National Housing Authority v. Court of Appeals

d. Extinguishment of the Usufruct — Usufruct in favor of juridical or non-juridical entities (Art. 605)

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Case DigestChapter VI — Usufruct

National Housing Authority v. Court of Appeals

G.R. No. 148830 · April 13, 2005 · Supreme Court

d. Extinguishment of the Usufruct — Usufruct in favor of juridical or non-juridical entities (Art. 605)

Gist

Proclamation No. 1670 carved seven hectares out of the National Government Center site and gave the Manila Seedling Bank Foundation a usufruct over it, the exact location to be fixed by a future survey. MSBF spread over sixteen hectares and leased part of the excess to Bulacan Garden Corporation, which the NHA then demolished. The Supreme Court set aside the Court of Appeals and remanded for a joint survey — and added, as a final point, that a usufruct in favour of a corporation or association cannot exceed fifty years, leaving MSBF twenty-two.

Core Doctrine

Two holdings. On the grant: Article 565 makes the title constituting the usufruct the source of the usufructuary's rights, so where the proclamation left the location to a "future survey under the administration of the Foundation," MSBF had the latitude to choose — but "MSBF's rights begin and end within the seven-hectare portion of its usufruct," and a usufructuary owes the owner duties, not merely privileges. On duration: Article 605 provides that "usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years," because unlike a natural person such an entity's lifetime may be extended indefinitely and the usufruct would become perpetual — "especially invidious in cases where the usufruct given to a corporation or association covers public land."

Facts

On 24 October 1968, Proclamation No. 481 set aside a 120-hectare portion of land in Quezon City owned by the NHA, under TCT No. 309814, as reserved property for the site of the National Government Center.
On 19 September 1977, Proclamation No. 1670 removed a seven-hectare portion from the NGC's coverage and reserved it for the Manila Seedling Bank Foundation, Inc. "for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation," the parcel "shall embrace 7 hectares" and "shall be determined by the future survey" based on the technical descriptions in Proclamation No. 481. This proclamation is the title constituting the usufruct, and its date is what later fixes the fifty-year clock under Article 605 — 1977 plus 50 gives 2027.
MSBF occupied the granted area, and over the years its occupancy exceeded the seven hectares; by 1987 it occupied approximately 16 hectares, bounded by EDSA to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north. This encroachment is what the Court says "gave birth to the confusion that attended this case" — and it is why the ruling goes against MSBF as well as against the NHA.
On 18 August 1987, MSBF leased a portion to Bulacan Garden Corporation and other stallholders; BGC took the portion facing EDSA, occupying 4,590 square meters of the 16-hectare area. (Whether that 4,590 sq m sits inside or outside the seven hectares is the whole case: a usufructuary may lease, and the owner must respect the lease — but only within the usufruct.)
On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127, revoking the reserved status of "the 50 hectares, more or less, remaining out of the 120 hectares" and authorising the NHA to commercialize the area and sell it to the public. (MO 127 does not touch MSBF's seven hectares, which Proclamation No. 1670 had already excluded from Proclamation No. 481's operation.)
On 15 August 1988, acting under MO 127, the NHA gave BGC ten days to vacate, warning that any structure left behind would be demolished; BGC filed its complaint for injunction on 21 April 1988 and amended it on 26 May 1988 to add MSBF as co-plaintiff. (As the decision records them, the demand post-dates the complaint it supposedly provoked — the dates are reproduced here as the Court states them.)
The trial court (Branch 87, RTC Quezon City, Judge Elsie Ligot Telan, Civil Case No. Q-53464) agreed that Proclamation No. 1670 gave MSBF the right to conduct the survey, but held MSBF had failed to act seasonably, dismissed its two surveys as covering 16 hectares and therefore inappropriate, and concluded that letting MSBF fix the area now "would be grossly unfair to the grantor of the usufruct." On 8 March 1994 it dismissed BGC's complaint, while denying the suggestion that MO 127 had repealed Proclamation No. 1670, and the NHA demolished BGC's facilities soon thereafter — the ground on which BGC later argued the case had become moot.
On 30 March 2001 the Court of Appeals reversed, holding that MSBF had in fact asserted its right by conducting two surveys and erecting its main structures in the area of its choice, and enjoined the NHA from demolishing BGC's structures during the life of its lease. Reconsideration was denied 25 June 2001.
The surveys were the heart of the dispute. Ben Malto, MSBF's surveyor, measured from Quezon Avenue northward along EDSA to the creek, because MSBF's main facilities lie there; Rogelio Inobaya, the NHA's geodetic engineer, measured from Quezon Avenue towards Agham Road, because he saw MSBF's gate fronting Agham Road. (MSBF's General Manager Lucito M. Bertol admitted on cross that he did not personally know the exact boundaries and that MSBF prepared its map without consulting the NHA, the owner. Malto's surveys — 1984 and 1986 — were both of 16 hectares, only the second shading a seven-hectare portion in yellow.)

Issue

Whether the premises leased by BGC from MSBF lie within the seven-hectare area that Proclamation No. 1670 granted to MSBF by way of usufruct — the NHA having the right to evict only if the leased portion falls outside it.

Secondary issues. Whether the petition had become moot by reason of the demolition of BGC's structures; and, as a final point, whether the usufruct granted to MSBF, a foundation, is subject to the fifty-year limit in Article 605 of the Civil Code.

Ruling

Main issue. Neither survey prevails — the case is remanded for a joint survey, though on the merits MSBF's method is the better one. A usufructuary may lease the object held in usufruct, and "the owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists"; hence "the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by MSBF," but "the NHA has the right to evict BGC if BGC occupied a portion outside" it. Under Article 565 the usufructuary's rights are "those provided in the title constituting the usufruct," and "Proclamation No. 1670 is the title." Because it both authorised MSBF to determine the location and left that location unstated, it "leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose" — so the trial court's dismissal of MSBF's two surveys as self-serving was "clearly an error," those surveys having been made in 1984 and 1986, long before the controversy and before the lease to BGC. On the merits of the two methods, MSBF's is better grounded: its main office, three green houses, warehouse and composting area all fall within its delineation, while the NHA's would capture only "the four hardening bays and the display area" and would "strip MSBF of most of its main facilities"; and Inobaya's reliance on the position of a gate "is not a sufficient basis to determine the starting point," since MSBF's right "should rest on something more substantial than where MSBF chose to place a gate." But the Court refuses to simply pick a survey. MSBF may not be indulged either: "this Court cannot countenance MSBF's act of exceeding the seven-hectare portion," it has "abused the privilege given it," and "MSBF's rights begin and end within the seven-hectare portion of its usufruct" — a usufructuary owes the owner duties, not only privileges. The area being "no longer easily determinable," there is "a need for a new survey, one conducted jointly by the NHA and MSBF," which "should consider existing structures" and include as many of MSBF's facilities as possible "without sacrificing contiguity."

Secondary issues. Not moot — and YES, the fifty-year cap applies, leaving 22 years. On mootness: "BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not," the issue having "a direct effect on MSBF's usufructuary rights"; the exact location of the seven hectares must be settled "to forestall future disputes and to put this 20-year litigation to rest." On duration, raised by the Court as "a final point": Article 605 provides that "usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years," and extinguishes it earlier if the corporation or association is dissolved. "A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association's lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land." Proclamation No. 1670 having issued 19 September 1977, "28 years ago," the usufruct "has 22 years left." MO 127 does not shorten it: the seven hectares had already been "exclude[d] from the operation of Proclamation No. 481."

"WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City, which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670. The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval within sixty days from the date ordering the joint survey. SO ORDERED."

Ratio

Not moot. "BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not." The issue "has a direct effect on MSBF's usufructuary rights," and there remains "the central question of the exact location of the seven-hectare area," which must be settled "to forestall future disputes and to put this 20-year litigation to rest."
Why a factual question is reached at all. Rule 45 limits the Court to errors of law and it will not normally disturb findings of fact — but the matter "deserves resolution because the findings of the trial court and the appellate court conflict on several points."
The lease is protected, but only inside the grant. A usufruct "may be constituted for a specified term and under such conditions as the parties may deem convenient," a usufructuary "may lease the object held in usufruct", and "the owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists." Hence "the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area" — but "the NHA has the right to evict BGC if BGC occupied a portion outside" it.
The title governs. Article 565: "The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct." "In the present case, Proclamation No. 1670 is the title constituting the usufruct," and it states that the seven hectares "shall be determined 'by future survey under the administration of the Foundation subject to private rights if there be any.'"
MSBF had the right to choose the location. The proclamation's authority to determine the area, "coupled with the fact that Proclamation No. 1670 did not state the location... leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct." The trial court, "[c]onfronted with evidence that MSBF did in fact conduct two surveys,... dismissed the two surveys as self-serving. This is clearly an error on the part of the trial court." The surveys were made in 1984 and 1986, "way before the present controversy started" and before the lease to BGC.
MSBF's survey is the better-founded one. Its delineation contains MSBF's "main office, the three green houses, the warehouse and the composting area" — "buildings and facilities that MSBF needs for its operations," built before the controversy — whereas the NHA's would cover only "the four hardening bays and the display area," facilities "less essential to MSBF's existence." "This distinction is decisive as to which survey should prevail." Inobaya's starting point was chosen because of a gate, and "[t]he location of the gate is not a sufficient basis to determine the starting point"; MSBF's right "should rest on something more substantial than where MSBF chose to place a gate." Preferring the NHA's survey "will strip MSBF of most of its main facilities."
But MSBF is not indulged either. "[T]his Court cannot countenance MSBF's act of exceeding the seven-hectare portion granted to it." "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests" — Article 601 — and a usufruct is a right to enjoy "the property of another". "This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBF's encroachment of its benefactor's property gave birth to the confusion that attended this case."
Hence the remand rather than a choice. "MSBF's rights begin and end within the seven-hectare portion of its usufruct," and "[t]he direct corollary of enforcing MSBF's rights within the seven-hectare area is the negation of any of MSBF's acts beyond it." The portion being "no longer easily determinable considering the varied structures erected within and surrounding the area," "[t]here is a need for a new survey, one conducted jointly by the NHA and MSBF," which "should consider existing structures of MSBF" and "as much as possible include all of the facilities of MSBF within the seven-hectare portion without sacrificing contiguity."
A final point — the fifty-year cap. Article 605: "Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years." "The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association's lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land." Proclamation No. 1670 issued 19 September 1977, "or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left."
MO 127 is irrelevant to the seven hectares. It released roughly 50 hectares of NHA property from the NGC reservation, "[h]owever, MO 127 does not affect MSBF's seven-hectare area since under Proclamation No. 1670, MSBF's seven-hectare area was already 'exclude[d] from the operation of Proclamation No. 481.'"

Doctrine

The Fifty-Year Rule for Juridical Entities (Art. 605): A usufruct in favour of a town, corporation or association cannot exceed fifty years; and it is extinguished earlier if the town is abandoned or the entity dissolved before the period runs.
Rationale — No Perpetual Usufructs: "A usufruct is meant only as a lifetime grant." A juridical entity's life may be extended indefinitely, so an uncapped grant "would then be perpetual" — "especially invidious" where it covers public land.
The Title Constituting the Usufruct Governs (Art. 565): The usufructuary's rights and obligations are "those provided in the title constituting the usufruct." Where the title leaves the location of the grant to a survey "under the administration" of the grantee, the grantee has the latitude to choose it.
The Right to Lease (Art. 572): A usufructuary may lease the object held in usufruct, and "[t]he owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists" — but only as to the portion actually held in usufruct.
The Usufructuary's Duty (Art. 601): "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests," and must respect the limits of the beneficial use granted. Rights "begin and end" within the grant.

Two limits worth carrying forward. The Court declined to choose between the parties' surveys and ordered a joint one, directing that the seven hectares be contiguous and include as much of MSBF's existing major improvements as possible. And MO 127, which released the remaining NGC land for commercialisation, had no effect on the seven hectares, those having already been excluded from Proclamation No. 481 by Proclamation No. 1670.

Full Digest — Recitation Format

I. Gist and Central Doctrine

Relationship to requested topic: DIRECT. This is a petition for review under Rule 45 to set aside the Court of Appeals' decision of 30 March 2001, which had reversed the RTC of Quezon City, Branch 87 and enjoined the NHA from demolishing the facilities of Bulacan Garden Corporation on land leased from the Manila Seedling Bank Foundation, Inc. MSBF held a usufruct over a seven-hectare portion under Proclamation No. 1670, but had spread over roughly sixteen hectares. The Supreme Court set the CA decision aside and remanded for a joint survey, holding that under Article 565 the proclamation is the title constituting the usufruct and left the location to MSBF's choice, but that "MSBF's rights begin and end within the seven-hectare portion of its usufruct." As "a final point," the Court applied Article 605: a usufruct in favour of a corporation or association cannot exceed fifty years, since such an entity's "lifetime may be extended indefinitely" and the usufruct "would then be perpetual" — leaving MSBF's grant, issued in 1977, with 22 years to run.

II. Chronological Narration of Material Facts

On 24 October 1968, Proclamation No. 481 issued by President Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA as reserved property for the site of the National Government Center.
On 19 September 1977, Proclamation No. 1670 removed a seven-hectare portion from the NGC's coverage and reserved it for the Manila Seedling Bank Foundation, Inc., "for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation," the parcel to "embrace 7 hectares" as "determined by the future survey."
MSBF occupied the granted area; over the years its occupancy exceeded seven hectares, and by 1987 it occupied approximately 16 hectares, bounded by EDSA to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north.
On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders; BGC took the portion facing EDSA, occupying 4,590 square meters of the 16-hectare area.
On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127, revoking the reserved status of "the 50 hectares, more or less, remaining out of the 120 hectares of the NHA property reserved as site of the National Government Center," and authorising the NHA to commercialize the area and sell it to the public.
On 15 August 1988, acting under MO 127, the NHA gave BGC ten days to vacate, any structure left behind to be demolished. BGC filed its complaint for injunction on 21 April 1988 before the trial court, and on 26 May 1988 amended it to include MSBF as co-plaintiff.
The trial court agreed that Proclamation No. 1670 gave MSBF the right to conduct the survey establishing the seven-hectare area, but held MSBF "failed to act seasonably"; it found the previous MSBF surveys covered 16 hectares and were "thus inappropriate to determine the seven-hectare area," and concluded that allowing MSBF to fix the area now "would be grossly unfair to the grantor of the usufruct."
On 8 March 1994, the trial court dismissed BGC's complaint for injunction, while denying the suggestion that MO 127 had repealed Proclamation No. 1670. "The NHA demolished BGC's facilities soon thereafter."
On 30 March 2001, the Court of Appeals reversed, holding that MSBF "did in fact assert this right by conducting two surveys and erecting its main structures in the area of its choice," and enjoined the NHA from demolishing BGC's structures during the life of its lease with MSBF. On 25 June 2001 it denied reconsideration.
On the surveys: Ben Malto, a registered forester and MSBF's Assistant Vice-President for Planning, Research and Marketing, measured from Quezon Avenue northward along EDSA to the creek, his method resting on the fact that MSBF's main facilities lie in that area; he had conducted surveys in 1984 and 1986, both covering 16 hectares, with only the second asked to determine the seven-hectare portion.
Rogelio Inobaya, a geodetic engineer of the NHA's Survey Division, surveyed in May 1988 using the same technical descriptions, reached the same 16-hectare total, and measured the seven hectares from Quezon Avenue towards Agham Road because he saw MSBF's gate fronting Agham Road; he testified that the seven-hectare portion on MSBF's map "does not tally with the boundaries BGC and MSBF indicated in their complaint."
Lucito M. Bertol, MSBF's General Manager, presented the map with the seven-hectare area shaded yellow; it was clear from map and testimony "that MSBF knew that it had occupied an area in excess of the seven-hectare area," and on cross-examination he admitted he "personally did not know the exact boundaries" and that MSBF prepared the map "without consulting NHA, the owner of the property."
On 13 April 2005, the Supreme Court set aside the CA's decision and resolution and remanded the case for a joint survey.

III. Arguments of the Parties

A. Petitioner (National Housing Authority)

The NHA maintained that BGC occupied a portion outside the seven hectares granted to MSBF, so that as owner of the land it was entitled to evict BGC and demolish its structures; its own survey, measured from Quezon Avenue towards Agham Road, placed BGC's stall outside the usufruct.

B. Respondents (BGC and MSBF)

BGC argued first that the petition had become moot, its facilities having already been demolished, so that "there is nothing more to enjoin and... there are no longer any rights left for adjudication." On the merits, respondents contended that Proclamation No. 1670 gave MSBF the latitude to determine the location of the seven hectares, that MSBF had exercised that right through its 1984 and 1986 surveys and by erecting its main structures there, and that a usufructuary may lease the property with the owner bound to respect the lease.

C. Common Ground

Both surveyors worked from the same technical descriptions and both concluded that the area MSBF actually occupied totals about 16 hectares. Neither side disputed that Proclamation No. 1670 is the instrument constituting the usufruct or that the grant is limited to seven hectares.

IV. Issues

A. MAIN ISSUE

Whether the premises leased by BGC from MSBF are within the seven-hectare area that Proclamation No. 1670 granted to MSBF by way of usufruct.

B. SECONDARY ISSUES

Whether the petition is moot because of the demolition of BGC's structures; and — raised by the Court as "a final point" — whether the usufruct granted to MSBF is subject to the fifty-year limit in Article 605.

V. Ruling / Disposition

A. MAIN ISSUE

Neither survey is adopted; the case is remanded for a joint survey — though MSBF's method is the better founded. "[T]he NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists. However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-hectare area." Under Article 565, "Proclamation No. 1670 is the title constituting the usufruct," and it "left it to MSBF to choose the location of the seven-hectare area"; the trial court's dismissal of MSBF's two surveys as self-serving "is clearly an error." MSBF's delineation contains its main office, three green houses, warehouse and composting area, and "[t]his distinction is decisive as to which survey should prevail"; Inobaya's gate-based starting point "is not a sufficient basis." But "this Court cannot countenance MSBF's act of exceeding the seven-hectare portion" — "MSBF's rights begin and end within the seven-hectare portion of its usufruct" — so "[t]here is a need for a new survey, one conducted jointly by the NHA and MSBF."

B. SECONDARY ISSUES

Not moot, and YES, the fifty-year cap applies with 22 years remaining. "BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not"; the issue must be settled "to forestall future disputes and to put this 20-year litigation to rest." As to duration, Article 605 provides that "[u]sufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years." "A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association's lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land." Proclamation No. 1670 having issued 19 September 1977, "or 28 years ago... the usufruct in favor of MSBF has 22 years left." MO 127 does not affect the seven hectares, already excluded from Proclamation No. 481.

"WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City, which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670. The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval within sixty days from the date ordering the joint survey. SO ORDERED."

VI. Ratio Decidendi and Doctrines

A. Ratio Decidendi

Mootness rejected. "BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not. The issue for resolution has a direct effect on MSBF's usufructuary rights." The central question of location "is squarely raised in this petition," and must be settled "to forestall future disputes and to put this 20-year litigation to rest."
Why a factual question is entertained. Rule 45 confines the Court to errors of law and it will not disturb findings of fact absent an established exception, but the matter "deserves resolution because the findings of the trial court and the appellate court conflict on several points."
The usufructuary's lease binds the owner — within the grant. "A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct. A usufructuary may lease the object held in usufruct" (Art. 572), and "[t]he owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists."
Article 565 makes the proclamation the governing instrument. "The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct." "In the present case, Proclamation No. 1670 is the title constituting the usufruct," and it states the seven hectares "shall be determined 'by future survey under the administration of the Foundation subject to private rights if there be any.'"
MSBF had the right to choose, and exercised it in time. The proclamation's grant of authority "coupled with the fact that Proclamation No. 1670 did not state the location of the seven-hectare area, leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose." MSBF "conducted at least two surveys" — 1984 and 1986 — "way before the present controversy started" and before the lease to BGC; the trial court's dismissal of them as self-serving "is clearly an error."
Why MSBF's survey is better founded. Its delineation holds "the main office, the three green houses, the warehouse and the composting area" — "buildings and facilities that MSBF needs for its operations" — while the NHA's would cover only "the four hardening bays and the display area," which are "less essential to MSBF's existence." "This distinction is decisive as to which survey should prevail." Inobaya's starting point rested on a gate, and "[t]he location of the gate is not a sufficient basis to determine the starting point"; MSBF's right "should rest on something more substantial than where MSBF chose to place a gate." The NHA's survey "will strip MSBF of most of its main facilities."
MSBF's encroachment is condemned. "[T]his Court cannot countenance MSBF's act of exceeding the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests" — Article 601 — and usufruct "gives a right to enjoy the property of another". "This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBF's encroachment of its benefactor's property gave birth to the confusion that attended this case."
Hence a remand, not a choice of surveys. "MSBF, for its part, must vacate the area that is not part of its usufruct. MSBF's rights begin and end within the seven-hectare portion of its usufruct," and "[t]he direct corollary of enforcing MSBF's rights within the seven-hectare area is the negation of any of MSBF's acts beyond it." The portion being "no longer easily determinable," "[t]here is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all doubts on the exact location," which "should consider existing structures of MSBF" and include as many of its facilities as possible "without sacrificing contiguity."
A final point: Article 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." "The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association's lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land." Proclamation No. 1670 having issued 19 September 1977, "or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left."
MO 127 leaves the grant untouched. It "released approximately 50 hectares of the NHA property as reserved site for the National Government Center. However, MO 127 does not affect MSBF's seven-hectare area since under Proclamation No. 1670, MSBF's seven-hectare area was already 'exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site.'"

B. Doctrines/Rules

The 50-Year Rule for Juridical Persons (Art. 605): A usufruct in favour of a town, corporation or association is limited to fifty years, and is extinguished sooner if the town is abandoned or the entity dissolved within the period.
Rationale: "A usufruct is meant only as a lifetime grant"; a juridical entity has no natural lifetime, so without the cap the usufruct "would then be perpetual" — "especially invidious" where public land is involved.
Primacy of the Title (Art. 565): The usufructuary's rights and obligations are those in the title constituting the usufruct; where the title leaves the grant's location to a survey under the grantee's administration, the grantee chooses the location.
The Right to Lease (Art. 572): A usufructuary may lease the object held in usufruct, and the owner "must respect the lease... so long as the usufruct exists" — but only as to the area actually held.
The Usufructuary's Duty (Art. 601): "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests," and must keep within the beneficial use granted.

C. Limitations/Exceptions

The Court declined to adopt either party's survey, ordering instead a joint survey that "should consider existing structures of MSBF" and include as much of its facilities as possible "without sacrificing contiguity," to be submitted for the trial court's approval within sixty days.
MO 127 did not shorten or defeat the grant, MSBF's seven hectares having already been excluded from Proclamation No. 481's operation.
The fifty-year cap in Article 605 speaks to towns, corporations and associations; it does not by its terms reach a usufruct in favour of a natural person, whose own lifetime supplies the limit.

D. Topic Integration

The relationship is DIRECT.
This case is the definitive Philippine application of "Usufruct in favor of juridical or non-juridical entities (Art. 605)," fixing the hard fifty-year ceiling on corporate usufructs and giving the reason: a juridical entity can outlive any natural term, so an uncapped grant becomes a de facto alienation of the property through perpetual beneficial use.
Note where the holding sits in the judgment. The Art. 605 discussion is raised by the Court itself as "a final point" — neither party had put duration in issue — which is worth remembering when reciting the case's issues.
It pairs naturally with Baluran and Moralidad on the other side of the same coin: those cases end a usufruct by the parties' own stipulated condition, while this one ends it by operation of law, on a term the grantor could not have extended even if it wished.
It also teaches that a usufructuary's position is not purely beneficial. Read with Article 601 and Article 562, the case holds that rights "begin and end" within the grant, and that encroaching beyond it is not an enlarged right but a trespass on the naked owner's land.

VII. Separate Opinions

NOT IN RECORD. The decision was penned by Justice Antonio T. Carpio, with Chief Justice Davide, Jr. (Chairman) and Justices Quisumbing, Ynares-Santiago and Azcuna concurring.

Cited Laws & Provisions

Every statute, rule, and issuance the decision turns on — the text as written, and the work it does in this case.

Civil Code

Article 605, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 4 (Extinguishment of Usufruct)

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. (515a)

Why it is cited here

The fifty-year cap, and the reason for it. "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."

The rationale is structural. "A usufruct is meant only as a lifetime grant," and a natural person's lifetime supplies its own limit. A corporation's does not — its "lifetime may be extended indefinitely," so an uncapped grant "would then be perpetual," which is "especially invidious in cases where the usufruct given to a corporation or association covers public land."

Note what the article adds beyond the cap: dissolution of the entity before the fifty years run also extinguishes the usufruct. So there are two termination triggers here, one temporal and one existential.

Applied: Proclamation No. 1670 issued 19 September 1977, so as of the 2005 decision the usufruct had 22 years left — expiring in 2027. The Court raised this on its own, as "a final point"; neither party had put duration in issue.

Civil Code

Article 565, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 1 (Usufruct in General)

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. (470)

Why it is cited here

The provision that makes the proclamation the governing instrument. "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."

Here "Proclamation No. 1670 is the title constituting the usufruct," and it "categorically states that the seven-hectare area shall be determined 'by future survey under the administration of the Foundation subject to private rights if there be any.'"

That single clause decides the survey dispute. Because the proclamation both authorised MSBF to determine the location and left the location unstated, it "leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct" — which is why the trial court erred in brushing MSBF's two surveys aside as self-serving.

Civil Code

Article 601, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 3 (Obligations of the Usufructuary)

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. (511)

Why it is cited here

The counterweight the Court invokes against MSBF. "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."

It is cited for a proposition broader than its letter: "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests."

That framing is what lets the Court rule against both sides in the same breath — the NHA may not evict a lessee inside the seven hectares, but MSBF "must vacate the area that is not part of its usufruct," having "abused the privilege given it." The encroachment "gave birth to the confusion that attended this case."

Civil Code

Article 572, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 2 (Rights of the Usufructuary)

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. (480)

Why it is cited here

The rule that made BGC's lease worth litigating over. A usufructuary may lease the thing held in usufruct — the Court states it flatly ("A usufructuary may lease the object held in usufruct") on a footnote citation, and draws the consequence: "The owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists."

So the lease is not merely permitted; it binds the naked owner for the life of the usufruct. That is why the outcome turns entirely on location: "the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area," but "the NHA has the right to evict BGC if BGC occupied a portion outside" it.

Read this together with Article 605: the lease is protected only "so long as the usufruct exists," and for a corporate usufructuary that is at most fifty years.

Civil Code

Article 562, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 1 (Usufruct in General)

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. (467)

Why it is cited here

The definition the Court returns to when it turns from MSBF's rights to MSBF's duties: a 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."

The phrase doing the work is "the property of another." The naked owner here is the NHA, holding under TCT No. 309814, and the seven hectares remained its land throughout. A usufructuary who spreads over sixteen hectares is not exercising a larger right; he is occupying somebody else's property without any right at all.

Cited laws & provisions

Article 605, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 4 (Extinguishment of Usufruct)

Why it is cited here

Full entry below ↓

Article 565, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 1 (Usufruct in General)

Why it is cited here

Full entry below ↓

Article 601, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 3 (Obligations of the Usufructuary)

Why it is cited here

It is cited for a proposition broader than its letter: "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests."

Full entry below ↓

Article 572, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 2 (Rights of the Usufructuary)

Why it is cited here

Read this together with Article 605: the lease is protected only "so long as the usufruct exists," and for a corporate usufructuary that is at most fifty years.

Full entry below ↓

Article 562, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book II (Property, Ownership, and Its Modifications), Title VI (Usufruct), Chapter 1 (Usufruct in General)

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. (467)

Why it is cited here

Full entry below ↓

Facts

On 24 October 1968, Proclamation No. 481 set aside a 120-hectare portion of land in Quezon City owned by the NHA, under TCT No. 309814, as reserved property for the site of the National Government Center.
On 19 September 1977, Proclamation No. 1670 removed a seven-hectare portion from the NGC's coverage and reserved it for the Manila Seedling Bank Foundation, Inc. "for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation," the parcel "shall embrace 7 hectares" and "shall be determined by the future survey" based on the technical descriptions in Proclamation No. 481. This proclamation is the title constituting the usufruct, and its date is what later fixes the fifty-year clock under Article 605 — 1977 plus 50 gives 2027.
MSBF occupied the granted area, and over the years its occupancy exceeded the seven hectares; by 1987 it occupied approximately 16 hectares, bounded by EDSA to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north. This encroachment is what the Court says "gave birth to the confusion that attended this case" — and it is why the ruling goes against MSBF as well as against the NHA.
On 18 August 1987, MSBF leased a portion to Bulacan Garden Corporation and other stallholders; BGC took the portion facing EDSA, occupying 4,590 square meters of the 16-hectare area. (Whether that 4,590 sq m sits inside or outside the seven hectares is the whole case: a usufructuary may lease, and the owner must respect the lease — but only within the usufruct.)
On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127, revoking the reserved status of "the 50 hectares, more or less, remaining out of the 120 hectares" and authorising the NHA to commercialize the area and sell it to the public. (MO 127 does not touch MSBF's seven hectares, which Proclamation No. 1670 had already excluded from Proclamation No. 481's operation.)
On 15 August 1988, acting under MO 127, the NHA gave BGC ten days to vacate, warning that any structure left behind would be demolished; BGC filed its complaint for injunction on 21 April 1988 and amended it on 26 May 1988 to add MSBF as co-plaintiff. (As the decision records them, the demand post-dates the complaint it supposedly provoked — the dates are reproduced here as the Court states them.)
The trial court (Branch 87, RTC Quezon City, Judge Elsie Ligot Telan, Civil Case No. Q-53464) agreed that Proclamation No. 1670 gave MSBF the right to conduct the survey, but held MSBF had failed to act seasonably, dismissed its two surveys as covering 16 hectares and therefore inappropriate, and concluded that letting MSBF fix the area now "would be grossly unfair to the grantor of the usufruct." On 8 March 1994 it dismissed BGC's complaint, while denying the suggestion that MO 127 had repealed Proclamation No. 1670, and the NHA demolished BGC's facilities soon thereafter — the ground on which BGC later argued the case had become moot.
On 30 March 2001 the Court of Appeals reversed, holding that MSBF had in fact asserted its right by conducting two surveys and erecting its main structures in the area of its choice, and enjoined the NHA from demolishing BGC's structures during the life of its lease. Reconsideration was denied 25 June 2001.
The surveys were the heart of the dispute. Ben Malto, MSBF's surveyor, measured from Quezon Avenue northward along EDSA to the creek, because MSBF's main facilities lie there; Rogelio Inobaya, the NHA's geodetic engineer, measured from Quezon Avenue towards Agham Road, because he saw MSBF's gate fronting Agham Road. (MSBF's General Manager Lucito M. Bertol admitted on cross that he did not personally know the exact boundaries and that MSBF prepared its map without consulting the NHA, the owner. Malto's surveys — 1984 and 1986 — were both of 16 hectares, only the second shading a seven-hectare portion in yellow.)

Issue

Ruling

"WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City, which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670. The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval within sixty days from the date ordering the joint survey. SO ORDERED."

Ratio

Not moot. "BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not." The issue "has a direct effect on MSBF's usufructuary rights," and there remains "the central question of the exact location of the seven-hectare area," which must be settled "to forestall future disputes and to put this 20-year litigation to rest."
Why a factual question is reached at all. Rule 45 limits the Court to errors of law and it will not normally disturb findings of fact — but the matter "deserves resolution because the findings of the trial court and the appellate court conflict on several points."
The lease is protected, but only inside the grant. A usufruct "may be constituted for a specified term and under such conditions as the parties may deem convenient," a usufructuary "may lease the object held in usufruct", and "the owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists." Hence "the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area" — but "the NHA has the right to evict BGC if BGC occupied a portion outside" it.
The title governs. Article 565: "The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct." "In the present case, Proclamation No. 1670 is the title constituting the usufruct," and it states that the seven hectares "shall be determined 'by future survey under the administration of the Foundation subject to private rights if there be any.'"
MSBF had the right to choose the location. The proclamation's authority to determine the area, "coupled with the fact that Proclamation No. 1670 did not state the location... leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct." The trial court, "[c]onfronted with evidence that MSBF did in fact conduct two surveys,... dismissed the two surveys as self-serving. This is clearly an error on the part of the trial court." The surveys were made in 1984 and 1986, "way before the present controversy started" and before the lease to BGC.
MSBF's survey is the better-founded one. Its delineation contains MSBF's "main office, the three green houses, the warehouse and the composting area" — "buildings and facilities that MSBF needs for its operations," built before the controversy — whereas the NHA's would cover only "the four hardening bays and the display area," facilities "less essential to MSBF's existence." "This distinction is decisive as to which survey should prevail." Inobaya's starting point was chosen because of a gate, and "[t]he location of the gate is not a sufficient basis to determine the starting point"; MSBF's right "should rest on something more substantial than where MSBF chose to place a gate." Preferring the NHA's survey "will strip MSBF of most of its main facilities."
But MSBF is not indulged either. "[T]his Court cannot countenance MSBF's act of exceeding the seven-hectare portion granted to it." "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests" — Article 601 — and a usufruct is a right to enjoy "the property of another". "This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBF's encroachment of its benefactor's property gave birth to the confusion that attended this case."
Hence the remand rather than a choice. "MSBF's rights begin and end within the seven-hectare portion of its usufruct," and "[t]he direct corollary of enforcing MSBF's rights within the seven-hectare area is the negation of any of MSBF's acts beyond it." The portion being "no longer easily determinable considering the varied structures erected within and surrounding the area," "[t]here is a need for a new survey, one conducted jointly by the NHA and MSBF," which "should consider existing structures of MSBF" and "as much as possible include all of the facilities of MSBF within the seven-hectare portion without sacrificing contiguity."
A final point — the fifty-year cap. Article 605: "Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years." "The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association's lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land." Proclamation No. 1670 issued 19 September 1977, "or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left."
MO 127 is irrelevant to the seven hectares. It released roughly 50 hectares of NHA property from the NGC reservation, "[h]owever, MO 127 does not affect MSBF's seven-hectare area since under Proclamation No. 1670, MSBF's seven-hectare area was already 'exclude[d] from the operation of Proclamation No. 481.'"

Doctrine

The Fifty-Year Rule for Juridical Entities (Art. 605): A usufruct in favour of a town, corporation or association cannot exceed fifty years; and it is extinguished earlier if the town is abandoned or the entity dissolved before the period runs.
Rationale — No Perpetual Usufructs: "A usufruct is meant only as a lifetime grant." A juridical entity's life may be extended indefinitely, so an uncapped grant "would then be perpetual" — "especially invidious" where it covers public land.
The Title Constituting the Usufruct Governs (Art. 565): The usufructuary's rights and obligations are "those provided in the title constituting the usufruct." Where the title leaves the location of the grant to a survey "under the administration" of the grantee, the grantee has the latitude to choose it.
The Right to Lease (Art. 572): A usufructuary may lease the object held in usufruct, and "[t]he owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists" — but only as to the portion actually held in usufruct.
The Usufructuary's Duty (Art. 601): "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests," and must respect the limits of the beneficial use granted. Rights "begin and end" within the grant.

Full Digest — Recitation Format

I. Gist and Central Doctrine

II. Chronological Narration of Material Facts

On 24 October 1968, Proclamation No. 481 issued by President Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA as reserved property for the site of the National Government Center.
On 19 September 1977, Proclamation No. 1670 removed a seven-hectare portion from the NGC's coverage and reserved it for the Manila Seedling Bank Foundation, Inc., "for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation," the parcel to "embrace 7 hectares" as "determined by the future survey."
MSBF occupied the granted area; over the years its occupancy exceeded seven hectares, and by 1987 it occupied approximately 16 hectares, bounded by EDSA to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north.
On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders; BGC took the portion facing EDSA, occupying 4,590 square meters of the 16-hectare area.
On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127, revoking the reserved status of "the 50 hectares, more or less, remaining out of the 120 hectares of the NHA property reserved as site of the National Government Center," and authorising the NHA to commercialize the area and sell it to the public.
On 15 August 1988, acting under MO 127, the NHA gave BGC ten days to vacate, any structure left behind to be demolished. BGC filed its complaint for injunction on 21 April 1988 before the trial court, and on 26 May 1988 amended it to include MSBF as co-plaintiff.
The trial court agreed that Proclamation No. 1670 gave MSBF the right to conduct the survey establishing the seven-hectare area, but held MSBF "failed to act seasonably"; it found the previous MSBF surveys covered 16 hectares and were "thus inappropriate to determine the seven-hectare area," and concluded that allowing MSBF to fix the area now "would be grossly unfair to the grantor of the usufruct."
On 8 March 1994, the trial court dismissed BGC's complaint for injunction, while denying the suggestion that MO 127 had repealed Proclamation No. 1670. "The NHA demolished BGC's facilities soon thereafter."
On 30 March 2001, the Court of Appeals reversed, holding that MSBF "did in fact assert this right by conducting two surveys and erecting its main structures in the area of its choice," and enjoined the NHA from demolishing BGC's structures during the life of its lease with MSBF. On 25 June 2001 it denied reconsideration.
On the surveys: Ben Malto, a registered forester and MSBF's Assistant Vice-President for Planning, Research and Marketing, measured from Quezon Avenue northward along EDSA to the creek, his method resting on the fact that MSBF's main facilities lie in that area; he had conducted surveys in 1984 and 1986, both covering 16 hectares, with only the second asked to determine the seven-hectare portion.
Rogelio Inobaya, a geodetic engineer of the NHA's Survey Division, surveyed in May 1988 using the same technical descriptions, reached the same 16-hectare total, and measured the seven hectares from Quezon Avenue towards Agham Road because he saw MSBF's gate fronting Agham Road; he testified that the seven-hectare portion on MSBF's map "does not tally with the boundaries BGC and MSBF indicated in their complaint."
Lucito M. Bertol, MSBF's General Manager, presented the map with the seven-hectare area shaded yellow; it was clear from map and testimony "that MSBF knew that it had occupied an area in excess of the seven-hectare area," and on cross-examination he admitted he "personally did not know the exact boundaries" and that MSBF prepared the map "without consulting NHA, the owner of the property."
On 13 April 2005, the Supreme Court set aside the CA's decision and resolution and remanded the case for a joint survey.

III. Arguments of the Parties

A. Petitioner (National Housing Authority)

B. Respondents (BGC and MSBF)

C. Common Ground

IV. Issues

A. MAIN ISSUE

Whether the premises leased by BGC from MSBF are within the seven-hectare area that Proclamation No. 1670 granted to MSBF by way of usufruct.

B. SECONDARY ISSUES

V. Ruling / Disposition

A. MAIN ISSUE

B. SECONDARY ISSUES

VI. Ratio Decidendi and Doctrines

A. Ratio Decidendi

Mootness rejected. "BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not. The issue for resolution has a direct effect on MSBF's usufructuary rights." The central question of location "is squarely raised in this petition," and must be settled "to forestall future disputes and to put this 20-year litigation to rest."
Why a factual question is entertained. Rule 45 confines the Court to errors of law and it will not disturb findings of fact absent an established exception, but the matter "deserves resolution because the findings of the trial court and the appellate court conflict on several points."
The usufructuary's lease binds the owner — within the grant. "A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct. A usufructuary may lease the object held in usufruct" (Art. 572), and "[t]he owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists."
Article 565 makes the proclamation the governing instrument. "The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct." "In the present case, Proclamation No. 1670 is the title constituting the usufruct," and it states the seven hectares "shall be determined 'by future survey under the administration of the Foundation subject to private rights if there be any.'"
MSBF had the right to choose, and exercised it in time. The proclamation's grant of authority "coupled with the fact that Proclamation No. 1670 did not state the location of the seven-hectare area, leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose." MSBF "conducted at least two surveys" — 1984 and 1986 — "way before the present controversy started" and before the lease to BGC; the trial court's dismissal of them as self-serving "is clearly an error."
Why MSBF's survey is better founded. Its delineation holds "the main office, the three green houses, the warehouse and the composting area" — "buildings and facilities that MSBF needs for its operations" — while the NHA's would cover only "the four hardening bays and the display area," which are "less essential to MSBF's existence." "This distinction is decisive as to which survey should prevail." Inobaya's starting point rested on a gate, and "[t]he location of the gate is not a sufficient basis to determine the starting point"; MSBF's right "should rest on something more substantial than where MSBF chose to place a gate." The NHA's survey "will strip MSBF of most of its main facilities."
MSBF's encroachment is condemned. "[T]his Court cannot countenance MSBF's act of exceeding the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests" — Article 601 — and usufruct "gives a right to enjoy the property of another". "This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBF's encroachment of its benefactor's property gave birth to the confusion that attended this case."
Hence a remand, not a choice of surveys. "MSBF, for its part, must vacate the area that is not part of its usufruct. MSBF's rights begin and end within the seven-hectare portion of its usufruct," and "[t]he direct corollary of enforcing MSBF's rights within the seven-hectare area is the negation of any of MSBF's acts beyond it." The portion being "no longer easily determinable," "[t]here is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all doubts on the exact location," which "should consider existing structures of MSBF" and include as many of its facilities as possible "without sacrificing contiguity."
A final point: Article 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." "The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association's lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land." Proclamation No. 1670 having issued 19 September 1977, "or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left."
MO 127 leaves the grant untouched. It "released approximately 50 hectares of the NHA property as reserved site for the National Government Center. However, MO 127 does not affect MSBF's seven-hectare area since under Proclamation No. 1670, MSBF's seven-hectare area was already 'exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site.'"

B. Doctrines/Rules

The 50-Year Rule for Juridical Persons (Art. 605): A usufruct in favour of a town, corporation or association is limited to fifty years, and is extinguished sooner if the town is abandoned or the entity dissolved within the period.
Rationale: "A usufruct is meant only as a lifetime grant"; a juridical entity has no natural lifetime, so without the cap the usufruct "would then be perpetual" — "especially invidious" where public land is involved.
Primacy of the Title (Art. 565): The usufructuary's rights and obligations are those in the title constituting the usufruct; where the title leaves the grant's location to a survey under the grantee's administration, the grantee chooses the location.
The Right to Lease (Art. 572): A usufructuary may lease the object held in usufruct, and the owner "must respect the lease... so long as the usufruct exists" — but only as to the area actually held.
The Usufructuary's Duty (Art. 601): "A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owner's interests," and must keep within the beneficial use granted.

C. Limitations/Exceptions

The Court declined to adopt either party's survey, ordering instead a joint survey that "should consider existing structures of MSBF" and include as much of its facilities as possible "without sacrificing contiguity," to be submitted for the trial court's approval within sixty days.
MO 127 did not shorten or defeat the grant, MSBF's seven hectares having already been excluded from Proclamation No. 481's operation.
The fifty-year cap in Article 605 speaks to towns, corporations and associations; it does not by its terms reach a usufruct in favour of a natural person, whose own lifetime supplies the limit.

D. Topic Integration

The relationship is DIRECT.
This case is the definitive Philippine application of "Usufruct in favor of juridical or non-juridical entities (Art. 605)," fixing the hard fifty-year ceiling on corporate usufructs and giving the reason: a juridical entity can outlive any natural term, so an uncapped grant becomes a de facto alienation of the property through perpetual beneficial use.
Note where the holding sits in the judgment. The Art. 605 discussion is raised by the Court itself as "a final point" — neither party had put duration in issue — which is worth remembering when reciting the case's issues.
It pairs naturally with Baluran and Moralidad on the other side of the same coin: those cases end a usufruct by the parties' own stipulated condition, while this one ends it by operation of law, on a term the grantor could not have extended even if it wished.
It also teaches that a usufructuary's position is not purely beneficial. Read with Article 601 and Article 562, the case holds that rights "begin and end" within the grant, and that encroaching beyond it is not an enlarged right but a trespass on the naked owner's land.

VII. Separate Opinions

NOT IN RECORD. The decision was penned by Justice Antonio T. Carpio, with Chief Justice Davide, Jr. (Chairman) and Justices Quisumbing, Ynares-Santiago and Azcuna concurring.