12

6. Abnormal or Imperfect Usufruct (Art. 573) Art. 573. Whenever the usufruct includes things which, without being consumed, gradually deteriorate through wear and tear, the usufructuary shall have the right to make use thereof in accordance with the purpose for which they are intended, and shall not be obliged to return them at the termination of the usufruct except in their condition at that time, but he shall be obliged to indemnify the owner for any deterioration they may have suffered by reason of his fraud or negligence.  Usufruct includes things which gradually deteriorate through wear and tear.  Usufructuary shall have the right to make use of these things. Q. What is the Rule in Art. 574 re Deterioration & Usufructuary´s Liability thereto? General Rule: If things in usufruct without being consumed, deteriorates through ordinary wear and tear due to normal use for which it is intended –  the usufructuary has NO LIABILITY  he shall not be obliged to return the property in its original condition.  he may return them in their actual condition at the time of termination. Exception: The usufructuary is obliged to indemnify the owner for the deterioration if there is fraud or negligence by the usufructuary in its obligation to preserve the things during the usufruct period. Example: A naked owner of delivery truck; B usufructuary for 2 years. Q. What are the Rights & Obligations of B to the truck? Q. If B leases the truck sometimes for delivery of harvest by C, and as a result the tires were now more used than usual, should B replaced them with new tires? Yes. Art. 590. A usufructuary who alienates or leases his right of usufruct shall answer for any damage which the things in usufruct may suffer through the fault or negligence of the person who substitutes him.

Art. 574. Whenever the usufruct includes things which cannot be used without being consumed, the usufructuary shall have the right to make use of them under the obligation of paying their appraised value at the termination of the usufruct, if they were appraised when delivered. In case they were not 13

appraised, he shall have the right to return the same quantity and quality, or pay their current price at the time the usufruct ceases. 

This article is about an instance of “QUASI-USUFRUCT” as the form and substance of the property subject of the usufruct are not preserved.

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This is usufruct in name only, but is actually a SIMPLE LOAN (Mutuum).

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But it has been included in the title on usufructs because in what are called universal usufructs, both consumable and non-consumable properties are included. Usufruct on consumable property alone is seldom done but it exists. Thus, the Supreme Court held that even money may be the object of a usufruct. (Alunan v. Veloso, 52 Phil. 545)

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Rules for Quasi-Usufruct: 1. The usufructuary (debtor/borrower) can use them as if he is the owner, with complete right of pledge or alienation or disposal. 2. But at the END of the usufruct, he must Pay the Appraised Value (if appraised when first delivered) 3. If the property was not appraised, the usufructuary may either i. Return the same quantity and quality; or ii. Pay their current price at the time the usufruct ceases Example: A naked owner. B usufructuary. of 100 goats she used for her Kambingan resto. After 1 year, what is the obligation of B to A? see – 2 & 3 above

7. Rights and Obligations as to Trees and Shrubs (Arts. 575, 576) Art. 575. The usufructuary of fruit-bearing trees and shrubs may make use of the dead trunks, and even of those cut off or uprooted by accident, under the obligation to replace them with new plants. This is a special usufruct on Fruit-Bearing Trees and Shrubs. Other Special Usufructs: a.) Periodical pension, income, dividends (Art. 570) b.) Woodland (Art. 577) c.) Right of action to recover real property, real right, or movable property (Art. 578) d.) Part of property owned in common (Art. 582) 14

e.) Entire patrimony of a person (Art. 598) f.) Mortgaged immovable (Art. 600) g.) Flock or herd of livestock (Art. 591)

Art. 576. If in consequence of a calamity or extraordinary event, the trees or shrubs shall have disappeared in such considerable number that it would not be possible or it would be too burdensome to replace them, the usufructuary may leave the dead, fallen or uprooted trunks at the disposal of the owner, and demand that the latter remove them and clear the land. Rights & Obligations of Usufructuary in Calamity on Trees or Shrubs: 1.) If impossible or too burdensome to replace them, the Usufructuary has an optiona. He may leave them at the disposal of the owner and demand that the owner remove them and clear the land. (Art. 576) b. If the usufructuary opt to use the trunks, he should replace them with new plants. (Art. 575) 2.) If only slightly burdensome to replace them, the usufructuary still has the obligation to replace them whether or not he uses them, and cannot also demand from the owner to clear the land. Art. 577. Read and study article and annotation

8. Right to Recover by usufructuary (Article 578) Art. 578. The usufructuary of an action to recover real property or a real right, or any movable property, has the right to bring the action and to oblige the owner thereof to give him the authority for his purpose and to furnish him whatever proof he may have. If in consequence of the enforcement of the action he acquires the thing claimed, the usufruct shall be limited to the fruits, the dominion remaining with the owner. Who may Institute the Action to recover the property in usufruct? o The action may be instituted in the usufructuary´s name, for being the owner of the usufruct, he is properly deemed a real party in interest (Sec. 2, Rule 3, Rules of Court) a.) If the purpose is the recovery of the property or right to usufruct, he is still required under Art. 578 to obtain the naked owner´s authority. 15

o The usufructuary of an action to recover real property or a real right, or movable property, has the right to bring the action. o The owner is obligated to give him the authority for this purpose and to furnish him whatever proof he may have. o If in consequence of the enforcement of the action he acquires the thing claimed, the usufruct shall be limited to the fruits, the dominion remaining with the owner. b.) If the purpose is to object to or prevent disturbance over the property (such as forcible entry), no special authority from the naked owner is needed. (see Pascual v. Angeles, 4 Phil. 604) NOTE: To bind or prejudice third parties, the usufruct must either be registered or known to them. (Art. 709)

9. Rights of usufructuary as to Useful and Ornamental Expenses (art. 579) Art. 579. The usufructuary may make on the property held in usufruct such useful improvement 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. Q. What are the Rights of Usufructuary as to Useful and Ornamental Expenses? 1. Usufructuary has the Right to make Useful & Luxurious Improvements; o Note: Any improvement made by Usufructuary belongs to him and thus, he has right to register this so as to protect him against third person, in case the naked owner sells or alienates the principal property. Note that a Usufructuary has the right of removal but not the right of refund for his improvements from the naked owner. 2. But he must not alter the form or substance of the property held in usufruct. 3. Usufructuary is NOT ENTITLED to a refund (to prevent a situation where he improves the naked owner out of his property). 4. But the Usufructuary may – a. REMOVE the improvements if no substantial damage to the property in usufruct is caused, or;

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b. SET OFF the cost of improvements against damages for which he may be liable. NOTA BENE: a.) The Naked owner cannot compel the usufructuary to remove the improvements, even if he can do so without damage to the property, the right being dependent on the will of the usufructuary. The law says “MAY”, which means “may or may not remove, the right being potestative. b.) Between a usufructuary who opts to remove the improvements he introduced, and the naked owner who wants to retain them and offers to reimburse them, the right of the usufructuary prevails because Art. 579 grants him this right provided no damage is done to the property. o This is different from Arts. 546 and 548 where the owner´s right to retain the improvement after refund, prevails over the possessor´s right to remove. c.) Also, while a possessor in good faith is entitled to a refund for useful improvements, a usufructuary is not. (Rivera v. Trinidad, 48 Phil. 396)

10. Rights of Usufructuary to Set Off Improvements (Art. 580) Art. 580. The usufructuary may set off the improvements he may have made on the property against any damage to the same. Rules: Set off Improvements vs. Damages – 1. If damage caused by usufructuary exceeds the value of the improvements, usufructuary is still liable for the difference. 2. If the value of the improvements made by the usufructuary exceeds the damage he caused, the difference does not go to the usufructuary, but accrues instead to the naked owner, in the absence of any stipulation to the contrary. 3. Otherwise, it is as if the usufructuary would be entitled to a partial refund in cash. And this is not allowed, as the usufructuary is not entitled to a refund for improvements. But the usufructuary has a right to remove them. Note: Before set off can be made, the damage must have been caused by the usufructuary, and the improvements must have added to the value of the property.

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Art. 581. The owner of property the usufruct of which is held by another, may alienate it, but he cannot alter its form or substance, or do anything thereon which may be prejudicial to the usufructuary. Q. Can the Naked Owner Alienate the property pending effectivity of the usufruct? A. The right to dispose (jus disponendi) and title remains with the naked owner, in case of a usufruct. BUT he cannot validly do the following acts, otherwise, he will be liable for damages to the usufructuary: a.) He cannot alter its form or substance b.) He cannot do anything prejudicial to the usufructuary

Q. Who Must Respect the Usufruct? 1. The BUYER of a property must respect the usufruct in case it is registered, or known to him (Art. 709). Otherwise, he can oust the usufructuary. 2. If the naked owner bequeathes or devises to another thru a Will, the Legatee (heir of personal property) or Devisee, (heir of real property) must respect the usufruct. (Art. 934) Example 1: Facts: A is the naked owner of a condo unit. B is its usufructuary for Jan. 1, 2000 to Jan. 1, 2005. Naked owner A leased the condo unit in Feb. 2003- Feb. 2004 unknown to usuf-B. The lessee C who is in good faith, paid 12 months advance deposit of P360K to A, relying on the title of the condo unit which is in the name of A, and there were no liens or encumbrance annotated thereon. 1. Can naked owner A legally lease the condo unit? o Naked owner A cannot lease the property (subject of usufructuary) to another. o The right to lease the property pertains to the usufructuary B, not to the naked owner A. Jus utendi pertains to the usufructuary. 2. Whose right will prevail in this case – usuf.-B’s or C’s, the lessee in good faith? o

Usufructuary B’s right will prevail for the following reasons: - The right to the use and to the fruits of the property, (which includes the right to lease the property) belong to the usufructuary-B, not the naked owner A. 18

- The lessee-C having derived his right to lease from the naked owner-A who does not possess such right to lease, will suffer the loss. The naked owner cannot do anything prejudicial to the usufructuary under Art. 581.

3. Can usuf-B be ousted from his use of the Condo unit by C? o B cannot be ousted from the condo unit by the lessee. o But as legal remedy, Lessee C can go after naked owner A for the refund of his (C’s) money plus damages.

Example 2: Facts: A is the naked owner of a condo unit. B is its usufructuary for Jan. 1, 2000 to Jan. 1, 2005. A sold the condo unit in Feb. 2003 without knowledge of B. The buyer, C is a buyer in good faith, relying on the title of the condo unit which is in the name of A, and there were no liens or encumbrance annotated thereon. Q. Can naked owner A sell the condo unit to buyer C, even before the end of Usufruct in Jan. 2005? Q. Can buyer C oust the usufructuary B from the condo unit before end of usufruct?  Naked owner A, may sell the condo unit as his right to dispose remains, even with a subsisting usufructuary on the property.  Buyer in good faith - C may oust usufructuary B. The real right of usufruct of B on the condo unit was not registered nor annotated in the title as required by Art. 709 to bind or prejudice innocent third persons.  Legal Remedy of B: usufructuary B may sue naked owner A for damages for his failure to respect the usufruct contract.

Art. 582. The usufructuary of a part of a thing held in common shall exercise all the rights pertaining to the owner thereof with respect to the administration and the collection of fruits or interest. Should the co-ownership cease by reason of the division of the thing held in common, the usufruct of the part allotted to the co-owner shall belong to the usufructuary. Usufructuary of a Part of Common Property – Rules: 1. A co-owner may give the usufruct of his share to another, even without the consent of the others, unless personal considerations are present. (Art. 493) 19

2. The (new or substitute) usufructuary in this case will take the owner´s place as to: i.) Administration (management); ii.) Collection of fruits or interest (Art. 582)  But the (new or substitute) Usufructuary cannot sell the principal property or create any real right over it, as these are acts ownership reserved to the naked owner only, unless he is so authorized by the latter.

Q. What are the Legal Effects to Usufructuary in case of Partition of Property owned in Common? a.) The usufructuary continues to have the usufruct of the part allotted to the coowner concerned, and may participate or intervene in the partition. b.) If the (new or substitute) usufructuary failed to intervene in the partition, he is nonetheless bound by the partition. But the naked owner is required to respect the subsisting usufruct. Example - Facts: A B & C are children of X & Y who died. As co-heirs, they inheritied from their parents and now co-owned a time share 3-bedroom condo unit in a beach resort in Batangas. Co-owner C donated for the period, 2000-2001, his right of usufruct or use of his share to his son-D in the co-owned condo unit. Q. Can Usufructuary D use the condo unit in the allotted time for the period 20002001? A. Yes, D will enjoy the rights of usufruct of co-owner C. Q. Can usuf.-D sell the share of ownership of C in the condo unit to X, a stranger? A. No, this right belongs to naked owner/co-owner C, not the usuf.-D. Q. If rent income from the condo unit are earned for 2000-2001, who will partake in the share of the rent in the absence of stipulation between C and D? A. D, for he is deemed as the usufructuary, by virtue of co-owner C’s donation of the right of usufruct for this period.

Chapter 3 OBLIGATIONS OF THE USUFRUCTUARY The Usufructuary has the following Obligations: 1. BEFORE the usufruct – to make inventory and give security 2. DURING – to take care of property 20

3. AFTER - to return and pay indemnity in certain cases

1. Obligation of Usufructuary BEFORE the Usufruct begins (Art. 583) Art. 583. The naked owner has also corresponding obligations. (1) To make, after notice to the owner or his legitimate representative an inventory of all the property, which shall contain an appraisal of the movables and a description of the condition of the immovables. (2) To give security, binding himself to fulfill the obligations imposed upon him in accordance with this Chapter. 

The obligations to make an inventory and give security are however not necessary before the right to the usufruct begins.

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They are merely necessary before physical possession and enjoyment of the property can be had.

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Inventory contains an appraisal of the movables and a description of the immovables.

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Requirements for Making the Inventory – see p. 605 of Paras, Vol. 2 Civil Code

Read: SECURITY – its Purpose, Form and When it is Not Required See: pp. 605-606, Paras, Vol. 2, Civil Code; Art. 586 discussion on security EXCEPTION to Requirement of Inventory & Giving of Security (Art. 584 & 585): 1. Giving of security will not apply if it is the DONOR who has reserved the usufruct of the property donated (Art. 584) 2. If it is the parents who are usufructuaries of their children (Art. 584) 3. When no one will be injured provided the naked owner consents. (Art. 585) 4. When naked owner waives it, or the law, thru stipulation in the Will or Contract.

Art. 584. The provisions of No. 2 of the preceding article shall not apply to the donor who has reserved the usufruct of the property donated, or to the parents who are usufructuaries of their children. See comments on p. 606, Paras, id.

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Art. 585. The usufructuary, whatever may be the title of the usufruct, may be excused from the obligation of making an inventory or of giving security, when no one will be injured thereby. See comments on p. 607, Paras, id. EFFECTS OF FAILURE TO GIVE SECURITY (unless exempted): Art. 586. Should the usufructuary fail to give security in the cases which he is bound to give it, the owner may demand that the immovables be placed under administration, that the movables be sold, that the public bonds, instruments of credit payable to order or bearer be converted into registered certificates or deposited in a bank or public institution, and that the capital or sums in cash and the proceeds of the sale of the movable property be invested in safe securities. The interest on the proceeds of the sale of the movables and that on public securities and bonds, and the proceeds of the property placed under administration, shall belong to the usufructuary. Furthermore, the owner may, if he so prefers, until the usufructuary gives security or is excused from so doing, retain in his possession the property in usufruct as administrator, subject to the obligation to deliver to the usufructuary the net proceeds thereof, after deducting the sums which may be agreed upon or judicially allowed him for such administration. What are the legal effects for failure by usufructuary to give security (unless exempted)? A. On the Rights of the NAKED OWNER: 1. He may opt to deliver the property to the usufructuary (but may still demand security) 2. He may retain the real property as administrator, or place it under receivership or administration by another. 3. He may demand the sale of movables, such as  conversion or deposit of public bonds, or credit instruments in a bank  investment of cash and proceeds of sale of movables to safe securities Interest on Cash Proceeds of Sale  If movables are sold, the cash belongs to the naked owner, but the interest thereon belongs to the usufructuary. (par. 2, Art. 586). B. On the Rights of the USUFRUCTUARY: 1. He cannot possess the property until he gives the security 22

2. He cannot administer the property nor execute a lease thereon 3. He cannot collect credits that have matured, nor invest them unless the Court or the naked owner consents. 4. He may alienate his right to the usufruct as failure to give security does not extinguish the usufruct. The grantee may possess once he gives security.

Art. 587. If the usufructuary who has not given security claims, by virtue of a promise under oath, the delivery of the furniture necessary for his use, and that he and his family be allowed to live in a house included in the usufruct, the court may grant this petition, after due consideration of the facts of the case. The same rule shall be observed with respect to implements, tools and other movable property necessary for an industry or vocation in which he is engaged. If the owner does not wish that certain articles be sold because of their artistic worth or because they have a sentimental value, he may demand their delivery to him upon his giving security for the payment of the legal interest on their appraised value. Art. 587 is also known as Caucion juratoria. 

This refers to a case whereby the usufructuary, being unable to file the required bond or security, files a verified petition in the proper court, asking for the delivery of the house and furniture necessary for himself and his family without any bond or security.

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The same rule shall also be applied to the instruments or tools necessary for an industry or vocation in which the usufructuary is engaged.

RIGHTS AND OBLIGATIONS OF USUFRUCTUARY DURING THE USUFRUCT 1. What are the rights and benefits to be enjoyed by the Usufructuary after he gave the security required by the Usufruct, or if his request for exemption is granted?  Art. 588. After the security has been given by the usufructuary, he shall have a right to all the proceeds and benefits from the day on which, in accordance with the title constituting the usufruct, he should have commenced to receive them.

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2. What are the OBLIGATIONS of the Usufructuary DURING the Usufruct period?  The Usufructuary has the following Obligations DURING the Usufruct period: S U M M A R Y: a.)

Take care of the things like a good father of a family (Art. 589)

b.)

Answer for any damage which the things in usufruct may suffer through the fault or negligence of the person who substitutes him. (Art. 590)

c.)

If the usufruct be over livestock, the usufructuary is obliged to replace with the young, the animals that die each year from natural causes or, lost due to the rapacity of beasts. If the animals on which the usufruct is constituted should all perish, without the fault of the usufructuary, on account of some contagious disease or any other uncommon event, the usufructuary shall deliver to the owner the remains which may have been saved from the misfortune. (Art. 591)

d.)

Make ordinary repairs needed by the thing given in usufruct. (Art. 592)

e.)

Notify the owner when there is urgent need for Extraordinary repairs. (Art. 593)

f.)

Pay to the owner legal interest on the amount expended for the extraordinary repairs, during the usufruct period. (Art. 594)

g.)

Allow works or improvements to be made by the naked owner provided they do not prejudice the object of usufruct and rights usufructuary (Art. 595)

h.)

Pay the annual charges and taxes and of those considered as a lien on the fruits, [not on the capital as this pertains to the owner]. (Art. 597)

i)

Notify the owner of any acts of a 3rd person that may be prejudicial to the rights of ownership. Failure to do so will make the usufructuary liable for damages, as if they had been caused through his own fault. (Art. 601)

j.)

Pay the expenses, costs and liabilities in suits brought with regard to the usufruct. (Art. 602)

Read Annotations of Paras or Tolentino re: Art. 589. The usufructuary shall take care of the things given in usufruct as a good father of a family. (497)

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Art. 590. A usufructuary who alienates or leases his right of usufruct shall answer for any damage which the things in usufruct may suffer through the fault or negligence of the person who substitutes him. (498)

Art. 591. If the usufruct be constituted on a flock or herd of livestock, the usufructuary shall be obliged to replace with the young thereof the animals that die each year from natural causes, or are lost due to the rapacity of beasts of prey. If the animals on which the usufruct is constituted should all perish, without the fault of the usufructuary, on account of some contagious disease or any other uncommon event, the usufructuary shall fulfill his obligation by delivering to the owner the remains which may have been saved from the misfortune. Should the herd or flock perish in part, also by accident and without the fault of the usufructuary, the usufruct shall continue on the part saved. Should the usufruct be on sterile animals, it shall be considered, with respect to its effects, as though constituted on fungible things.

Art. 592. The usufructuary is obliged to make the ordinary repairs needed by the thing given in usufruct. By ordinary repairs are understood such as are required by the wear and tear due to the natural use of the thing and are indispensable for its preservation. Should the usufructuary fail to make them after demand by the owner, the latter may make them at the expense of the usufructuary.

Art. 593. Extraordinary repairs shall be at the expense of the owner. The usufructuary is obliged to notify the owner when the need for such repairs is urgent. Art. 594. If the owner should make the extraordinary repairs, he shall have a right to demand of the usufructuary the legal interest on the amount expended for the time that the usufruct lasts. Should he not make them when they are indispensable for the preservation of the thing, the usufructuary may make them; but he shall have a right to demand of the owner, at the termination of the usufruct, the increase in value which the immovable may have acquired by reason of the repairs. Read: What constitute Extraordinary Repairs?  See Comment and classification of Paras, p. 617, Vol. II, 2008 ed. Q. Who should make or pay for extraordinary repairs of the thing under usufruct? 25

A. The Naked OWNER, whom the usufructuary must notify if it is urgent. Q. What is the naked owner’s right if he makes the extraordinary repairs of the thing given in usufruct? A. The owner can demand from the usufructuary, legal interest on the sum he spent, for the duration of the usufruct period. (Art. 594) Q. What is the effect if the naked owner does not make the extraordinary repairs when they are indispensable for the preservation of the thing in usufruct? A. The usufructuary may make them. But he must first notify the owner of the urgency of the extraordinary repairs to be made needed for the preservation of the property. Yet, the owner failed to make them. In this case, the usufructuary shall have the right to demand of the owner, at the termination of the usufruct, the increase in value which the immovable may have acquired by reason of the repairs. (Art. 594) Art. 595. The owner may construct any works and make any improvements of which the immovable in usufruct is susceptible, or make new plantings thereon if it be rural, provided that such acts do not cause a diminution in the value of the usufruct or prejudice the right of the usufructuary. Note: If the value of the usufruct increases due to the construction, improvement or plantings made by the owner, the usufructuary is entitled to enjoy it, and he does not have to pay legal interests for these improvements as this was a voluntary act of the naked owner.

Art. 596. The payment of annual charges and taxes and of those considered as a lien on the fruits, shall be at the expense of the usufructuary for all the time that the usufruct lasts. Example: Taxes on Cash dividends, on Rent incomes – charged to Usufructuary.

Art. 597. The taxes which, during the usufruct, may be imposed directly on the capital, shall be at the expense of the owner. If the latter has paid them, the usufructuary shall pay him the proper interest on the sums which may have been paid in that character; and, if the said sums have been advanced by the usufructuary, he shall recover the amount thereof at the termination of the usufruct. o

Real Property Tax is a burden on the Capital, to be paid by the Owner of the land, and NOT by the usufructuary. (Mercado v. Rizal, 67 Phil. 608) 26

RULES: 1. If naked owner pays the taxes on capital, the usufructuary must pay the owner legal interest on the sum paid. 2. If taxes on capital is paid by the usufructuary, the naked owner must refund him – a.) At the end or termination of usufruct if advanced voluntarily by the usufructuary; b.) Immediately thereafter, if usufructuary only paid the taxes because he was forced to do so, as in there was deduction made from his share of the fruits. (Mercado v. Rizal, supra)

Q. What is the obligation of the Usufructuary if third parties commit acts prejudicial to the right of ownership of naked owner, or to the right of usufruct? Q. What is the Liability of Usufructuary if he fails to notify the naked owner of prejudicial acts to rights of ownership of the property under usufruct? Answer: 

Art. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have knowledge, that may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for damages, as if they had been caused through his own fault.

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Art. 602. The expenses, costs and liabilities in suits brought with regard to the usufruct shall be borne by the usufructuary.

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