_______Title VI_______

USUFRUCT

ARTICLES 56 2-565
ELEIZEGUI vs. MANILA LAWN TENNIS CLUB
GR No. 967. May 19, 1903.
Usufruct is a right of superior degree to that which arises from a lease. It is a real right and includes all the jus utendi and jus
fruendi. Nevertheless, the utmost period for which a usufruct can endure, if constituted in favor of a natural person, is the
lifetime of the usufructuary; and if in favor of a juridical person, it can not be created for more than thirty years.

FACTS
On January 25, 1980 petitioners DARIO and GAUDENCIO ELEIZEGUI entered into a contract of lease of its land with the respondent
MANILA LAWN TENNIS CLUB through its secretary Mr. Williamson.
By the contract of lease the lessee is expressly authorized 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 as might be considered desirable for the comfort
and amusement of the members. It was also stipulated that the lease for all the time and that the members of the said club may desire to use it.
Also, Mr. Williamson or whoever may succeed him as secretary of said club may terminate the lease whenever desired without other formality
than that of giving a month's notice. It was also specified that the ELEZEGUIs as owners of the land would undertake to maintain the club as
long as the tenant, the MANILA LAWN TENNIS CLUB should see fit without altering in the slightest degree the conditions of this contract, even
though the estate be sold. The rent of the said land is fixed at P25 per month.
On August 8, 1980, the ELEZEGUIs terminated the contract of lease by the notice given to the MANILA LAWN TENNIS CLUB. The latter
however, refused to accede and vacate the leased land.
On the ground that the lease was already terminated, the ELEZEGUIs filed an action for unlawful detainer.
With respect to the term of the lease the present question has arisen. In its discussion 3 theories have been presented:
1. the duration depends upon the will of the lessor, who, upon one month's notice given to the lessee, may terminate the lease so
stipulated;
2. the duration makes it dependent upon the will of the lessee, as stipulated in the contract; and
3. the right is reserved to the courts to fix the duration of the term.
The first theory is that which has prevailed in the judgment below. Hence, this appeal.
ISSUE
Whether or not the contract of lease was perpetual since in the contract, the duration thereof as left to the will of the lessee alone.
RULING
NO, it was not perpetual. Although the contract left to the will of the lessee the duration of the lease, it could not be understood to be a
life tenancy nor a perpetual lease. If the lease could last during such time as the lessee might see fit, because it has been so stipulated by the
lessor, it would last, first, as long as the will of the lessee that is, all his life; second, during all the time that he may have succession, inasmuch
as he who contracts does so for himself and his heirs.
Being a lease, it then it must be for a determinate period. By its very nature it must be temporary just as by reason of its nature a
emphyteusis must be perpetual or for an unlimited period. If the lease was intended to be perpetual, they should have not merely entered into a
contract of lease but either contract for a usufruct or an emphyteusis. Why should the lessee have a greater right than the usufructuary, as
great as that of an empbyteuta, with respect to the duration of the enjoyment of the property of another?
Usufruct is a right of superior degree to that which arises from a lease. It is a real right and includes all the jus utendi and jus fruendi.
Nevertheless, the utmost period for which a usufruct can endure, if constituted in favor of a natural person, is the lifetime of the usufructuary;
and if in favor of a juridical person, it can not be created for more than thirty years.
Hence, the term of the lease could not be left to the will of the lessor, the MANILA LAWN TENNIS CLUB alone. The proper remedy was
the ask the court to fic the duration of the lease and not the action for unlawful detainer.

ALUNAN vs. VELOSO

GR No. 29158. December 29, 1928

It is incorrect to say that there can be no usufruct of money, because it is a fungible thing.

FACTS
Petitioner RAFAEL ALUNAN was the judicial administrator of the estate of the deceased Rosendo Alunan. The settlement of deceaseds
estate was approved by the court below. Jose Hernaez, one of the heirs interested in this proceeding, assigned the whole of his portion to
respondent ELEUTERIA CH. VELOSO and the latter objects to some of the items of the account filed.
VELOSO alleged that the lower court erred in admitting the partition proposed by the administrator in his account. According to this
account, the total amount to be partitioned among the heirs is P88,979.08, which the administrator distributed equally among all the heirs,
including the widow, each one receiving P11,122.38. This partitionwas objected to with respect to the widow.
It was alleged that the distributable amount is in money, and since the widow's right is only a usufruct, and as there can be no usufruct of
money, since it is a fungible thing, the adjudication made to the widow was erroneous.
ISSUE
Whether or not there could be a usufruct of money.
RULING
YES, there could be. It is incorrect to say that there can be no usufruct of money, because it is a fungible thing.
The widow, according to the law, only has a right to a portion of the estate equal to that of the legitime of each of the children without
betterment. In the instant case none of the children received a betterment. Consequently, the widow should receive a portion equal to the share
of each in the two-thirds of the distributable amount making up the legitime, to be taken from the one-third forming the betterment. Then, the
other free third, which the decedent failed to dispose of, must be partitioned among the heirs to the exclusion of the widow, as an addition to
their legitime. Working out the computations on this basis, the widow should receive only P8,474.19.

ART. 56 6
BACHRACH vs. SEIFERT
GR No. L-2659. October 12, 1950
Shares of stocks dividends are civil fruits. The usufructuray then, being entitled to civil fruits other than natural and industrial
fruits shall be entitled to shares of stocks dividends as well.

FACTS
The deceased E. M. Bachrach, left no forced heir except his widow, petitioner MARY MCDONALD BACHRACH.
In his last will and testament, the deceased bequeath and devised to his wife BACHRACH for life all the fruits and usufruct of the
remainder of his estate after payment of the legacies, bequests, and gifts; and she may enjoy said usufruct and use or spend such fruits as she
may in any manner wish. The will further provided that upon the death of BACHRACH, one-half of all his estate shall be divided share and
share alike by and between his legal heirs respondents SOPHIE SIEFERT and ELISA ELIANOFF, to the exclusion of his brothers.
The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co., Inc., received from the latter
54,000 shares representing 50% stock dividend on the said 108,000 shares.
On July 10, 1948, BACHRACH, as usufructuary or life tenant of the estate, petitioned the lower court to authorize the Peoples Bank and
Trust Company, as administrator of the estate of E. M. Bachrach, to transfer to her the said 54,000 shares of stock dividend by indorsing and
delivering to her the corresponding certificate of stock, claiming that said dividend, although paid out in the form of stock, is fruit or income and
therefore belonged to her as usufructuary or life tenant.
Respondents SIEFERT and ELIANOFF, as legal heirs of the deceased, opposed said petition on the ground that the stock dividend in
question was not income but formed part of the capital and therefore belonged not to the usufructuary but to the remainderman.
The lower court granted the petition of BACHRACH. HENCE, this appeal. While appellants admitted that a cash dividend is an income,
they contend that a stock dividend is not, but merely represents an addition to the invested capital.
ISSUE
Whether or not the 54,000 shares of stock dividends belong to the the usufructuary MARY MCDONALD BACHRACH.
RULING
YES, the shares belong to the usufructuary.
There are two rules applicable in the present case: the Massachussetts rule and the Pensylvannia rule. The Massachusetts supports
SEIFERT and ELIANOFF 's contention. The Pennsylvania rule on the other hand, supports the contention of BACHRACH.
The Massachusetts rule regards cash dividends, however large, as income, and stock dividends, however made, as capital. It holds that a
stock dividend is not in any true sense any dividend at all since it involves no division or severance from the corporate assets of the subject of

the dividend; that it does not distribute property but simply dilutes the shares as they existed before; and that it takes nothing from the property
of the corporation, and adds nothing to the interests of the shareholders.
The Pennsylvania rule declares that all earnings of the corporation made prior to the death of the testator stockholder belong to the
corpus of the estate, mid that all earnings, when declared as dividends ill whatever form, made during the lifetime of the usufructuary or life
tenant are income and belong to the usufructuary or life tenant.
The Supreme Court thought that the Pennsylvania rule was more in accord with our statutory laws than the Massachusetts rule. Under
section 16 of our Corporation Law, no corporation may make or declare any dividend except from the surplus profits arising from its business.
Any dividend, therefore, whether cash or stock, represents surplus profits. Article 566 (then Article 471) of the Civil Code provides that the
usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct.
The 108,000 shares of stock were part of the property in usufruct. The 54,000 shares of stock dividend were civil fruits of the original
investment. They represented profits, and the delivery of the certificate of stock covering said dividend is equivalent to the payment of said
profits. Said shares may be sold independently of the original shares, just as the offspring of a domestic animal may be sold independently of
its mother.

OROZCO vs. ALCANTARA

GR No. L-3691. November 21, 1951
A dividend, whether in the form of cash or stock, is income and, consequently, should go to the usufructuary, taking into
consideration that a stock dividend as well as a cash dividend can be declared only out of profits of the corporation, for if it were
declared out of the capital it would be a serious violation of the law.

FACTS
In 1922, Eugenio del Saz Orozco died, leaving a will which he had executed in 1921. It was afterwards duly admitted to probate. The
pertinent clause of that will provided that certain properties should be given in life usufruct to his son petitioner JACINTO DEL SAZ OROZCO Y
MORTERA, with the obligation on his part to preserve said properties in favor of the other heirs who were declared the naked owners thereof.
Among these properties were 5,714 shares of stock of the Benguet Consolidated Mining Company and 94 shares of stock of the Manila
Electric Company, according to the project of partition executed pursuant to said will and duly approved by the court.
In 1934, the Benguet Consolidated Mining Company declared and distributed stock dividends out of its surplus profits, the petitioner
OROZCO received his proportionate portion of 11,428 shares. In 1939, said Mining Company again declared stock dividends out of its surplus
profits, of which the OROZCO received 17,142 shares, making a total of 28,570 shares.
ISSUE
Whether the stock dividends should be preserved in favor of the owners or an income or fruits of the capital which should be given to and
enjoyed by the life usufructuary as his own exclusive property.
RULING
The stock dividends were income or fruits of the capital which should be given to and enjoyed by the life usufructuary, OROZCO as his
own exclusive property.
Citing the case of Bachrach vs. Seifert, a dividend, whether in the form of cash or stock, is income and, consequently, should go to the
usufructuary, taking into consideration that a stock dividend as well as a cash dividend can be declared only out of profits of the corporation, for
if it were declared out of the capital it would be a serious violation of the law.
Respondents SALVADOR ARANETA ET AL. attempted to differentiate the present case from the Bachrach case, contending that, while
the doctrine in that case effected a just and equitable distribution, the application of it in the present case would cause an injustice, for, quoting
Justice Holmes, "abstract propositions do not decide concrete cases."
One of the differences pointed out is that by the declaration of stock dividends the voting power of the original shares of stock is
considerably diminished, and, if the stock dividends are not given to the remaindermen, the voting power of the latter would be greatly
impaired. Bearing in mind that the number of shares of stock of the Benguet Consolidated Mining Company is so large, the diminution of the
voting power of the original shares of stock in this case cannot possibly affect or influence the control of the policies of the corporation which is
vested in the owners of the great block of shares. This would not be a sufficient reason for modifying the doctrine of the Bachrach case. These
remarks were made in answer to the argument of the appellees in this particular case, but they do not imply that if the diminution of the voting
power were considerable the doctrine should be modified.