NHA vs. CA (456 SCRA 17 [2005])

Corp Law Topic: Corporate Term (Secs. 11; 19)

The trial court dismissed the complaint for injunction filed by Bulacan Garden Corporation ("BGC") against the National Housing Authority ("NHA"). BGC wanted to enjoin the NHA from demolishing BGC’s facilities on a lot leased from Manila Seedling Bank Foundation, Inc. ("MSBF"). MSBF allegedly has usufructuary rights over the lot leased to BGC.

The appellate court reversed the Decision of the Trial Court.

On 24 October 1968, Proclamation No. 481 issued by then President Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA4 as reserved property for the site of the National Government Center ("NGC").

On 19 September 1977, President Marcos issued Proclamation No. 1670, which removed a seven-hectare portion from the coverage of the NGC. Proclamation No. 1670 gave MSBF usufructuary rights over this segregated portion.

MSBF occupied the area granted by Proclamation No. 1670. Over the years, MSBF’s occupancy exceeded the seven-hectare area subject to its usufructuary rights. By 1987, MSBF occupied approximately 16 hectares.

On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders.

On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127 ("MO 127") which revoked 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." MO 127 also authorized the NHA to commercialize the area and to sell it to the public.

On 15 August 1988, acting on the power granted under MO 127, the NHA gave BGC ten days to vacate its occupied area.

The appellate court agreed with the trial court that Proclamation No. 1670 granted MSBF the right to determine the location of the seven-hectare area covered by its usufructuary rights. However, the appellate court ruled that MSBF did in fact assert this right by conducting two surveys and erecting its main structures in the area of its choice.

On 30 March 2001, the appellate court reversed the trial court’s ruling: The National Housing Authority is enjoined from demolishing the structures, facilities and improvements of the plaintiff-appellant Bulacan Garden Corporation at its leased premises located in Quezon City which premises were covered by Proclamation No. 1670, during the existence of the contract of lease it (Bulacan Garden) had entered with the plaintiff-appellant Manila Seedling Bank Foundation, Inc.


Held:

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.

Corporate Term

Article 605 of the Civil Code states:
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.

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.

Proclamation No. 1670 was issued 19 September 1977, or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left.