GR L 3691; (November, 1951) (Digest)
G.R. No. L-3691 November 21, 1951
JACINTO DEL SAZ OROZCO y MORTERA and MARIA PAZ ALCANTARA, plaintiffs-appellants, vs. SALVADOR ARANETA, FRANCISCO DEL SAZ OROZCO Y LOPEZ, DOLORES DEL SAZ OROZCO Y LOPEZ, and the minors FELISA, EUGENIO, ANTONIO, JOSE, MARIA Y CARLOS, all surnamed DEL SAZ OROZCO Y LOPEZ whose natural guardian is DOÑA CONCEPCION LOPEZ VDA. DE DEL SAZ OROZCO, defendants-appellees.
FACTS
Eugenio del Saz Orozco died in 1922, leaving a will that gave a life usufruct over certain properties, including 5,714 shares of Benguet Consolidated Mining Company stock, to his son Jacinto del Saz Orozco y Mortera. Jacinto was obligated to preserve the properties for the other heirs, who were the naked owners. In 1934 and 1939, the company declared stock dividends from its surplus profits, and Jacinto received a total of 28,570 additional shares as his proportionate portion. The dispute is whether these stock dividends form part of the capital (corpus) that must be preserved for the naked owners or constitute income/fruits that belong exclusively to the life usufructuary, Jacinto.
ISSUE
Whether stock dividends declared from surplus profits are to be considered as income belonging to the life usufructuary or as capital belonging to the naked owners/remaindermen.
RULING
The Supreme Court ruled that the stock dividends belong exclusively to the life usufructuary, Jacinto del Saz Orozco y Mortera. The Court applied the doctrine established in the recent case of Testate Estate of Emil Maurice Bachrach (G.R. No. L-2659, October 12, 1950), which held that a dividend, whether in cash or stock, declared from corporate profits is income and therefore pertains to the usufructuary. The Court found no material difference between the present case and the Bachrach case to justify a deviation from this doctrine. It rejected the appellees’ argument about the potential diminution of voting power in the original shares, noting it was not a sufficient reason to modify the established rule. The Court also found no proof to support a claim for the delivery of a separate sum (P3,428.40) allegedly received from a capital reduction. The appealed judgment was reversed.