I. Introduction

This memorandum exhaustively examines the rights of a usufructuary under Philippine civil law, specifically focusing on the entitlement to fruits and the treatment of improvements made to the property subject to the usufruct. The analysis is grounded in the provisions of the Civil Code of the Philippines, primarily Articles 562 to 567 and 579 to 580, which delineate the scope, classification, and legal consequences of these rights. The usufruct, as a real right defined under Article 562, grants the usufructuary the right to enjoy the property of another with the obligation of preserving its substance. A precise understanding of the rules governing fruits and improvements is essential for determining the economic benefits accruing to the usufructuary and the corresponding obligations to the naked owner upon the extinguishment of the usufruct.

II. Definition and Nature of Usufruct

Article 562 of the Civil Code defines usufruct as the right to enjoy the property of another with the obligation of preserving its substance. The holder of this right is the usufructuary, while the holder of the underlying ownership, stripped of the right to present enjoyment, is the naked owner. The usufruct is a real right but is temporary in nature, lasting for a period stipulated by law or by the will of the parties, or for the lifetime of the usufructuary in the case of a usufruct constituted in favor of a natural person. Its temporary character is central to the rules on fruits and improvements, as it necessitates a final accounting between the usufructuary and the naked owner.

III. Classification and Ownership of Fruits

The Civil Code provides a detailed classification of fruits, which is critical for determining when the right to them accrues to the usufructuary. Article 441 classifies fruits as natural, industrial, or civil.
Natural fruits are the spontaneous products of the soil, and the young and other products of animals (Article 442).
Industrial fruits are those produced by lands of any kind through cultivation or labor (Article 443).
Civil fruits are the rentals of buildings, the price of leases of lands, and other property, and the amount of perpetual or life annuities, or other similar income (Article 444).
Pursuant to Article 566, the usufructuary shall own the fruits received from the time the usufruct begins until its termination. The pivotal rule is found in Article 567: “Natural and industrial fruits are considered perceived from the moment they are gathered or severed. Civil fruits are deemed to accrue daily and belong to the usufructuary in proportion to the duration of the usufruct.” This distinction governs the apportionment of fruits at the start and end of the usufruct.

IV. Right to Fruits During the Usufruct

During the existence of the usufruct, the usufructuary is entitled to all benefits and fruits emanating from the property. This right is inherent in the very definition of the usufruct. The usufructuary may lease the property to another and collect the civil fruits (rentals) for his own benefit, provided the lease does not extend beyond the period of the usufruct (Article 571). The usufructuary bears the costs of ordinary cultivation, production, and collection of fruits, including expenses for tools and other necessary implements (Article 583). He is also responsible for the payment of annual charges and taxes on the fruits (Article 597).

V. Apportionment of Fruits at the Beginning and End of Usufruct

The rules on apportionment ensure an equitable distribution of fruits that are in a state of pendency when the usufruct commences or terminates.
At the commencement of the usufruct, the usufructuary has no right to fruits that have already been perceived (i.e., gathered or collected) by the naked owner. However, he is entitled to fruits still pending or ungarnered. For natural and industrial fruits, the usufructuary is entitled to the portion corresponding to the time the usufruct existed during the cycle of production. For civil fruits, he is entitled to a proportionate share calculated on a daily basis from the start of the usufruct.
Upon termination of the usufruct, the same principles apply in reverse. The usufructuary is entitled to fruits perceived before termination but must account to the naked owner for fruits that are pending. The naked owner does not owe the usufructuary any share of fruits for the period after the usufruct ends, and the usufructuary must reimburse any fruits he may have received in advance (Article 567, last paragraph).

VI. Improvements Introduced by the Usufructuary

An improvement is any addition or alteration to the property that increases its value or utility, beyond mere repairs for preservation. The law distinguishes between useful improvements and luxurious or ornamental improvements (Article 579).
Useful improvements are those that increase the productivity or useful value of the property.
Luxurious or ornamental improvements are those for mere pleasure or adornment, which do not augment the property’s utility or income.
The usufructuary has the right to make improvements to the property, but this right is not unlimited. He cannot alter the form or substance of the property, as his fundamental duty is to preserve its substance (Article 562, 575).

VII. Rights and Remedies Regarding Improvements

The rights of the usufructuary and the naked owner concerning improvements are governed by Articles 579 and 580. The rules differ based on the classification of the improvement and the option of the naked owner.

The usufructuary has no right to indemnity for improvements that he made without the consent of the naked owner and which are not necessary expenses, unless the naked owner elects to pay for them as provided by law. The usufructuary loses the right to remove improvements if such removal would cause damage to the property.

VIII. Obligation to Preserve the Form and Substance

The usufructuary’s right to enjoy fruits and make improvements is bounded by the paramount obligation to preserve the form and substance of the property (Article 562, 575). This obligation prohibits acts that would change the economic destination or fundamental character of the property. For instance, converting a residential building into an industrial factory without consent may violate this duty. Any act constituting abuse or deterioration of the property can give rise to an action for damages by the naked owner and may, under judicial authority, lead to the provision of security by the usufructuary or even the administration of the property by a receiver (Articles 582, 592).

IX. Extinguishment of Usufruct and Final Accounting

Upon the extinguishment of the usufruct (by expiration of term, death of the usufructuary, consolidation, etc.), the property is returned to the naked owner. The usufructuary or his heirs must deliver the property to the naked owner, accounting for any fruits that may have been perceived in advance and any deterioration due to the usufructuary’s fault (Article 612). Concurrently, the usufructuary may demand reimbursement for necessary expenses and, subject to the rules in Section VII, for useful improvements. Any pending fruits belong to the naked owner. This mutual accounting finalizes the financial relationship created by the usufruct.

X. Conclusion

The rights of the usufructuary to fruits and improvements are meticulously defined in the Civil Code. The usufructuary is entitled to all fruits (natural, industrial, and civil) produced or accruing during the period of the usufruct, subject to equitable apportionment rules at its commencement and termination. Regarding improvements, the usufructuary is generally entitled to reimbursement only for necessary expenses. For useful improvements, reimbursement is at the option of the naked owner, and for luxurious improvements, the usufructuary has only a limited right of removal. These rules balance the usufructuary’s right of enjoyment with the duty to preserve the substance of the property, ultimately protecting the reversionary interest of the naked owner.