USUFRUCT Explained

USUFRUCTS

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.

Characteristics of usufruct

(1) It is a real right (whether registered or not in the Registry of Property) of use and enjoyment

(2) It is of temporary duration

(3) It is transmissible

(4) It may be constituted on real or personal property, consumable or non-consumable, tangible or intangible, the ownership of which is vested in another.

Normal usufruct or that which involves non-consumable things which the usufructuary can enjoy without altering their form or substance, though they may deteriorate or diminish by time or by the use to which they are applied such as a house, a piece of land, furniture, etc. It is also known as perfect or regular usufruct.

Abnormal usufruct or that which involves things which would be useless to the usufructuary unless they are consumed or expended, such as money, grain, liquors.

It is also called imperfect, irregular, or quasiusufruct.

Creation of usufruct

(1) Legal or that created by law or declared by law, such as the usufruct of the parents over the property of their unemancipated children

(2) Voluntary or that created by will of the parties, either by act inter vivos, such as contract or donation, or by act mortis causa, such as in a last will and testament

(3) Mixed or that acquired by prescription, such as where one believing himself the owner of the property of an absentee, gave in his will the usufruct of the property to his wife and the naked ownership to his brother, and the wife possessed in good faith the property as usufructuary for the requisite prescriptive period.

As to extent of object:

(a) Total, if it is constituted on the whole of a thing

(b) Partial, if it is constituted only on a part of a thing

As to number of beneficiaries:

(a) Simple, if there is only one usufructuary; or

(b) Multiple, if there are several usufructuaries, and the latter may be:

1) Simultaneous (at the same time); or

2) Successive (one after another);

(3) As to effectivity or extinguishment:

(a) Pure, if there is no term or condition;

(b) With a term, if there is a period which may be either suspensive (from a certain day) or resolutory (up to a certain day); or

(c) Conditional, if it is subject to a condition which may be either suspensive (from the beginning of a certain event) or resolutory (until the happening of a certain event); and

(4) As to subject matter:

(a) Over things, if it involves tangible property; or

(b) Over rights, if it involves intangible property as rights are, but the rights must not be strictly personal or intransmissible; thus, the right to receive support cannot be the subject matter of usufruct.

RIGHTS OF THE USUFRUCTUARY

(1) As to the thing and its fruits:

(a) To receive the fruits of the property in usufruct and half of the hidden treasure he accidentally finds on the property. (natural, industrial and civil fruits)

 (b) To enjoy any increase which the thing in usufruct may acquire through accession.

(c) To personally enjoy the thing in usufruct or lease it to another.

(d) To make on the property in usufruct such improvements or expenses he may deem proper and to remove the improvements provided no damage is caused to the property.

 (e) To set-off the improvements he may have made on the property against any damage to the same

(f) To retain the thing until he is reimbursed for advances for extraordinary expenses and taxes on the capital.

(2) As to the usufruct itself:

(a) To alienate (or mortgage) the right of usufruct except parental usufruct.

(b) In a usufruct to recover property or a real right, to bring the action and to oblige the owner thereof to give him proper authority and necessary proof.

(c) In a usufruct of part of a common property, to exercise all the rights pertaining to the co-owner with respect to the administration and collection of fruits or interests from the property.

3) As to advances and damages:

(a) To be reimbursed for indispensable extraordinary repairs made by him in an amount equal to the increase in value which the property may have acquired by reason of such repairs.

(b) To be reimbursed for taxes on the capital advanced by him.

(c) To be indemnified for damages caused to him by the naked owner.

Right of usufructuary to pending natural and industrial fruits.

Fruits growing at beginning of usufruct. — They belong to the usufructuary who is not bound to refund to the owner the expenses of cultivation and production incurred.

Fruits growing at the termination of usufruct. — They belong to the owner but he is bound to reimburse the usufructuary the ordinary cultivation expenses out of the fruits received.

Rents are civil fruits. As they are deemed to accrue from day to day, they belong to the usufructuary in proportion to the time the usufruct may last.

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.

Art. 572. The usufructuary may personally enjoy the thing in usufruct, lease it to another, or alienate his right of usufruct, even by a gratuitous title; but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct, saving leases of rural lands, which shall be considered as subsisting during the agricultural year.

EXEMPTION:

1.       Legal usufruct of the parent over his or her unemancipated children cannot be alienated, pledged, or mortgaged.

2.       A usufruct given in consideration of the person of the usufructuary to last during his lifetime is also personal and, therefore, intransmissible.

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.

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

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 this 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.

Art. 579. The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance; but he shall have no right to be indemnified therefor. He may, however, remove such improvements, should it be possible to do so without damage to the property.

Art. 580. The usufructuary may set-off the improvements he may have made on the property against any damage to the same.

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.

OBLIGATIONS OF THE USUFRUCTUARY

 (1) Those before the usufruct begins:

(a) to make an inventory of the property

** Contents of inventory. — The inventory shall contain an itemized list and an appraisal of the movables and description of the condition of the immovables. The movables must be appraised because, compared to immovables, they are subject to greater danger of loss and deterioration.

(b) to give security

Purpose:  to insure the fulfillment by the usufructuary of the obligations imposed upon him including the duty to return to the owner the thing in usufruct upon the termination of the usufruct.

(2) Those during the usufruct

(a) to take care of the property

(b) to replace with the young thereof animals that die or are lost in certain cases when the usufruct is constituted on flock or herd of livestock

(c) to make ordinary repairs

(d) to notify the owner of urgent extraordinary repairs

(e) to permit works and improvements by the naked owner not prejudicial to the usufruct

(f) to pay annual taxes and charges on the fruits

(g) to pay interest on taxes on capital paid by the naked owner

(h) to pay debts when the usufruct is constituted on the whole of a patrimony

(i) to notify the owner of any prejudicial act committed by third persons

(j) to pay for court expenses and costs regarding usufruct

(3) Those at the termination of the usufruct

(a) to return the thing in usufruct to the naked owner unless there is a right of retention

(b) to pay legal interest for the time that the usufruct lasts, on the amount spent by the owner for extraordinary repairs and the proper interest on the sums paid as taxes by the owner

(c) to indemnify the naked owner for any losses due to his negligence or of his transferees.

Exemption to giving security

1.       donor who has reserved the usufruct of the property donated

2.       parental usufruct

3.       where the naked owner renounces or waives his right to the inventory or security

4.       where the title constituting the usufruct relieves the usufructuary from the obligation

5.       where the usufructuary asks that he be exempted from the obligation and no one will be injured thereby.

Art. 586. Should the usufructuary fail to give security in the cases in 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 to 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.

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.

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.

Art. 589. The usufructuary shall take care of the things given in usufruct as a good father of a family.

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.

If made by the usufructuary, he shall have the right to demand of the owner the payment provided the following requirements are present:

1.       He notified the owner of the urgency of the repairs

2.       The owner failed to make the repairs notwithstanding such notification

3.       The repair is necessary for the preservation of the property.

Right of retention. — The usufructuary, like a possessor in good faith  has the right of retention even after the termination of the usufruct until he is reimbursed for the increase in value of the property caused by extraordinary repairs for preservation.

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.

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.

EXTINGUISHMENT OF USUFRUCT

Art. 603. Usufruct is extinguished:

1.  By the death of the usufructuary, unless a contrary intention clearly appears;

2.  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

3.  By merger of the usufruct and ownership in the same person;

4.  By renunciation of the usufructuary;

5.  By the total loss of the thing in usufruct;

6.  By the termination of the right of the person constituting the usufruct;

7.  By prescription.

Art. 604. If the thing given in usufruct should be lost only in part, the right shall continue on the remaining part.

Art. 605. Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. If it has been constituted, and before the expiration of such period the town is abandoned, or the corporation or association is dissolved, the usufruct shall be extinguished by reason thereof.

Art. 606. A usufruct granted for the time that may elapse before a third person attains a certain age, shall subsist for the number of years specified, even if the third person should die before the period expires, unless such usufruct has been expressly granted only in consideration of the existence of such person.

Art. 607. 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.

Usufruct of land and materials of building. — The destruction of the building terminates the usufruct on the building but not the usufruct on the land. Therefore, the usufructuary is still entitled to the use of the land and in place of the building, the materials thereof. This is a case of partial loss.

Art. 609. Should the thing in usufruct be expropriated for public use, the owner shall be obliged either to replace it with another thing of the same value and of similar conditions, or to pay the usufructuary the legal interest on the amount of the indemnity for the whole period of the usufruct. If the owner chooses the latter alternative, he shall give security for the payment of the interest.

Art. 610. 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. 611. 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.

DONATION EXPLAINED

DONATION

Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.

Requisites of donation

1.       The donor must have capacity to make the donation of a thing or right.

2.       He must have the donative intent (animus donandi) or intent to make the donation out of liberality to benefit the done.

3.       There must be delivery, whether actual or constructive, of the thing or right donated.

4.       The donee must accept or consent to the donation.

KINDS OF DONATION

inter vivos or that which takes effect during the lifetime of the donor.

mortis causa or that which takes effect upon the death of the donor

propter nuptias or that made by reason of marriage and before its celebration, in consideration of the same, and in favor of one or both of the future spouses.

As to consideration:

pure or simple or that the cause of which is the pure liberality of the donor.

remuneratory or compensatory or that which is given out of gratitude on account of the services rendered by the donee to the donor, provided they do not constitute a demandable debt.

modal or that which imposes upon the donee a burden (e.g., services to be performed in the future) less than the value of the gift.

onerous or that the value of which is considered the equivalent of the consideration for which it is given or that made for a valuable consideration and is thus governed by the rules on obligations and contracts.

Art. 727. Illegal or impossible conditions in simple and remuneratory donations shall be considered as not imposed.

When condition is not deemed imposed.

the illegal or impossible condition in a simple or remuneratory donation would be deemed not imposed following the rule in testamentary dispositions.

When donation rendered void.

If the donation is onerous (or modal, as to its onerous portion), the illegal or impossible condition will render it void. Being contractual in nature, the rule applicable would be that found in Article 1183.

In case of doubt, the conveyance should be deemed donation mortis causa in order to avoid uncertainty as to the ownership of the property subject to the deed.  The legal principle enunciated in Article 1378 is that incase of doubt relative to a gratuitous contract, the construction must be that entailing “the least transmission of rights and interests.

Instances of donations inter vivos.

Donor warrants title to property over which she reserved lifetime usufruct.

Donation accepted by donees who were given limited right of disposition, with donor reserving beneficial ownership.

Donation was executed out of love and affection as well as a recognition of the personal services rendered by the donee.

Ownership and possession of property immediately transferred to donee but his right to fruits to begin only after donor’s death.

Donor states that he makes a perfect, irrevocable and consummated donation.

Donor and donee prohibited from alienating and encumbering the property.

Usufruct reserved by the donor.

Instances of donations mortis causa.

Registration of deed of donation prohibited.

Donation to take effect and pass title only by and because of death.

Donated properties to be delivered after donor’s death.

Right to dispose and enjoy reserved by donor.

Donation makes no actual conveyance.

Art. 734. The donation is perfected from the moment the donor knows of the acceptance by the donee.

 Necessity of acceptance. - Its absence makes the donation null and void. The acceptance

must be made during the lifetime of the donor and the donee.

Notice of acceptance. — Perfection takes place, not from the time of acceptance by the donee but from the time it is made known, actually or constructively, to the donor.

 Revocation before/after perfection. — If the donor revokes the donation before learning of the acceptance by the donee, there is no donation. Once a valid donation is perfected, it cannot be revoked without the consent of the donee except on grounds provided by law such as inofficiousness, failure of the donee to comply with the charges imposed in the donation or by reason of ingratitude.

Art. 735. All persons who may contract and dispose of their property may make a donation.

NO CAPACITY TO DISPOSE

Neither spouse may donate any community property nor conjugal partnership property without the consent of the other, except moderate donations for charity or on occasion of family rejoicing or family distress.

Art. 737. The donor’s capacity shall be determined as of the time of the making of the donation.

Making of donation – at the time of the perfection – knowledge of acceptance

Art. 739. The following donations shall be void:

(1) Those made between persons who were guilty of adultery or concubinage at the time of the donation;

(2) Those made between persons found guilty of the same criminal offense, in consideration thereof;

(3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office.

Art. 746. Acceptance must be made during the lifetime of the donor and of the donee.

Art. 748. The donation of a movable may be made orally or in writing.

An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated.

If the value of the personal property donated exceeds P5,000, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void.

Art. 749. In order that the donation of an immovable may be valid, it must be made in a public document

Donation and acceptance are in same instrument. — The requirements are:

(a) The donation must be in a public document or instrument;

(b) The instrument must specify the property donated and the charges, if any, which the donee must satisfy.

Donation and acceptance are in separate instruments. — If the acceptance does not appear in the same document, it must be made in another. The requirements are:

(a) The donation must be in a public document or instrument;

(b) The instrument must specify the property donated and the charges, if any, which the donee must satisfy;

(c) The acceptance by the donee must be in a public document;

(d) It must be done during the lifetime of the donor;

(e) The donor must be notified in authentic form of the acceptance of the donation in a separate instrument

(f) The fact that such notification has been made must be noted in both instruments.

Art. 750. The donation may comprehend all the present property of the donor, or part thereof, provided

he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced on petition of any person affected.

Present property means property which the donor can rightfully dispose of at the time of the donation.

Art. 754. The donee is subrogated to all the rights and actions which in case of eviction would pertain to the donor. The latter, on the other hand, is not obliged to warrant the things donated, save when the donation is onerous, in which case, the donor shall be liable for eviction to the concurrence of the burden.

The donor shall be liable for eviction or hidden defects in case of bad faith on his part.

Art. 758. When the donation imposes upon the done the obligation to pay the debts of the donor, if the clause does not contain any declaration to the contrary, the former is understood to be liable to pay only the debts which appear to have been previously contracted. In no case shall the donee be responsible for debts exceeding the value of the property donated, unless a contrary intention clearly appears.

Where donor imposes obligation upon the donee.

(a) The donee is liable to pay only debts previously contracted;

(b) He is liable for subsequent debts only when there is a stipulation to that effect; and

(c) He is not liable for debts in excess of the value of the donation received, unless the contrary is intended.

Art. 759. There being no stipulation regarding the payment of debts, the donee shall be responsible therefore only when the donation has been made in fraud of creditors.

The donation is always presumed to be in fraud of creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation.

Where there is no stipulation regarding the payment of debts

The donee is generally not liable to pay the donor’s debts

He is responsible therefor only if the donation has been made in fraud of creditors which is always presumed.

He is not liable beyond the value of the donation received.

REVOCATION AND REDUCTION OF DONATIONS

Revocation. — This affects the whole donation and is allowed during the lifetime of the donor. The grounds are:

Birth, appearance, or adoption of a child

 Non-fulfillment of a resolutory condition imposed by the donor

 Ingratitude of the donee.

Reduction. — This generally affects a portion only of the donation (unless the donee has no free portion left) and is allowed during the lifetime of the donor or after his death. The grounds are:

 Failure of the donor to reserve sufficient means for support of himself or dependent relatives

Failure of the donor to reserve sufficient property to pay off his existing debts

Inofficiousness, that is, the donation exceeds that which the donor can give by will

Birth, appearance, or adoption of a child.

Obligation of donee upon revocation or reduction.

1.  If the property affected is still in his possession, he must return the same.

2.  If he has sold the property, he must give its value.

3. If the property has been mortgaged by him, and the donor redeemed the mortgage, he must reimburse the donor.

4.  If the property cannot be returned, as when it has been lost or destroyed, he must return its value at the time (of the perfection) of the donation.

Art. 764. The donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed upon the latter.

In this case, the property donated shall be returned to the donor, the alienations made by the donee and the mortgages imposed thereon by him being void, with the limitations established, with regard to third persons, by the Mortgage Law and the Land Registration Laws.

This action shall prescribe after four years from the non-compliance with the condition, may be transmitted to the heirs of the donor, and may be exercised against the donee’s heirs.

Art. 765. The donation may also be revoked at the instance of the donor, by reason of ingratitude in the following cases:

1.  If the donee should commit some offense against the person, the honor or the property of the donor, or of his wife or children under his parental authority;

2.  If the donee imputes to the donor any criminal offense, or any act involving moral turpitude; even though he should prove it, unless the crime or the act has been committed against the donee himself, his wife or children under his authority;

3.  If he unduly refuses him support when the donee is legally or morally bound to give support to the donor.                     

Art. 770. This action shall not be transmitted to the heirs of the donor, if the latter did not institute the same, although he could have done so, and even if he should die before the expiration of one year.

Neither can this action be brought against the heir of the donee, unless upon the latter’s death the complaint has been filed.    

General Rule:  The action to revoke a donation by reason of ingratitude is purely personal to the donor.

Exemption:

(a) If the donee killed the donor, the latter’s heirs can ask for revocation.

(b) The heirs may also do so if the donor dies without having known of the act of ingratitude.

(c) If a criminal case against the donee was instituted by the donor, but the donor dies before he could bring the civil action for revocation, his heirs may likewise bring action because in such case, the intent of the donor not to pardon the donee is quite clear.   

(d) If the action for revocation has already been filed by the donor before his death, his heirs are allowed to continue the same.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Art. 773. If, there being two or more donations, the disposable portion is not sufficient to cover all of them, those of the more recent date shall be suppressed or reduced with regard to the excess.

1.       The subsequent donations shall first be reduced and only if they are not sufficient to cover the disposable portion should the earlier ones be reduced also with regard to the excess.

2.        If the two donations were perfected at the same time, the reduction should be proportionate unless otherwise provided by the donor.