Municipality of Paoay vs Manaois

MUNICIPALITY OF PAOAY v. MANAOIS

G.R. No. L-3485, June 30, 1950

Facts:

The municipality of Paoay leased 6 fishery lots to Francisco V. Duque for a period of four years. However, Duque was not able to comply with the terms of the lease contract; hence, the municipality approved a resolution confiscating said fishery lots and advertised its lease for public bidding.

TeodoroManaois, being the highest bidder, was awarded the lease. However, Manaois was not able to exercise his right to possession because Duque continued to claim possession over the properties and despite the appeal of Manaois to the Municipality of Paoay to put him in possession and the efforts of the municipality to oust Duque, Duque succeeded in continuing in his possession and keeping Manaois and his men out.

Manaois brought an action against the Municipality of Paoay to recover the sum paid by him for the lease of the fishery lots plus damages. Court of First Instance of Pangasinan ruled in his favor. A writ of execution and attachment were issued to enforce the judgment. The municipality filed a petition asking for the dissolution of that attachment of levy of the properties which was denied by the CFI.

The municipality filed a petition for certiorari with the writ of preliminary injunction, asking that the order of the CFI be reversed and that the attachment of the properties of the municipality be dissolved. The municipality contended that the properties attached by the sheriff for purposes of execution are not subject to levy because they are properties for public use.

Issue:

WON fishery or municipal waters of the town of Paoay or its usufruct may be levied upon and subject to execution?

Held:

No. There can be no question that properties for public use held by municipal corporation are not subject to levy and execution. The authorities are unanimous on this point. This Court held that properties for public use like trucks used for sprinkling the streets, police patrol wagons, police stations, public markets, together with the land on which they stand are exempt from execution. Even public revenues of municipal corporations destined for the expenses of the municipality are also exempt from the execution. The reason behind this exemption extended to properties for public use, and public municipal revenues is that they are held in trust for the people, intended and used for the accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and public funds to execution would materially impede, even defeat and in some instances destroy said purpose.

Property however, which is patrimonial and which is held by municipality in its proprietary capacity is treated by great weight of authority as the private asset of the town and may be levied upon and sold under an ordinary execution. The same rule applies to municipal funds derived from patrimonial properties, for instance, it has been held that shares of stocks held by municipal corporations are subject to execution. If this is true, with more reason should income or revenue coming from these shares of stock, in the form of interest or dividends, be subject to execution.

The fishery or municipal waters of the town of Paoay, Ilocos Norte, which had been parceled out or divided into lots and later let out to private persons for fishing purposes at an annual rental are clearly not subject to execution. In the first place, they do not belong to the municipality. They may well be regarded as property of State. What the municipality of Paoay hold is merely what may be considered the usufruct or the right to use said municipal waters, granted to it by section 2321 of the Revised Administrative Code.

Now, is this particular usufruct of the municipality of Paoay over its municipal waters, subject to execution to enforce a judgment against the town? No. First, it is not a usufruct based on or derived from an inherent right of the town. It is based merely on a grant made by the Legislature. These marine waters are ordinarily for public use, open to navigation and fishing by the people. The municipality of Paoay is not holding this usufruct or right of fishery in a permanent or absolute manner so as to enable it to dispose of it or to allow it to be taken away from it as its property through execution. The Legislature thru section 2321 of the Administrative Code, as already stated, saw fit to grant the usufruct of said marine waters for fishery purpose, to the towns bordering said waters. Said towns have no visited right over said marine waters. The Legislature, for reasons it may deem valid or as a matter of public policy, may at any time, repeal or modify said section 2321 and revoke this grant to coastal towns and open these marine waters to the public. Or the Legislature may grant the usufruct or right of fishery to the provinces concerned so that said provinces may operate or administer them by leasing them to private parties.All this only goes to prove that the municipality of Paoay is not holding this usufruct or right of fishery in a permanent or absolute manner so as to enable it to dispose of it or to allow it to be taken away from it as its property through execution.

Second, if this were to be allowed and this right sold on execution, the buyer would immediately step into the shoes of the judgment-debtor municipality. Such buyer presumably buys only the right of the municipality. He does not buy the fishery itself nor the municipal waters because that belongs to the State. All that the buyer might do would be to let out or rent to private individuals the fishery rights over the lots into which the municipal waters had been parceled out or divided, and that is, after public bidding. Then, we shall have a situation rather anomalous to be sure, of a private individual conducting public bidding, renting to the highest bidders fishery lots over municipal waters which are property of the State, and appropriating the results to his own private use. The impropriety, if not illegality, of such a contingency is readily apparent. The situation imagined implies the deprivation of the municipal corporation of a source of a substantial income, expressly provide by law. Because of all this, we hold that the right or usufruct of the town of Paoay over its municipal waters is not subject to execution.

But we hold that the revenue or income coming from the renting of these fishery lots is certainly subject to execution. It may be profitable, if not necessary, to distinguish this kind of revenue from that derived from taxes, municipal licenses and market fees are provided for and imposed by the law, they are intended primarily and exclusively for the purpose of financing the governmental activities and functions of municipal corporations. Not so with the income derived from fisheries. In the first place, the usufruct over municipal waters was granted by the Legislature merely to help or bolster up the economy of municipal government. This kind of revenue is not indispensable for the performance of governmental functions. In the second place, the amount of this income is far from definite or fixed. It depends upon the amounts which prospective bidders or lessees are willing to pay. In other words, too many municipalities engaged in this business of letting out municipal waters for fishing purposes, it is a sort of sideline, so that even without it the municipality may still continue functioning and perform its essential duties as such municipal corporations.

We call this activity of municipalities in renting municipal waters for fishing purposes as a business for the reasons that the law itself allowed said municipalities to engage in it for profit. And it is but just that a town so engaged should pay and liquidate obligations contracted in connection with said fishing business, with the income derived therefrom.

In conclusion, we hold that the fishery lots numbering about forty in the municipality of Paoay, mentioned at the beginning of this decision are not subject to execution. For this reason, the levy and attachment made by the Provincial Sheriff of Ilocos Norte of theses fishery lots is void and the order of the Court of First Instance of Pangasinan insofar as it failed to dissolve the attachment made on these lots is reversed. However, the amount of P1,712.01 in the municipal treasury of Paoay representing the rental paid by Demetrio Tabije on fishery lots let out by the municipality of Paoay is a proper subject of levy, and the attachment made thereon by the Sheriff is valid.

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Usufruct

Define usufruct

Usufruct is a real right by virtue of which a person is given 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 (Art. 562, CC)

Requisites of usufruct

1. The right to enjoy the property of another (essential requisite)

2. The obligation of preserving the form and substance of such property. (accidental requisite)

The latter is accidental because the title constituting the usufruct or the law may otherwise provide, as in the case of abnormal usufruct.

Usufruct vs. Ownership

While ownership has for its attributes: (1) the right to enjoy, (2) the right to dispose, and the right to vindicate or recover property, usufruct is limited merely to the enjoyment of the property.

Usufruct vs Lease

1. As to nature of right - Usufruct is always a real right, whereas lease becomes a real right only when registered.

2. As to constitution - Usufruct is constituted by law, by the will of private persons express in acts inter vivos or in a last will and testament, and by prescription, whereas lease is as a rule constituted by contract.

3. As to the person constituting it - In usufruct, the person constituting it is the owner, whereas in lease, the person constituting need not be the owner.

4. As to extent - Usufruct includes the right to use and to enjoy the fruits of the thing, whereas lease is more limited.

5. As to repairs - The usufructuary is responsible for ordinary repairs, whereas the lessee is not.

6. As to taxes - The usufructuary is responsible for taxes on the fruits, whereas in lease the lessee is not

How may usufruct be constituted?

Usufruct is constituted 

1. by law, 

2. by the will of private persons expressed in acts inter vivos or in a last will and testament, 

3. by prescription. (Art. 563, CC)

Extent

Usufruct may be constituted on the whole or a part of the fruits of the thing, in favor of one more persons, simultaneously or successively, and in every case from or to a certain day, purely or conditionally. It may also be constituted on a right, provided it is not strictly personal or intransmissible. (Art. 564, CC)

Rules governing a usufruct

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. (Art. 565, CC)

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Obligations of the Usufructuary

What are the obligations of the usufructuary?

The obligations of the usufructuary are the following:

At the commencement of the usufruct

1. To make an inventory of the property; and

2. To give the necessary security. (Art. 583, CC)

During the pendency of the usufruct

1. To take care of the property as a good father of a family (Art. 589, CC)

2.  To make ordinary repairs on the property (Art. 592, CC)

3. To notify the owner in case the need for extraordinary repairs on the property is urgent (Art. 593, CC)

4. To pay the annual charges and taxes and those considered as a lien on the fruits (Art. 596, CC)

5. To notify the owner of any act of a third person that may be prejudicial to the right of ownership. (Art. 601, CC)

6. To pay the expenses, costs and liabilities in suits with regard to the usufruct. (Art. 602, CC)

Upon the termination of the usufruct

His obligation upon the termination of the usufruct is to deliver the thing to the owner, without prejudice to the right of retention pertaining to him or his heirs for taxes and extraordinary expenses which should be reimbursed. (Art. 612, CC)

When is the usufructuary excused from the obligation of giving a bond or security?

There are 4 instances when the usufructuary is excused from such obligation. They are:

1. When no one will be injured by the lack of a bond or security (Art. 585, CC)

2. When the donor has reserved the usufruct of the property donated (Art. 584, CC)

3. In case of parents who are usufructuaries of their unemancipated children's property, except when the parents contract a second marriage (Art. 584, CC)

4. In the case of usufructs subject to caucion juratoria under Art. 587 of the Civil Code.

If the usufructuary incurs necessary, useful and ornamental expenses, what are his rights?

The usufructuary shall have the right to demand reimbursement from the owner of all necessary expenses which he might have incurred for the preservation of the property. This right, however, is not available to him with regard to useful and ornamental expenses, but he may remove the improvements provided that it is possible to do so without damage to the property. In addition, he may set off such improvements against any damage to the same. (Arts. 546, 579, 580, CC)

In usufructs, who are responsible for repairs and taxes?

In case of repairs, we must distinguish. As far as ordinary repairs, or those required by the wear and tear due to the natural use of the thing and are indispensable for its preservation are concerned, the usufructuary is responsible; however, as far as extraordinary repairs, or those which are neither required by the wear and tear due to the natural use of the thing and are indispensable for its preservation are concerned, the naked owner is responsible (Arts. 592, 593, CC)

In case of taxes, again, we must distinguish. As far as those imposed upon or which constitutes a lein on the fruits are concerned, the usufructuary is responsible; however, as far as those imposed directly on the thing or capital itself are concerned, the naked owner is responsible (Arts. 596, 597, CC)

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Extinguishment of Usufructuary

When is usufruct extinguished?

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 603, Civil Code)

What is the effect if the thing given in usufruct is partially lost?

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

Can usufruct be constituted in favor of towns, corporations or associations for more than 50 years?

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 605, Civil Code)

What is the effect if a third person is granted a usufruct for elapsed time before he attains a certain age and that person dies before the period expires? Exception.

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 606, Civil Code)

Usufruct on a building and/or land 

If the usufruct is constituted on immovable property of which a building forms part, and the latter should be destroyed in any manner whatsoever, the usufructuary shall have a right to make use of the land and the materials.

The same rule shall be applied if the usufruct is constituted on a building only and the same should be destroyed. But in such a case, if the owner should wish to construct another building, he shall have a right to occupy the land and to make use of the materials, being obliged to pay to the usufructuary, during the continuance of the usufruct, the interest upon the sum equivalent to the value of the land and of the materials. (Art 607, Civil Code)

Payment of insurance on tenement held in usufruct

If the usufructuary shares with the owner the insurance of the tenement given in usufruct, the former shall, in case of loss, continue in the enjoyment of the new building, should one be constructed, or shall receive the interest on the insurance indemnity if the owner does not wish to rebuild.

Should the usufructuary have refused to contribute to the insurance, the owner insuring the tenement alone, the latter shall receive the full amount of the insurance indemnity in case of loss, saving always the right granted to the usufructuary in the preceding article. (Art 608, Civil Code)

Rules in case of expropriation 

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 609, Civil Code)

Effect of bad use of property held in usufruct 

A usufruct is not extinguished by bad use of the thing in usufruct; but if the abuse should cause considerable injury to the owner, the latter may demand that the thing be delivered to him, binding himself to pay annually to the usufructuary the net proceeds of the same, after deducting the expenses and the compensation which may be allowed him for its administration. (Art 610, Civil Code)

When shall a multiple usufruct be extinguished?

A usufruct constituted in favor of several persons living at the time of its constitution shall not be extinguished until death of the last survivor. (Art 611, Civil Code)

Rights and obligations upon termination of usufruct

Upon the termination of the usufruct, the thing in usufruct shall be delivered to the owner, without prejudice to the right of retention pertaining to the usufructuary or his heirs for taxes and extraordinary expenses which should be reimbursed. After the delivery has been made, the security or mortgage shall be cancelled. (Art 612, Civil Code)

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