VDA DE ALBAR v. CARANDANG, 106 PHIL 855- Usufruct

The reparation or indemnity given in exchange for the destruction of the building is the substitute for the building itself. The indemnity is the capital which belongs to the naked owner while the interest on the capital is the fruits which belong to the usufructuary.

Notes:

The Civil Code contemplates a situation where the owner pays for the construction of a new building. However, the twist in this case was that the naked owner did not have to construct a new one because the Chinaman had one built at his own expense. This is the reason why the court had a difficult time ascertaining who had the right to the indemnity given by the government for the destruction of the building due to the war.

Majority Opinion: The reparation should be treated as fruits. Usufructuary should get 6% of the reparation (from the time it was actually received to the tend of the life of the usufruct) because it was not used to construct a new building. Otherwise, the naked owner is enriched twice – first from the reparation and second from the fruits if payment of rent stops when the building is constructed. Thus, the new building should be considered as the capital, and the reparation as fruits. The naked owner should share the reparation with the usufructuary to prevent unjust enrichment.

Ponente’s Opinion: The reparation should be treated as capital (NCC). Only the interest on the reparation up to the date that the new building was constructed time should be given to the usufructuary, not the interest until the end of the usufruct. The reparation itself which is considered as the capital (which rightfully belongs to the naked owner) intended to replace the old building. The intention was fulfilled when the Chinaman constructed a new one. It was not the naked owner’s fault that he need not use the reparation to construct a new building. The owner is not doubly compensated because it was not his fault.

Dissenting opinion: There is double benefit in either case. In the first, the usufructuary will be receiving interest on the reparation and rent from the building. In the second, the naked owner receives value for the building and the construction of a building at no expense to him.

Payment of interest should continue during the life of the usufruct (not just 6%) because the war damage is the equivalent to the building. The construction of the new building does not relieve the owners of the land used in the war damage payment from continuing the payment of interest. If they had used it to construct the building, they would have been freed from paying interest – but they did not.

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FACTS:

Doña Rosario Fabie y Grey was the owner of the lot in the City of Manila with a building and improvements, and by a will left by her upon her death which was duly probated she devised the naked ownership of the whole property to Rosario Grey Vda. de Albar, et al. but its usufruct to Josefa Fabie for life.

During liberation, as a consequence of the fire that gutted the building in many portions of Manila, the building on the Ongpin lot was burned, leaving only the walls and other improvements that were not destroyed by the fire.

One Au Pit, a Chinaman, offered to lease the property for a period of five years, at the same time agreeing to construct on the lot a new building provided the naked owners as well as the usufructuary sign the agreement of the lease. As the usufructuary maintains that she has the exclusive right to cede the property by lease and to receive the full rental value by virtue of her right to usufruct while on the other hand the naked owners maintain that the right of usufruct was extinguished when the building was destroyed, the right of the usufructory being limited to the legal interest on the value of the lot and the materials, in order that the agreement of lease may be affected, the parties agreed on a temporary compromise whereby the naked owners would receive P100.00, or 20% of the monthly rental of P500.00 and the usufructuary the balance of 80% or P400.00 of said monthly rental. It was likewise stipulated in the agreement that the title to the building to be constructed would accrue to the land upon it completion as an integral part of the lot covered by the transfer certificate of title issued in the name of the naked owners but subject to the right of usufruct of Josefa Fabie. The parties expressly reserved the right to litigate their respective claims after the termination of the contract of lease to determine which of said claims was legally correct.

By reason of the destruction of the building on the Ongpin property, the United States War Damage Commission approved the claim that was presented for the damage caused to the property, paid to and received by the naked owners. In the meantime, the usufructuary paid the real estate taxes due on the property at Ongpin for the years 1945 to 1952.

ISSUE:

Whether or not the usufruct included the building and the land? W/N the usufructuary (FABIE) or naked owner (VDA DE ALBAR) should undertake the reconstruction? W/N the usufructuary should pay the real estate taxes?

HELD:

The usufruct for life extended to the land and the building. From the above, it is clear that when the deceased constituted the life usufruct on the rentals "fincas situadas" in Ongpin and Sto. Cristo streets, she meant to impose the encumbrance both the building and the land on which it is erected for indeed the building cannot exist without the land. And as this Court well said, "The land, being an indispensable part of the rented premises cannot be considered as having no rental value whatsoever." Moreover, in the Spanish language, the term "fincas" has a broad scope; it includes not only building but land as well. (Diccionario Ingles-Español, por Martines Amador) Since only the building was destroyed and the usufruct is constituted not only on the building but on the land as well, then the usufruct is not deemed extinguished by the destruction of the building for under the law usufruct is extinguished only by the total loss of the thing subject of the encumbrance (Article 603, old Civil Code).
FABIE, the usufructuary has the discretion to reconstruct the building. Of course, this is addressed to the wisdom and discretion of the usufructuary who, to all intents and purposes is deemed as the administrator of the property. This has been clarified in the case of Fabie vs. Gutierrez David, 75 Phil., 536, which was litigated between the same parties and wherein the scope of the same provision of the will has been the subject of interpretation.

The usufructuary should pay the taxes. We find, however, merit in the contention that the real estate taxes paid by respondent in her capacity as usufractuary for several years previous to the present litigation should be paid by her, as she did, instead of by petitioners not only because she bound herself to pay such taxes in a formal agreement approved by the court in Civil Case No. 1569 of the Court of First Instance of Manila (Fabie vs. Gutierrez David, supra). In the case, which involved the same parties and the same properties subject to usufruct, the parties submitted an amicable agreement which was approved by the court wherein the usufructuary, herein respondent, bound herself to pay all the real estate taxes, special assessment and insurance premiums, and make all the necessary repairs on each of the properties covered by the usufruct and in accordance with said agreement, respondent paid all the taxes for the years 1945 to 1954.