G.R. No. L-13361 - Vda. de Albar vs. De Carangdang

Dona Rosario Fabie y Grey owned a lot in the City of Manila at 950-956 Ongpin, evidenced by Original Certificate of Title No. 5030.
In her will, duly probated, she devised the naked ownership of the property to Rosario Grey Vda. de Albar and others while granting a life usufruct to her ahijada, Maria Josefa de la Paz Fabie.
The will specifically provided: “Lego a mi ahijada menor de edad, Maria Josefa de la Paz Fabie, en usufructo vitalicio las rentas de las fincas [...] en la calle Ongpin, Numeros 950 al 956 del Distrito de Santa Cruz, Manila,” and imposed a restriction prohibiting the usufructuary from selling, mortgaging, or otherwise transferring her right while she remains a minor.
On registration, the property title reflected both the naked ownership and the life usufruct reserved for Josefa Fabie.

A devastating fire in Manila destroyed the building on the Ongpin lot, leaving only walls and some improvements.
A Chinaman, Au Pit, offered to lease the property for five years at P500.00 per month on the condition that, in addition to leasing, he would construct a new building valued at P30,000.00.
To accommodate competing interests, the parties agreed on a compromise:

The naked owners would receive 20% (P100.00) and the usufructuary 80% (P400.00) of the monthly rental.
It was stipulated that the title to the new building, upon its completion, would automatically become part of the land title in the name of the naked owners but remain subject to the usufruct of Josefa Fabie.

The agreement expressly reserved the option for further litigation after the lease’s termination to definitively settle their respective rights.

The United States War Damage Commission paid P8,574.00 as compensation for the destruction of the building to the naked owners.
The usufructuary herself paid real estate taxes on the property amounting to P1,989.27 for the years 1945 to 1952 and an additional P295.80 annually for 1953 and 1954.
On October 2, 1952, petitioners (the naked owners) filed an action to resolve the dispute over:

The trial court rendered a decision in favor of the usufructuary, granting her uninterrupted right to the total rents and additional sums, including a 6% interest on the war damage compensation.
The Court of Appeals modified parts of the decision by:

Affirming that the usufructuary’s right remains in full force over both the lot and the extant building.
Ordering the appellants to pay a 6% annual interest on the portion of the war damage compensation from when it was received.
Deferring reimbursement of real estate taxes until the termination of the usufruct.
Denying any entitlement to attorney’s fees to the usufructuary.

The central controversy focused on the interpretation of the will’s provision regarding the “rentas” of the “fincas situadas” at Ongpin and Santo Cristo Streets.
Petitioners argued that the usufruct was limited solely to the rentals derived from the buildings erected on the land and should cease upon their destruction.
The usufructuary maintained that the usufruct encompassed both the land and the buildings (or their replacements), emphasizing that a building cannot exist separate from its land.
The dispute extended to whether the new lease and construction arrangement altered the usufructuary’s rights, particularly concerning the interest on the war damage payment and administrative control over the property.

Whether the term “fincas situadas” in the will should be construed narrowly as the buildings alone or broadly as including both the buildings and the land.
If the usufruct is aimed solely at the rental income derived from the buildings, whether the destruction of the building terminates the usufruct.

Whether the partial destruction of the property (i.e., only the building) extinguishes the usufructuary’s rights over the property.
Determining who bears the responsibility and cost for the construction of the new building and the subsequent effect on rental income.

Whether the war damage compensation, intended to indemnify the destruction of the building, should yield a 6% annual interest payable to the usufructuary for the duration of her life.
Whether the usufructuary should be reimbursed for the real estate taxes paid, or if such expenses should continue to be her responsibility under the existing agreement.

Whether the usufructuary holds the exclusive right to administer the property—including aspects such as selecting tenants and managing leases—as originally stipulated in the will and prior agreements.