Short answer. Yes. Article 605 extinguishes the usufruct the moment the corporation is dissolved, even if the fifty-year maximum period the usufruct could otherwise run had not yet expired. Dissolution ends it early — the usufruct does not continue in the hands of successors or simply lapse once the corporation ceases to exist.
What the law says
Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years.
Civil Code, Article 605 — The Fifty-Year Limit for Entities. Read the full provision →
What the law says
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.
Civil Code, Article 605 — The Fifty-Year Limit for Entities. Read the full provision →
The fifty-year ceiling on usufructs held by entities
Article 605 starts with a general limit: usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. This caps how long such a usufruct can run in the first place, regardless of what the parties who created it might have agreed to when the usufruct was originally set up, however long they may have intended it to last.
Dissolution cuts the usufruct short, even within that period
The second sentence answers your question directly: if it has been constituted, and before the expiration of such period the corporation or association is dissolved, the usufruct shall be extinguished by reason thereof. So even where the fifty-year period has not run out, the corporation's dissolution itself ends the usufruct — the two events, dissolution and the running out of the fifty years, are separate triggers, and either one is enough on its own to bring the usufruct to an end.
The parallel rule for a town that is abandoned
Article 605 applies the same logic to a town holding a usufruct, extinguishing it if the town is abandoned before the fifty-year period expires. Whether the holder is a town, a corporation, or an association, the underlying idea is the same: the usufruct is tied to the continued existence of the entity holding it, not to a fixed period that runs regardless of what happens to that entity.
What this means once the corporation actually dissolves
Once dissolution takes place, the usufruct does not pass to the corporation's successors, liquidators, or shareholders as though it were an ordinary asset being wound up — Article 605 says it is extinguished outright. The underlying property reverts to the owner, or to whoever now holds the naked ownership, free of the usufruct, from the moment the dissolution occurs, rather than continuing until whatever the original fifty-year term would have been.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- National Housing Authority vs. Court of Appeals, et al, G.R. No. 148830, April 13, 2005 — read the decision on LawPhil →