Civil law, distinct from criminal or administrative law, is a branch of law that regulates the non-criminal rights, duties, and obligations of persons (i.e., both natural and juridical persons), as well as equal legal relations among private individuals.
The Republic Act 386 of 1949, also known as the “Civil Code of the Philippines”, provides a comprehensive legal framework for various aspects of civil law, including but not limited to, effects and application of laws, human relations and marriages, citizenship, property ownership, family, and successions. It serves as a pivotal code in governing the private lives of Filipino citizens, as well as the obligations, contracts, and other legal agreements entered into.
Furthermore, property laws, as based on the Civil Code, govern the ownership of properties, may these be parcels of land, buildings, or other assets. These delineate what properties Filipino citizens, juridical entities, and even foreign nationals can acquire, how these can be acquired, what rights they have as far as their ownerships are concerned, and how these rights can be protected. Without basic knowledge about these, there is a high risk of getting involved in legal issues or disputes, usually concerning ownership, property boundaries, inheritance, and co-ownership.
In this article, we’ll explore an interesting legal topic under property laws – usufruct. While this may provide a comprehensive and general discussion, it is crucial to consult a legal expert to address specific issues or concerns regarding properties.
Usufruct
The term usufruct is derived from the Late Latin word usufructus, or in its full form, usus et fructus, which translates to “use and enjoyment” (i.e., usus means “use” and fructus means “enjoyment”). Thus, it is the right to use (jus utendi) and enjoy (jus fruendi) another’s property.
Usufructuary refers to the person who enjoys another’s property, while the one who actually owns it is called, in legal terms, the naked owner. In a usufruct, only the jus utendi and jus fruendi over the property are transferred to the usufructuary. The naked owner of the property maintains the jus disponendi (right to dispose) or the power to alienate, encumber, transfer, and even destroy the same (Hemedes vs. CA, 316 SCRA 347, 1999).
The Civil Code defines usufruct as the “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” (Art. 562).
How Usufruct Works (An Example)
In the Philippines, usufruct roughly translates to “karapatang gamitin ang ari-arian ng iba sa loob ng itinakdang panahon.” It usually applies when a landowner grants a legal right to a tenant or “taga-bantay” to use the former’s property (i.e., usually agricultural land) and benefit from the crops produced by it.
For example, an old farmer, who owns a parcel of farmland and uses it to grow crops and raise livestock, suddenly gets ill and can no longer attend to farming. Without any heir or family to do the job, he enters into a legal agreement with his neighbor or friend and assigns him as the usufructuary of the land (i.e., including the crops and livestock) for two years or until recovery.
Although the naked ownership is retained by the old farmer, the neighbor or friend, who has been given the right as the usufructuary, will be in charge of the land, do the day-to-day farming tasks, and enjoy the harvest and other benefits. After the termination of the usufruct, the land will be turned over to the old farmer in its conserved form.
Characteristics of Usufruct
To distinguish usufruct from naked ownerships, easements (servitudes), leases, and other related forms, consider the following characteristics and elements:
[1] Essential: Without these characteristics or elements, it cannot be intrinsically called a usufruct.
[a] It is a real right (whether registered or not in the Registry of Property). However, it is classified differently from ownership. Usufruct is a personal right, not a real property right.
[b] It is temporary, or it comes with a certain duration. It is not perpetual; otherwise, it is considered an emphyteusis. Its basic purpose is for the usufructuary to enjoy the fruits of the property as a consequence of normal use or exploitation.
[2] Natural. As emphasized in the Civil Code, a usufruct comes with the usufructuary’s obligation to conserve or preserve the form and substance (value) of the property. For example, a building must be conserved as a building.
[3] Accidental. These are the characteristics or elements that may be present or absent depending upon the legal stipulations of the contracting parties (e.g., whether it is a pure or conditional usufruct, the duration of its existence, and whether the right is granted to one person or several, etc.).
Objects of Usufruct
Usufructs may apply to (a) real properties, such as parcels of land, buildings, swimming pools, and other permanent structures, (b) personal properties, such as automobiles or even money, (c) productive or sterile properties (e.g., sterile animals), or (d) any property created over a right (as long as it is not strictly personal or intransmissible), and as long as it has an independent existence.
Additionally, the Civil Code classifies properties that are or may be the objects of appropriation:
[a] Immovable property generally refers to the land and other things attached to it permanently, such as buildings, roads, quarries, and trees (Art. 415).
[b] Movable property, on the other hand, includes other things susceptible to appropriation which are not included in Article 415 (Art. 416). It is either consumable or non-consumable (Art. 418).
With the right of accession with respect to what is produced by the property, the following fruits are also defined by the Code (Art. 442):
[a] Natural fruits are the spontaneous products of the soil, as are the young and other products of animals.
[b] Industrial fruits are those produced by lands of any kind through cultivation or labor.
[c] Civil fruits are the rents of buildings, the price of leases of lands and other property, and the amount of perpetual or life annuities or other similar income.
Means of Constituting a Usufruct
Under Article 563 of the Civil Code, a “usufruct is constituted by law, by the will of private persons expressed in acts inter vivos or in a last will and testament, and by prescription.”
[a] By Law or Legal Usufruct. Parents may have a usufruct over the property of their minor children living in their custody and under their parental authority. Such a usufruct cannot, because of family reasons, be mortgaged or alienated by the parents.
[b] By Will of Private Persons Expressed in Acts Inter Vivos. Usufruct may also be created by will or the parties inter vivos (as by contract or donation) or when an owner sells or alienates the usufruct or creates mortis causa (as in a last will and testament).
[c] By Prescription. It may also be constituted by both the law and act of a person (mixed or prescriptive). For example, if the co-ownership of a usufruct ceases by reason of the division of the property held in common, the usufruct of the part allotted to the co-owner shall belong to the remaining usufructuary, hence, acquired by acquisitive prescription.
Classifications of Usufructs
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 may also be constituted on a right, provided it is not strictly personal or intransmissible (Art. 564).
[a] Based on Quantity/Extent. For the fruits, the usufruct may be total or partial (i.e., whether all the fruits are given or not).
[b] Based on Number of Usufructuaries. It may be simple (i.e., one usufructuary) or multiple (i.e., two or more usufructuaries simultaneously at the same time or by succession, one after another). If usufruct is created by donation, all the donees must be alive at the time of donation (Art. 756).
[c] Based on Quality or Objects Involved. It may be a usufruct over rights (i.e., must not be strictly personal or transmissible) or a usufruct over things (i.e., normal with non-consumable or abnormal with consumable property).
[d] Based on Terms and Conditions. It may be a pure usufruct (i.e., without a term or conditions), with a term or period, or conditions (i.e., with specific conditions).
Rights and Obligations of a Usufructuary
According to Article 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 Civil Code.
[1] Rights. The basic right of a usufructuary is to enjoy the fruits of the property under usufruct.
Enjoy all the natural, industrial, and civil fruits of the property (except for hidden treasures, wherein he is entitled only as a finder) (Art. 566).
Enjoy any increase the property may acquire through accession, the servitudes established, and all other benefits inherent therein (Art. 571).
Alienate or lease the right of usufruct to a third person, even by gratuitous title and without the consent of the naked owner, only until the expiration of the usufruct (Art. 572).
Make use of gradually deteriorating things without being consumed with the purpose for which they are intended (Art. 573).
Improve the property without altering or damaging the form and substance (Art. 579).
Exercise all rights pertaining to the owner with respect to the administration and collection of fruits and interest. If the co-ownership ceases 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 (Art. 582).
[2] Obligations. The basic obligation of a usufructuary is to preserve the form and substance of the property (Art. 562).
Make an inventory of all the properties including an appraisal of the movables and descriptions of conditions of the immovables (Art. 583 (1)).
Give security, binding himself to fulfill the obligations imposed upon him (except to the donor who has reserved the usufruct of the property donated, or to the parents who are usufructuaries of their children’s property, except when the parents contract a second marriage) (Art. 583 (2), Art. 584).
Take care of the things given in usufruct as a good father of a family (Art. 589).
Answer for any damage, which the things in usufruct may suffer through the fault or negligence of the person who substitutes him (i.e., in case of alienated or leased right of usufruct) (Art. 590).
Make the ordinary repairs needed by the thing given in the usufruct and notify the owner in case of the need for extraordinary repairs (Art. 592, Art. 593).
Pay annual charges, taxes, and of those considered as a lien on the fruits for all the time that the usufruct lasts (taxes imposed directly on the capital shall be at the expense of the owner) (Art. 596).
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 (Art. 601).
Shoulder the expenses, costs, and liabilities in suits brought with regard to the usufruct (Art. 602).
Grounds for Extinguishment of Usufruct
Under Article 603, a usufruct may be extinguished:
[a] By the death of the usufructuary, unless a contrary intention clearly appears;
[b] By the expiration of the period for which it was constituted, or by the fulfillment of any resolutory condition provided in the title creating the usufruct;
[c] By merger of the usufruct and ownership in the same person;
[d] By renunciation of the usufructuary;
[e] By the total loss of the thing in usufruct;
[f] By the termination of the right of the person constituting the usufruct; or
[g] By prescription.
A usufruct is not extinguished by bad use of the thing in usufruct; but if the abuse should cause considerable injury to the owner, the latter may demand that the thing be delivered to him, binding himself to pay annually to the usufructuary the net proceeds of the same, after deducting the expenses and the compensation which may be allowed him for its administration (Art. 610).
A usufruct constituted in favor of several persons living at the time of its constitution shall not be extinguished until the death of the last survivor (Art. 611).
Upon the termination of the usufruct, the thing in usufruct shall be delivered to the owner, without prejudice to the right of retention pertaining to the usufructuary or his heirs for taxes and extraordinary expenses which should be reimbursed. After the delivery has been made, the security or mortgage shall be canceled (Art. 612).
Notable Usufruct-Related Court Decisions in the Philippines
To further understand usufruct, the following cases and court decisions have been compiled and summarized:
Moralidad vs. Spouses Pernes, G.R. 152809, 2006-08-03. The case involved a dispute over a parcel of land owned between the land owner, Moralidad (i.e., also petitioner) and spouses Pernes, (i.e., respondents) after the former filed a complaint for unlawful detainer against the latter, alleging that they refused to vacate the property under usufruct.
Although the Court of Appeals (CA) ruled in favor of the respondents, the Supreme Court (SC) disagreed with its ruling and recognized the existence of a usufruct. The SC emphasized that the usufruct could be terminated if the indispensable conditions set forth by the petitioner were not met, i.e., including maintaining a peaceful and harmonious relationship between parties. Thus, the petitioner had the right to eject the respondents from the property.
Vda. de Albar vs. De Carangdang, G.R. L-13361, 1959-12-29. The case revolved around a dispute over the interpretation of a will granting a life usufruct on a property’s rentals, including the land and building, to Fabie, while devising the naked ownership to Vda. de Albar. During the liberation of Manila, a fire destroyed the property, leaving only the walls and other remaining improvements. The naked owners argued that the usufruct was extinguished when the building was destroyed. The Supreme Court (SC) concluded that the usufruct was not extinguished because it was constituted on both the building and the land.
Eleizegui vs. Manila Lawn Tennis Club, G.R. 967, 1903-05-19. The Manila Lawn Tennis Club, the lessee was expressly authorized through the contract to make improvements upon the land, by erecting buildings of both permanent and temporary character, by making fills, laying pipes, and making such other improvements. Mr. Williamson, or whoever might succeed him as secretary, might terminate the lease whenever desired without other formality than giving a month’s notice. Within the same year, the Eleizeguis then terminated the contract of lease by notice given to the Manila Lawn Tennis Club, but the latter refused to accede and vacate the leased land. An action for unlawful detainer on the ground that the lease was already terminated was filed by the Eleizeguis. The judgment of the lower court was reversed by the Supreme Court (SC), and the case was remanded to enter a dismissal of the action in favor of the defendant.
National Housing Authority (NHA) vs. Manila Seedling Bank Foundation, Inc. (MSBFI), G.R. 183543, 2016-06-20. The NHA owned the 120-hectare land of the government in Diliman Quezon, City, which was also reserved for the establishment of the National Government Center. President Marcos, through a proclamation, reserved 7 hectares of such for Manila Seedling Bank Foundation, Inc (MSBFI), granting it usufructuary rights. MSBFI, however, occupied 16 hectares, thereby exceeding the limit. President Aquino subsequently revoked the reserved status of the remaining 50 hectares of the original land and directed the NHA to commercialize what is now referred to as the North Triangle Property, which included the 7 hectare land.
MSBFI filed a complaint for injunction with the Regional Trial Court (RTC) to prevent NHA from making them vacate the land. A final injunction was granted. NHA’s petition for certiorari was denied by the Court of Appeals (CA) so the case was remanded to the RTC to resolve the issue regarding the excess in the land. RTC and the CA validated the turnover of the excess in the land to NHA.
The Supreme Court (SC) denied NHA’s prayer for the award of exemplary damages. It insisted that although the MSBFI was a possessor in bad faith, there was no evidence that it acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Frequently Asked Questions (FAQs)
[1] Who is entitled to the fruits? With basic understanding of the property laws, fruits must always be enjoyed by the property owner, but with usufruct, the usufructuary is entitled to all of the natural, industrial, and civil fruits. Additionally, all natural and industrial fruits, at the time the usufruct begins, belong to the usufructuary, while those at the time the usufruct terminates, belong to the naked owner. 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 lessee.
[2] Who is entitled to the dividends from shares in a corporation concerning the property under usufruct? Dividends from shares are considered civil fruits. As such, whether in the form of cash or stock, the dividends are considered income and, consequently, should go to the usufructuary (Bachrach v Seifert et al, G.R. L-1592 1949-09-20).
[3] Can the right of usufruct be alienated or encumbered? Yes. Technically, the law does not require the usufructuary to enjoy the usufruct on his own. In most cases, he may transfer such a right of enjoyment either by leasing it or by alienating the right of usufruct itself. However, any contract must be subject to the life or duration of the actual usufruct. Additionally, there are instances where the right of usufruct may not be alienated, such as those involving properties owned by minor children and under the usufruct of parents.
[4] Can the naked owner lease the property held in usufruct to a third person? No. The right to constitute a lease over the property held in usufruct has already been granted to the usufructuary, not the naked owner. Equally, a lease involves use and possession of the property, the rights which are already legally transferred to the usufructuary.
[5] Who will be liable for the damages caused by the third-party lessee to the property? According to the Code, 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 590).
[6] Who will be liable for the repairs needed by the things in usufruct? It depends on the repairs required. The usufructuary is obliged to make the ordinary repairs for damages caused by wear and tear due to natural use. Extraordinary repairs, on the other hand, shall be at the expense of the owner upon notification by the usufructuary.
[7] What will happen if the immovable property (e.g., a building), on which the usufruct is constituted, should be destroyed? If the usufruct is constituted on immovable property of which a building forms part, and the latter should be destroyed in any manner whatsoever, the usufructuary shall have a right to make use of the land and the materials. The same rule shall be applied if the usufruct is constituted on a building only and the same should be destroyed. But in such a case, if the owner should wish to construct another building, he shall have a right to occupy the land and to make use of the materials, being obliged to pay to the usufructuary, during the continuance of the usufruct, the interest upon the sum equivalent to the value of the land and of the materials (Art 607).
[8] In what instances may the usufructuary exercise the right of retention. The usufructuary may enjoy the right of retention until payment of the following: (a) sums that may have been advanced by the usufructuary for payment of taxes which are imposed directly on the capital; or (b) the increase in the aluse which the immovable acquired by reason of the extraordinary repairs paid for by the usufructuary.
[9] Is a usufruct in favor of a foreigner valid? A usufruct upheld in favor of a foreign national or alien, because a usufruct, although a real right, does not vest title to the land in the usufructuary. It is the vesting of the title to a land in favor of aliens which is prohibited by the Constitution (Ramirez v Vda. De Ramirez, G.R. L-27952, 1982-02-15).
Usufruct Requirements and Process
[1] Seek legal advice. Consulting legal experts is crucial to understand the complex and complicated aspects and processes of property-related transactions. Their knowledge about civil law and cumulative experience can always guarantee that property owners and usufructuaries are well guided throughout, from drafting to enforcing the contracts. As a result, future issues and disputes may be minimized, if not totally prevented.
[2] Hire a lawyer to draft the contract. It may be costly to hire lawyers to draft contracts (i.e., compared to if someone without legal expertise will do it); however, their legal expertise and experience can ensure that these documents contain all the salient features and are legally valid. For usufructs, the terms and conditions usually revolve around the subject properties (i.e., including the movable and immovable properties), duration, rights and obligations of the contracting parties, duration, and termination.
[3] Process the registration with the Registry of Deeds, as may be necessary. Technically, the registration of transactions involving registered lands (e.g., mortgage, lease, usufruct, etc.) is not compulsory. However, under Section 52 of Presidential Decree 1529, otherwise known as the ‘Property Registration Decree,” “every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument, or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.” The proof of registration is the annotation of the interests on the certificate of title covering the property.
[4] Enforce the contract. Before the usufructuaries take over the properties from the naked owners, the Civil Code requires an inventory of the property, which will contain an appraisal of the movables and descriptions of the conditions of the immovables. Equally, they must also give security to bind themselves to fulfill the obligations imposed. These may, however, be waived depending on the stipulations of the contract of the usufruct.
Final Thoughts
Usufruct has been around in the Philippines for ages, especially in the provinces and remote areas, where real properties, particularly parcels of land, are left by landowners under the care and supervision of other people, usually friends or relatives. In the cities, the same with immovable properties, such as buildings and other structures, are also objects of usufruct.
While the usufructuaries benefit from the properties, through the natural, industrial, and civil fruits, the naked owners usually rest assured that their properties are protected against trespassers and well-maintained until the termination of the usufruct or when the properties are already for turnover.
To ensure these, the legally binding agreement must stipulate clearly, completely, and accurately all the terms and conditions understood and agreed upon by both parties. It is also important to know the Civil Code concerning this, particularly the rights and obligations of the usufructuaries, as these will serve as an important legal reference in case of any deficiency in the contract.
Sounds Overwhelming? It doesn’t have to be!
Given the complexities associated with usufruct, it’s advisable to seek professional assistance. Here at Filedocsphil, in coordination with Duran & Duran-Schulze Law, our experienced team of lawyers and professionals is here to make it seamless and hassle-free. We provide invaluable support in identifying and resolving property-related transactions.
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