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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-19614 March 27, 1971 JESUS M.

GABOYA, as Administrator of the Estate of DON MARIANO CUI, plaintiff-appellant, vs. ANTONIO MA. CUI, MERCEDES CUI-RAMAS and GIL RAMAS, defendants-appellees, JESUS MA. CUI, JOSE MA. CUI, SERAFIN MA. CUI, JORGE MA. CUI, ROSARIO CUI DE ENCARNACION, PRECILLA C. VELEZ, and LOURDES C. VELEZ, intervenorsappellants, VICTORINO REYNES, defendant-in-counterclaim-appellee. Vicente Jayme for plaintiff-appellant. Hector L. Hofilea Candido Vasqueza and Jaime R. Nuevas for defendants-appellees. Jose W. Diokno for intervenors-appellants. REYES, J.B.L., J.: Direct appeal (before Republic Act 5440) from a decision of the Court of First Instance of Cebu (in its Civil Case No. R-1720) denying resolution of a contract of sale of lots 2312, 2313 and 2319 executed on 20 March 1946 by the late Don Mariano Cui in favor of three of his children Antonio Ma. Cui, Mercedes Cui de Ramas and Rosario Cui de Encarnacion, but sentencing the first two, Antonio Cui and Mercedes; Cui, to pay, jointly and severally (in solidum), to the Judicial Administrator of the Estate of Mariano Cui (appellant Jesus M. Gaboya the amount of P100,088.80, with legal interest from the interposition of the complaint (5 November 1951), plus P5,000.00 attorney's fees and the costs. The antecedents of the case are stated in the previous decision of this Supreme Court rendered on 31 July 1952, in the case of Antonio and Mercedes Cui vs. Judge Piccio, et al., 91 Phil. 712. Don Mariano Cui, widower, as owner of lots Nos. 2312, 2313 and 2319 situated in the City of Cebu, with an area of 152

square meters, 144 square meters and 2,362 square meters, respectively, or a total extension of 2,658 square meters, on March 8, 1946, sold said three lots to three of his children named Rosario C. de Encarnacion, Mercedes C. de Ramas and Antonio Ma. Cui, pro indiviso for the sum of P64,000. Because Rosario C. de Encarnacion for lack of funds was unable to pay her corresponding share of the purchase price, the sale to her was cancelled and the one-third of the property corresponding to her was returned to the vendor. These three lots are commercial. The improvements thereon were destroyed during the last Pacific War so that at the time of the sale in 1946, there were no buildings or any other improvements on them. Because of the sale of these lotspro indiviso and because of the cancellation of the sale to one of the three original vendees, Don Mariano and his children Mercedes and Antonio became co-owners of the whole mass in equal portions. In the deed of sale vendor Don Mariano retained for himself the usufruct of the property in the following words: " hereby sell, transfer, and convey to Messrs. Rosario C. de Encarnacion, Mercedes C. de Ramas and Antonio Ma. Cui, the abovementioned parcel of land in equal parts, ... and the further consideration, that I, shall enjoy the fruits and rents of the same, as long as my natural life shall last. Granting and conveying unto the said buyers the full rights as owners to enjoy the constructive possession of the same, improve, construct and erect a building in the lot, or do whatever they believe to be proper and wise, ..." Subsequently, a building was erected on a portion of this mass facing Calderon street and was occupied by a Chinese businessman for which he paid Don Mariano P600 a month

as rental. The date when the building, was constructed and by whom do not appear in the record. Sometime after the sale to Mercedes and Antonio the two applied to the Rehabilitation Finance Corporation (RFC) for a loan of P130,000 with which to construct a 12-door commercial building presumably on a portion of the entire parcel corresponding to their share. In order to facilitate the granting of the loan and inasmuch as only two of the three co-owners applied for the loan, Don Mariano on January 7, 1947, executed an authority to mortgage (Annex U) authorizing his two children co-owners to mortgage his share, the pertinent portion of said authority reading thus: "That by virtue of these presents, I hereby agree, consent permit and authorize my said co-owners to mortgage, pledge my share so that they may be able to construct a house or building in the said property, provided however, that the rents of the said land shall not be impaired and will always be received by me." The loan was eventually granted and was secured by a mortgage on the three lots in question, Don Mariano being included as one of the three mortgagors and signing the corresponding promissory note with his two co-owners. He did not however, join in the construction of the 12-door commercial building as may be gathered from the "Convenio de Asignacion de Parte' (Annex V) wherein it was agreed among the three co-owners to assign to Don Mariano that one-third of the whole mass facing Calderon street and on which was erected the building already referred to as being occupied by a Chinese businessman and for which he was paying Don Mariano P600 a month rental. The area of this one-third portion was fixed at 900 square meters approximately one-third of the total area of the three lots. The pertinent Portion of this Annex V reads as follows: "Que como quiera que, la propiedad arriba descrita esta actualmente hipotecada a la Rehabilitation Finance

Corporation para garantizar la construccion que mis condueos cnotruyeron en la parte que les correponde; "Y que como quiera que, el Sr. Don Mariano Cui, uno de los condueos, no ha querido unirse a la construccion de dicho edificio, y desea que la parte que le corresponda sea la 1/3 que este dando frente a la Calle Calderon." The 12-door commercial building was eventually constructed and the builder-owners thereof Mercedes and Antonio received and continued to receive the rents thereof amounting to P4,800 a month and paying therefrom the installments due for payment on the loan to the Rehabilitation Finance Corporation. On March 25, 1948, two other children of Don Mariano named Jesus and Jorge brought an action (Civil case No. 599R) in the Court of First Instance of Cebu for the purpose of annulling the deed of sale of the three lots in question on the ground that they belonged to the conjugal partnership of Don Mariano and his deceased wife Antonia Perales. Thereafter, plaintiffs Jesus and Jorge applied for the appointment of a receiver to take charge of the lots and of the rentals of the building. This petition was denied on November 8, 1948. On March 19, 1949, Rosario C. Encarnacion, that daughter of Don Mariano who was one of the original vendees, filed a petition to declare her father incompetent and to have a guardian appointed for his property, in Special Proceeding No. 481-R of the Court of First Instance of Cebu. In May 1949 the petition was granted and Don Mariano was declared incompetent and Victorino Reynes was appointed guardian of his property. Thereafter, the complaint in civil case No. 599-R seeking to annul the deed of sale of the three lots in favor of Mercedes and Antonio was amended so as to include as plaintiffs not only the guardian Victorino Reynes but also all the other children of Don Mariano.

On June 15, 1949, guardian Victorino Reynes filed a motion in the guardianship proceedings seeking authority to collect the rentals from the three lots in question and asking the Court to order Antonio and Mercedes to deliver to him as guardian all the rentals they had previously collected from the 12-door commercial building, together with all the papers belonging to his ward. This motion was denied by Judge Piccio in his order of July 12, 1949. The guardian did not appeal from this order. On May 22, 1951, Judge Saguin rendered a decision in civil case No. 599-R and found that the three lots in question were not conjugal property but belonged exclusively to Don Mariano and so upheld the sale of two-thirds of said lots to Antonio and Mercedes. The plaintiffs appealed to the Court of Appeals where the case is now pending. From the Court of Appeals the case was brought to the Supreme Court, and the decision of Judge Saguin upholding the validity of the sale in favor of Antonio and Mercedes Cui was finally affirmed on 21 February 1957, in Cui vs. Cui, 100 Phil, 914. This third case now before Us was started by the erstwhile guardian of Don Mariano Cui (while the latter was still alive) in order to recover P126,344.91 plus legal interest from Antonio Cui and Mercedes Cui (Record on Appeal, pages 2-3) apparently as fruits due to his ward by virtue of his usufruct. The guardian's complaint was supplemented and amplified by a 1957 complaint in intervention (duly admitted) filed by the other compulsory heirs of Mariano Cui, who had died on 29 July 1952, some nine months after the present case was instituted in the court below (Record on Appeal, pages 67-68). In essence, the complaint alleges that the usufructuary right reserved in favor of Don Mariano Cui extends to and includes the rentals of the building constructed by Antonio Cui and Mercedes Cui on the land sold to them by their father; that the defendants retained those rentals for themselves; that the usufructuary rights of the vendor were of the essence of the sale, and their violation entitled him to rescind (or resolve) the sale. It prayed either for rescission with accounting, or for

delivery of the rentals of the building with interests, attorneys' fees and costs (Record on Appeal, pages 12-38). The amended answer, while admitting the reserved usufruct and the collection of rentals of the building by the defendants, denied that the usufructuary rights included or extended to the said rentals, or that such usufruct was of the essence of the sale; that the vendor (Don Mariano Cui ) had waived and renounced the usufruct and that the defendants vendees gave the vendor P400.00 a month by way of aid; that the original complaint having sought fulfillment of the contract, plaintiff can not thereafter seek rescission; that such action is barred by res judicata (on account of the two previous decisions of the Supreme Court and by extinctive prescription. Defendants counterclaimed for actual and moral damages and attorney's fees. Plaintiffs denied the allegations in the counterclaim. . From a consideration of the pleadings, the basic and pivotal issue appears to be whether the usufruct reserved by the vendor in the deed of sale, over the lots in question that were at the time vacant and unoccupied, gave the usufructuary the right to receive the rentals of the commercial building constructed by the vendees with funds borrowed from the Rehabilitation and Finance Corporation, the loan being secured by a mortgage over the lots sold. Similarly, if the usufruct extended to the building, whether the failure of the vendees to pay over its rentals to the usufructuary entitled the latter to rescind, or more properly, resolve the contract of sale. In the third place, should the two preceding issues be resolved affirmatively, whether the action for rescission due to breach of the contract could still be enforced and was not yet barred. The court below declared that the reserved right of usufruct in favor of the vendor did not include, nor was it intended to include, nor was it intended to include, the rentals of the building subsequently constructed on the vacant lots, but that it did entitle the usufructuary to receive a reasonable rental for the portion of the land occupied by the building, which the Court a quo fixed at Pl,858.00 per month; and that the rentals for the land from November, 1947, when the building was rented, to 29 July 1952, when Don Mariano died, amounted to P100,088.80. It also found no preponderant evidence that the seller, Don Mariano Cui, had

ever waived his right of usufruct, as contended by the defendants; and that the Supreme Court, in denying reconsideration of its second (1957) decision (100 Phil. 914), had, like the court of origin, refused to pass upon the extent of the usufructuary rights of the seller, specially because the present case, was already pending in the Court of First Instance, hence no res judicata existed. No attorney's fees were awarded to the defendants, but they were sentenced to pay counsel fees to plaintiffs. Both parties appealed in the decision of the court a quo. We find no the decision appealed from. As therein pointed out, the terms of the 1946 deed of sale of the vacant lots in question made by the late Don Mariano Cui in favor of his three children, Rosario, Mercedes and Antonio Cui, in consideration of the sum of P64,000.00 and the reserved usufruct of the said lot in favor of the vendor, as amplified by the deed of 7 January 1947, authorizing Mercedes, and Antonio Cui to borrow money, with the security of a mortgage over the entirety of the lots, in order to enable them to construct a house or building thereon provided, however, that the rents of said land shall not be impaired and will always received by me. clearly prove that the reserved usufruct in favor of the vendor, Mariano Cui, was limited to the rentals of the land alone. Had it been designed to include also the rents of the buildings intended to be raised on the land, an express provision would have been included to the effect, since in both documents (heretofore quoted) the possibility of such construction was clearly envisaged and mentioned. Appellants, however, argue that the terms of the deed constituting the usufruct are not determinative of the extent of the right conferred; and that by law, the enjoyment of the rents of the building subsequently erected passed to the usufructuary, by virtue of Article 571 of the Civil Code of the Philippines (Article 479 of the Spanish Civil Code of 1889) prescribing that: Art. 571. The usufructuary shall have the right to enjoy any increase which the thing in usufruct may acquire through accession, the servitudes established in its favor, and, in general, all the benefits inherent therein,

inasmuch as (in the appellants' view) the building constructed by appellees was an accession to the land. This argument is not convincing. Under the articles of the Civil Code on industrial accession by modification on the principal land (Articles 445 to 456 of the Civil Code) such accession is limited either to buildings erected on the land of another, or buildings constructed by the owner of the land with materials owned by someone else. Thus, Article 445, establishing the basic rule of industrial accession, prescribes that Whatever is built, planted or sown on the land of another, and the improvements or repairs made thereon, belong to the owner of the land subject to the provisions of the following articles. while Article 449 states: He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. (Emphasis supplied) Articles 447 and 445, in turn, treat of accession produced by the landowner's building, planting and sowing "with the materials of another" and when "the materials, plants or seeds belong to a third person other than the landowner or the builder, planter or sower. Nowhere in these articles on industrial accession is there any mention of the case of landowner building on his own land with materials owned by himself (which is the case of appellees Mercedes and Antonio Cui). The reason for the omission is readily apparent: recourse to the rules of accession are totally unnecessary and inappropriate where the ownership of land and of the, materials used to build thereon are concentrated on one and the same person. Even if the law did not provide for accession the land-owner would necessarily own the building, because he has paid for the materials and labor used in constructing it. We deem it unnecessary to belabor this obvious point. . There is nothing in the authorities (Manresa, Venezian, Santamaria, and Borrell cited by appellants that specifically deals with constructions made by a party on his own land with his own materials, and at his own expense. The authorities cited merely indicate the application in general

of the rules of accession. But as already stated above, the Civil Code itself limits the cases of industrial accession to those involving land and materials belonging to different owners. Anyway, commentators' opinions are not binding where not in harmony with the law itself. The author that specifically analyses the situation of the usufructuary visa-vis constructions made by the landowner with his own materials is Scaevola (Codigo Civil, 2d Edition, pages 288 to 297) ; and his conclusion after elaborate discussion is that, at the most (b) El nudo propietario no podra, sin el consentimiento del usufructuario, hacer construcciones, plantaciones y siembras en el predio objecto del usufructo; y en el caso de que aquel lascosintiese, la utilizacion sera comun en los frutos y productosde lo sembrado y plantado, y con respecto a las construcciones,el usufructuario tendra derecho a la renta que de mutuo acuerdo se fije a las mismas; en su defecto, por la autoridad judicial (Author cit., Emphasis supplied). Scaevola's opinion is entirely in harmony with Article 595 of the Civil Code of the Philippines, prescribing that The owner may construct any works and make any improvements of which the immovable usufruct is susceptible, or make new plantings thereon if it be rural, provided that such acts do not cause a diminuition in the value of the usufruct or prejudice the right of the usufructuary. Note that if the income from constructions made by the owner during the existence of the usufruct should be held to accrue automatically to the usufructuary under Article 571, such improvements could not diminish the value of the usufruct nor prejudice the right of the usufructuary; and the qualifications by Article 595 on the owner's right to build would be redundant. The limitations set by Article 595 to the construction rights of the naked owner of the land are evidently premised upon the fact that such constructions would necessarily reduce the area of the land under usufruct, for which the latter should be indemnified. This is precisely what the court a quo has done in sentencing the appellee owners of the building to pay to the usufructuary a monthly rent of P1,758.00 for the

area occupied by their building, after mature consideration of the rental values of lands in the neighborhood. Additional considerations against the thesis sustained by appellants are (1) that the amount invested in the building represents additional capital of the landowners not foresee" when the usufruct was created; and (2) that no land-owner would be willing to build upon vacant lots under usufruct if the gain therefrom were to go to the usufructuary while the depreciation of the value of the building (as distinguished from the necessary repairs) and the amortization of its cost would burden exclusively the owner of the land. The unproductive situation of barren lots would thus be prolonged for an indefinite time, to the detriment of society. In other words, the rule that appellants advocate would contradict the general interest and be against public policy. Appellants urge, in support of their stand, that the loan .for the construction of the building was obtained upon the security of a mortgage not only upon the share of appellees but also upon the undivided interest of Don Mariano Cui in the lots in question. That factor is irrelevant to the ownership of the building, because the money used for the building was loaned exclusively to the appellees, and they were the ones primarily responsible for its repayment. Since the proceeds of the loan was exclusively their property, 1 the building constructed with the funds loaned is likewise their own. A mortgagor does not become directly liable for the payment of the loan secured by the mortgage, in the absence of stipulation to that effect; and his subsidiary role as guarantor does not entitle him to the ownership of the money borrowed, for which the mortgage is mere security. We agree with the trial court that there was no adequate proof that the vendor, Don Mariano Cui, ever renounced his usufruct. The alleged waiver was purely verbal, and is supported solely by the testimony of Antonio Cui, one of the alleged beneficiaries thereof. As a gratuitous renunciation of a real right over immovable property that as created by public document, the least to be expected in the regular course of business is that the waiver should also appear in writing. Moreover, as pointed out in the appealed decision (Record on Appeal, page 184, et seq.), in previous pleadings sworn to by Antonio Cui himself, in Civil

Case No. 599 and Special Proceeding 481-R of the Cebu Court of First Instance (Exhibits "I", "J", and "20-A"), he and his sister Mercedes had contended that Don Mariano Cui had been receiving from them P400.00 per month as the value of his usufruct, and never claimed that the real right had been renounced or waived. The testimony of Antonio Cui on the alleged waiver, given after the usufructuary had been declared incompetent and could no longer contradict him, is obviously of negligible probative value. Turning now to the second issue tendered by herein appellants, that the non-compliance with the provisions concerning the usufruct constituted sufficient ground for the rescission (or resolution) of the sale under the tacit resolutory condition established by Article 1191 of the Civil Code. What has been stated previously in discussing the import of Don Mariano's usufruct shows that the alleged breach of contract by the appellees Antonio and Mercedes Cui could only consist in their failure to pay to the usufructuary the rental value of the area occupied by the building constructed by them. But as the rental value in question had not been ascertained or fixed either by the parties or the court, prior to the decision of 31 October 1961, now under appeal, nor had Don Mariano Cui, or anyone else in his behalf, made any previous demand for its payment, the default, if any, can not be exclusively blamed upon the defendants-appellees. Hence, the breach is not it "so substantial and fundamental as to defeat the object of the parties in making the agreement" 2 as to justify the radical remedy of rescission. This Court, inBanahaw, Inc. vs. Dejarme 55 Phil. 338, ruled that

...Under the third paragraph of article 1124 of the Civil Code, the court is given a discretionary power to allow a period within which a person in default may be permitted to perform the stipulation upon which the claim for resolution of the contract is based. The right to resolve or rescind a contract for non-performance of one of its stipulations is, therefore, not absolute.

We have stated "the default, if any," for the reason that without previous ascertainment of the exact amount that the, defendants-appellees were obligated to turn over to the usufructuary by way of reasonable rental value of the land occupied by their building, said parties can not be considered as having been in default (mora) for failure to turn over such monies to the usufructuary. "Ab illiquido non fit mora": this principle has been repeatedly declared by the jurisprudence of Spanish Supreme

Court (v. Manresa, Commentaries to the Spanish Civil Code [5th Ed.], Vol. 8, No. 1, page 134) that is of high persuasive value in the absence of local adjudications on the point . No puede estimarse que incurre en mora el obligado al pago de cantidad mientras esta no sea liquida, y tenga aquel conocimiento por virtud de requirimiento o reclamacion judicial de lo que debe abonar (Sent. TS of Spain, 13 July 1904) . Seguin tiene declarado esta sala con repeticion, no se puede establecer que hay morosidad, ni condenar por tal razon al abono de intereses cuando no se conoce la cantidad liquida reclamable" (Sent. TS of Spain, 29 November 1912) ... es visto que no existiendo obligacion de entregar cantidad hasta tanto que se liquide no puede estimarse segun jurisprudencia, que los recurridos ineurran en mora, por tanto que hayan de pagar intereses legales de la cantidad que en su caso resulte (Sent, TS of Spain, 29 April 1914) In the absence of default on the part of the defendants-vendees, Article 1592 of the Civil Code of the Philippines that is invoked by appellants in, support of their all right to rescind the sale, is not applicable: for said article (which is a mere variant of the general principle embodied in Article 1191, of the same Code) presupposes default of the purchasers in the fulfilment of their obligations. As already noted, no such default or breach could occur before liquidation of the usufructuary's credit; and the time for paying such unliquidated claim can not be said to have accrued until the decisions under appeal was rendered, fixing the rental value of the land occupied by the building. The filing of the initial complaint by Victoriano Reynes, then guardian of the late Don Mariano in 1951, seeking to recover P126,344.91 plus interest, did not place appellees in default, for that complaint proceeded on the theory that the usufructuary was entitled to all the rentals of the building constructed by the appellees on the lot under usufruct; and as We have ruled, that theory was not legally tenable. And the 1957 complaint in intervention, seeking rescission of the sale as alternative remedy, was only interposed after the death of the usufructuary in 1952,

and the consequent extinction of the usufruct, conformably to Article 603, paragraph (1), of the Civil Code. It is also urged by the appellants that the usufruct was a condition precedent to the conveyance of ownership over the land in question to herein appellees, and their failure to comply with their obligations under the usufruct prevented the vesting of title to the property in said appellees. We need not consider this argument, since We have found that the usufruct over the land did not entitle the usufructuary to either the gross or the net income of the building erected by the vendees, but only to the rental value of the portion of the land occupied by the structure (in so far as the usufructuary was prevented from utilizing said portion), and that rental value was not liquidated when the complaints were filed in the court below, hence, there was no default in its payment. Actually, this theory of appellants fails to take into account that Don Mariano could not retain ownership of the land and, at the same time, be the usufructuary thereof. His intention of the usufructuary rights in itself imports that he was no longer its owner. For usufruct is essentially jus in re aliena; and to be a usufructuary of one's own property is in law a contradiction in terms, and a conceptual absurdity. The decision (Exhibit "30") as well as the resolution of this Court upon the motion to reconsider filed in the previous case (100 Phil 914) refusing to adjudicate the usufructuary rights of Don Mariano in view of the pendency of the present litigation (Exhibit "22") amply support the trial court's overruling of the defense of res judicata. Summing up, We find and hold: (1) That the usufructuary rights of the late Don Mariano Cui, reserved in the deed of sale (Exhibit "A" herein), was over the land alone and did not entitle him to the rents of the building later constructed thereon by defendants Mercedes and Antonio Cui at their own expense. (2) That said usufructuary was entitled only to the reasonable rental value of the land occupied by the building aforementioned. (3) That such rental value not having been liquidated until the judgment under appeal was rendered, Antonio and Mercedes Cui were not in default prior thereto, and the deed of sale was therefore, not subject to rescission.

(4) That as found by the court below, the reasonable rental value of the land occupied by the defendants' building totalled P100,088.80 up to the time the usufructuary died and the usufruct terminated. (5) That pursuant to Articles 2208 (No. 11), 2210 and 2213 of the Civil Code, 5 the trial court had discretion to equitably award legal interest upon said sum of P100,088.80, as well as P5,000.00 attorney's fees, considering that defendants Cui have enjoyed the said rental value of the land during all those years. WHEREFORE, finding no reversible error in the appealed decision, the same is hereby affirmed. Costs against appellant-intervenors, Jesus Ma. Cui, Jose Ma. Cui, Serafin Ma. Cui, Jorge Ma. Cui, Rosario Cui de Encarnacion, Precilla C. Velez, and Lourdes C. Velez.


There should be no rescission of the contract coz the exact amount of

rent due and owing to the Don Marianos estate is still unliquidated and undetermined. The trial court has the discretion to grant the debtor

Don Mariano sold his 2 lots to two of his children. Later on, he and his children became co-owners of the property. Don Mariano executed a deed authorizing the children to apply for a loan w/ mortgage with a stipulation reserving his right to the fruits of the land. The children then constructed a building on the land and collected rent from the lessee thereof. Much later, when Don Mariano died, his estate was claiming the fruits of the building.

(children) a period within which to pay the rental income from the portion of land owned by the building because the same has not yet been determined. Article 1191 of the Civil Code grants the right to rescind but subject to the period that the court will grant.

Moreover, on the issue of co-ownership, the court held that a co-owner cannot simultaneously be a usufructuary of the same land owned.


Whether or not Don Mariano had a right to fruits of the building?


The deed expressly reserved only to his right to the fruits of the land. He only owned the rent for the portion of land occupied by the building; thus, the estate could only claim the rent on that piece of land and not on the entire parcel of land. The children are entitled to the rents of the building. (A usufruct on the land may be separate from the building.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18003 September 29, 1962 ROSARIO GREY VDA. DE ALBAR and JOSE M. GREY, petitioners, vs. JOSEFA FABIE DE CARANDANG and THE COURT OF APPEALS (Second Division), respondents. Montenegro, Madayag, Viola and Hernandez for petitioners. Ambrosio Padilla and Santiago P. Blanco for respondents. DIZON, J.: Appeal taken by Rosario, Grey Vda. de Albar and Jose M. Grey from the decision of the Court of Appeals CA-G.R. No. 28196-R an original action for certiorari filed by respondents Josefa Fabie de Carandang. In her will the deceased Doa Rosario Fabie y Grey bequeathed the naked ownership of a parcel of land situated at Ongpin St., Manila, and of the building and other improvements existing thereon, to petitioners, and the usufruct thereof to respondent for life. Because the improvements were destroyed during the battle for the liberation of the City of Manila, the Philippine War Damage Commission paid petitioners a certain sum of money war damage. It was respondent, however, who paid the real estate taxes due on the land for the years 1945 to 1954. On October 2, 1952, petitioners commenced Civil Case No. 17674 in the Court of First Instance of Manila to limit respondent's usufruct to the legal interest on the value of the land. After due trial the court rendered judgment as follows: En virtud de todo lo cual, el Juzgado promulga decision a favor de la demandada usufructuaria, declarando: (a) Que su usufructo vitalicio continua sobre la finca en Ongpin con derecho exclusivo de percibir durante su vida la totalidad de sus

rentas, sin que los demandantes tengan derecho de inmiscuirse en la administracion de dicha finca; (b) Con derecho de percibir el 6% de la cantidad de P8,574.00 percibidos como indemnizacion de guerra desde Enero 11, 1950; (c) Al reembolso de la suma de P1,989.27 pagados o abonados por la demandada como pagos de amillaramiento desde la fecha de la Contestacion, Octubre 22, 1953; (d) Mas la suma de P2,000.00 como daos y perjuicios en forma de honorarios de abogado y gastos de litigio; (e) Con las costas a cargo de los demandantes. Deciding the appeal taken by petitioners, the Court of Appeals rendered judgment as follows: Wherefore, we hereby affirm the decision appealed from insofar as it holds that appellee's right of life usufruct subsist and is in full force and effect upon the Ongpin lot and the building now existing thereon, and that she is entitled to receive from appellants 6% of the amount the latter actually received from the Philippine War Damage Commission, and we hereby reverse said decision, declaring that reimbursement to appellee of the sum of P1,989.27 paid by her for real estate taxes is deferred until the termination of the usufruct, and that she is not entitled to any amount for attorney's fees. On appeal taken by petitioners, We, in turn, rendered judgment affirming that of the Court of Appeals with the modification that petitioners should not be made to reimburse the real estate taxes paid by respondent for the years 1945 to 1954. Upon a motion for reconsideration, filed by petitioner, We further modified the appealed judgment by eliminating therefrom the portion requiring them to give security for the payment of legal interest on the amount of the war damage. The record of the case having been remanded to the court of origin for execution, respondent filed a motion praying that the court issue an order for the "payment of the appellate jurisdiction of the Court of Appeals, 11, 1950 to January 11, 1960, which are already due to the defendant usufructuary from the plaintiffs, naked owners, as legal

interest on the war damage payments received by the latter covering said ten years period and that plaintiffs be ordered to pay defendant usufructuary the amount of P196.32 every year, representing the legal interest per annum payable on or before January 15, 1961, and every year thereafter during the existence of the usufruct." Petitioners opposed the motion alleging that because respondent failed to pay the real estate taxes on the property for the years 1954 to 1959, the property was declared delinquent and sold at public auction to Mrs. Pilar T. Bautista; that respondent failed to repurchase the property despite the fact that she was under obligation to do so in order to maintain her usufruct thereon; that June 8, 1959, petitioners repurchased the same for P715.05 and paid all the back taxes due thereon up to 1957, bringing the total amount of real estate taxes paid by them to P3,495.00; that, consequently, respondent's usufruct over the property was extinguished and they are entitled to reimbursement for the amount of real estate taxes paid by them. On these grounds they prayed for the denial respondent's motion, or for the suspension of the issuance of the writ of execution until the question of the termination of respondent's usufruct has been finally settled. On July 2, 1960, the Court of First Instance of Manila issued the following order: On motion of the defendant and it appearing that the decision of this Court dated August 10, 1953, as modified by the decisions of the Court of Appeals in CA-G.R. No. 11917-R and of the Supreme Court in G.R. No. L-13361, had already become final and executory, let a writ be issued for the execution of the said decision. In collecting and satisfying the sums adjudged in the judgment in favor of the plaintiffs, [defendant] the Sheriff of Manila is hereby ordered to withhold the sum of P3,495.90 which the plaintiffs claim to be reimbursable to them for real estate taxes paid on the property for the years 1954, 1955, 1957 and 1959, as well as the sum spent in repurchasing the property from the buyer at public auction, Mrs. Pilar T. Bautista. The disposition of the said
1awphl .nt

sum should be threshed out by the parties in a separate incident either in this action or in an independent litigation. On July 23, 1960 respondent filed a motion for the reconsideration of the above order upon the ground that it imposes a condition on the execution of the judgment rendered in the case which, as modified by the appellate courts, had already become executory. The court, however, denied the motion in its order of August 25 of the same year, which, in part, said: The Court recognizes the fact that the decision had already become final and executory and has ordered the issuance of the property writ for the enforcement of the said decision, in the first paragraph of the questioned order. The second paragraph of the same order was deemed necessary in view of the apparent conflict between the parties as to how to execute the decision, particularly with regard to the liability for real estate taxes on the property in question. The difference of their views on this matter is very evident in the pleadings they have filed in connection with the issuance of the writ of execution. In view of this divergence of opinion between the parties, the Court considered it wise to withhold the disputed sum, the same to be disposed of in such manner that the parties may thresh out between themselves in a separate incident or in an independent action. There is no intention to modify or impose any condition on the enforcement of the judgment; rather, the Court merely desires that the said judgment be enforced and executed in the correct and proper manner. A petition for certiorari was thereafter filed by respondent Josefa Fabie de Carandang with the Court of Appeals to annul the orders of July 2, 1960 and August 25, 1960, on the ground that the same were not in conformity with our decision in G.R. No. L-13361, as modified by our resolution of February 10, 1960. Respondents' answer, after admitting some of the averments made in the petition for certiorari and denying the others, alleged as affirmative defenses, inter alia, that appeal in due time was the proper remedy against the orders complained of; that the Court of Appeals had no jurisdiction over the petition because the writ sought was not in aid of

its appellate jurisdiction, and lastly, that the respondent judge, in issuing the aforesaid orders, did not commit any grave abuse of discretion. Upon the issues thus submitted, the Court of Appeals rendered the appealed decision annuling the orders of July 2 and August 25, 1960 mentioned heretofore, and ordering the respondent judge to issue the writ of execution in accordance with our decision of December 29, 1959, as modified by our resolution of February 10, 1960. Hence the present appeal. Petitioners reiterate now their contention that the Court of Appeals had no jurisdiction over the petition forcertiorari filed by herein respondent, Josefa Fabie Vda. de Carandang (CA-G.R. No. 28196), because the writ sought therein was not in aid of its appellate jurisdiction. We find this contention to be meritorious. It is not disputed that the Court of Appeals has original jurisdiction to issue writs of certiorari, prohibition,mandamus, and all other auxiliary writs in aid of its appellate jurisdiction (Section 30, Republic Act 296, commonly known as Judiciary Act of, 1948). Settled likewise is the view that anyone of the writs aforesaid is in aid of the appellate jurisdiction of the Court of Appeal within the meaning of the law, if said court has jurisdiction to review, by appeal or writ of error, the final decision that might be rendered in the principal case by the court against which the writ is sought. In Breslin vs. Luzon Stevedoring Co., et al., 47 O.G. 1170, the main question raised by certiorari, was whether or not the Court of First Instance of Manila erred in denying admission of an amended complaint filed by the plaintiffs in Civil Case No. 4609 and, accordingly, in dismissing the case. The Court of Appeals forwarded the case to us in the belief that the writ sought by petitioners therein was not in aid of its appellate jurisdiction. The reason given in support of this view was that if petitioners in the case had sought a review of the orders complained of, by appeal or writ of error, the review would have fallen under our exclusive appellate jurisdiction because it would have involved exclusively a question of law. In deciding whether or not the case was correctly forwarded to Us, however, we said that the reason relied upon had no bearing on the question of whether or not the writ

of certiorari sought by the therein petitioners was in aid of the appellate jurisdiction of the Court of Appeals because the determining factor for the solution of that question was whether said court had appellate jurisdiction to review the final decision of the Court of First Instance on the merits of petitioners' action. In the present case it is undisputed that the review of the final decision rendered by the Court of First Instance of Manila in Civil Case No. 17674 instituted by herein petitioner against respondent Josefa Fabie de Carandang was within the appellate jurisdiction of the Court of Appeals. In fact, it was actually appealed to said court (CA-G.R No. 11917-R) and its decision was subsequently appealed to us (G.R. No. L-13361). While from the above circumstances it might appear that conformally with our decision in the Breslin case the Court of Appeals had jurisdiction over the petition for certiorari filed by respondent Josefa Fabie de Carandang against herein petitioners and the Court of First Instance of Manila, because the writ sought was in aid of its appellate jurisdiction, we find it to be otherwise in view of one important fact that makes the aforesaid decision inapplicable to the present case. Before Breslin and others filed their petition for certiorari with the Court of Appeals, there had been no trial and decision on the merits in the principal case which was for the recovery of a sum of money because the trial court not only refused to admit their amended complaint but also dismissed the case on the ground that the plaintiffs had no cause of action against the defendant. Consequently, it was still reasonable and logical to say that the writ of certiorari sought in their petition was in aid of the appellate jurisdiction of the Court of Appeals because, upon trial on the merits, the final decision that would have been rendered by the Court of First Instance of Manila would have been appealable to the Court of Appeals considering the amount involved. In the present case such situation does not obtain. The main case (Civil Case No. 17674 of the Court of First Instance of Manila) had already been finally decided, first by the Court of First Instance of Manila, then by the Court of Appeals and lastly, by Us; our decision had become executory, for which reason the record of the case was remanded below for purposes of execution; there was absolutely nothing left of the

substance of the action to be resolved. Such being the case, there can be no reason to say that the Court of Appeals still had jurisdiction to review the final orders and decision of the Court of First Instance in said case, by appeal or writ of error. That jurisdiction had already been exercised and exhausted with the rendition of the decision of the Court of Appeals in C.A. G.R. No. 11917. Upon the other hand, assuming that the orders complained of are appealable, they could only be appealed to Us because the appeal would have necessarily involved nothing more than a question of law, namely, whether or not the Court of First Instance of Manila had jurisdiction to issue the orders complained of. In view of the foregoing, we hold that the Court Appeals had no jurisdiction to entertain Carandang's petition for certiorari, and, as a result, the appealed decision is set aside. But, in view of the fact that we have original jurisdiction to entertain said petition, we shall proceed to decide it on the merits as if it had been originally filed with Us, in order to save time and avoid unnecessary expenses for the parties following the practice adopted in the Breslin case. The question to be resolved is whether the order July 2 and August 25, 1960 issued by the Court of First Instance of Manila modify our decision in G.R. No. L-13361, as modified by our resolution of February 10, 1960. The answer must be in the negative. It is, of course, the law in this jurisdiction that a decision, once executory, is beyond amendment, the prevailing party being entitled to its execution as a matter of right; that the writ of execution to be issued must form with the decision (Buenaventura vs. Garcia, 78 Phil. 759); but it is likewise settled that a stay of execution of a final judgment may be authorized if necessary to accomplish the aims of justice, as for instance, where there has been a change in the situation of the parties which makes such execution inequitable (Chua Lee vs. Mapa, 51 Phil. 624625, Li Kim Tho vs. Sanchez, 83 Phil. 776, 778). As stated heretofore, when petitioners opposed respondent Carandang's motion for execution, they alleged that because the latter did not pay the real estate taxes on the property over which she had usufructuary rights, for the years 1954 to 1959, the property was declared delinquent and sold at public auction; that because Carandang

failed to repurchase it, petitioners made the purchase for the sum of P715.05, and paid all the back taxes up to 1957 as well as those for the year 1959, having paid the total sum of P3,495.00 as real estate taxes, which amount they claimed reimbursement from respondent Carandang. Upon the above facts if proven it would seem that petitioners had at least a prima facie case against the aforesaid respondent. It was in this connection precisely that the order of July 2, 1960 provided that "the Sheriff of Manila is hereby ordered to withhold the sum of P3,495.98 . . ., as well as the sum spent in repurchasing the property . . .", providing further that "the disposition of said sum should be threshed out by the parties in a separate incident either in this action or in the independent litigation." This order, in our opinion, does not amount to a modification of our final decision in the principal case, nor to the imposition of a condition upon its enforcement. It amounts to a mere stay of execution and is authorized by our decisions in the Chua Lee and Lim Kim Tho cases (supra). IN VIEW OF THE FOREGOING, the writ prayed for in the petition for certiorari filed by Josefa Fabie de Carandang against Rosario Grey Vda. de Albar, Jose M. Grey, and the Hon. Conrado M. Vasquez (CAG.R. No. 28196-R) is denied. With costs.


the reparation and second from the fruits if payment of rent stops when the building is constructed. Thus, the new building should be considered as the capital, and the reparation as fruits. The naked owner should share the reparation with the usufructuary to prevent unjust enrichment.

The reparation or indemnity given in exchange for the destruction of the building is the substitute for the building itself. The indemnity is the capital which belongs to the naked owner while the interest on the capital is the fruits which belong to the usufructuary.

Ponentes Opinion: The reparation should be treated as capital (NCC). Only the interest on the reparation up to the date that the new building was constructed time should be given to the usufructuary, not the interest until the end of the usufruct. The reparation itself which is considered as the capital (which rightfully belongs to the naked owner) intended to replace the old building. The intention was fulfilled when the Chinaman constructed a new one. It was not the naked owners fault that he need not use the reparation to construct a new building. The owner is not doubly compensated because it was not his fault.

The Civil Code contemplates a situation where the owner pays for the construction of a new building. However, the twist in this case was that the naked owner did not have to construct a new one because the Chinaman had one built at his own expense. This is the reason why the court had a difficult time ascertaining who had the right to the indemnity given by the government for the destruction of the building due to the war.

Dissenting opinion: There is double benefit in either case. In the first, the usufructuary will be receiving interest on the reparation and rent from the

Majority Opinion: The reparation should be treated as fruits. Usufructuary should get 6% of the reparation (from the time it was actually received to the tend of the life of the usufruct) because it was not used to construct a new building. Otherwise, the naked owner is enriched twice first from

building. In the second, the naked owner receives value for the building and the construction of a building at no expense to him.

Payment of interest should continue during the life of the usufruct (not

just 6%) because the war damage is the equivalent to the building. The construction of the new building does not relieve the owners of the land used in the war damage payment from continuing the payment of interest. If they had used it to construct the building, they would have been freed from paying interest but they did not. One Au Pit, a Chinaman, offered to lease the property for a period of five years, at the same time agreeing to construct on the lot a new building provided the naked owners as well as the usufructuary sign the agreement of the lease. As the usufructuary maintains that she has the exclusive right to cede the property by lease and to receive the full rental ********************************* value by virtue of her right to usufruct while on the other hand the naked owners maintain that the right of usufruct was extinguished when the building was destroyed, the right of the usufructory being limited to the

legal interest on the value of the lot and the materials, in order that the agreement of lease may be affected, the parties agreed on a temporary

Doa Rosario Fabie y Grey was the owner of the lot in the City of Manila with a building and improvements, and by a will left by her upon her death which was duly probated she devised the naked ownership of the whole property to Rosario Grey Vda. de Albar, et al. but its usufruct to Josefa Fabie for life.

compromise whereby the naked owners would receive P100.00, or 20% of the monthly rental of P500.00 and the usufructuary the balance of 80% or P400.00 of said monthly rental. It was likewise stipulated in the agreement that the title to the building to be constructed would accrue to the land upon it completion as an integral part of the lot covered by the transfer certificate of title issued in the name of the naked owners but

During liberation, as a consequence of the fire that gutted the building in many portions of Manila, the building on the Ongpin lot was burned, leaving only the walls and other improvements that were not destroyed by the fire.

subject to the right of usufruct of Josefa Fabie. The parties expressly reserved the right to litigate their respective claims after the termination of the contract of lease to determine which of said claims was legally correct.

Court well said, "The land, being an indispensable part of the rented By reason of the destruction of the building on the Ongpin property, the United States War Damage Commission approved the claim that was presented for the damage caused to the property, paid to and received by the naked owners. In the meantime, the usufructuary paid the real estate taxes due on the property at Ongpin for the years 1945 to 1952. premises cannot be considered as having no rental value whatsoever." Moreover, in the Spanish language, the term "fincas" has a broad scope; it includes not only building but land as well. (Diccionario Ingles-Espaol, por Martines Amador) Since only the building was destroyed and the usufruct is constituted not only on the building but on the land as well, then the usufruct is not deemed extinguished by the destruction of the building for under the law usufruct is extinguished only by the total loss

of the thing subject of the encumbrance (Article 603, old Civil Code). FABIE, the usufructuary has the discretion to reconstruct the building. Of course, this is addressed to the wisdom and discretion of the usufructuary who, to all intents and purposes is deemed as the administrator of the property. This has been clarified in the case of Fabie vs. Gutierrez David, 75 Phil., 536, which was litigated between the same parties and wherein the scope of the same provision of the will has been

Whether or not the usufruct included the building and the land? W/N the usufructuary (FABIE) or naked owner (VDA DE ALBAR) should undertake the reconstruction? W/N the usufructuary should pay the real estate taxes?


the subject of interpretation.

The usufruct for life extended to the land and the building. From the above, it is clear that when the deceased constituted the life usufruct on the rentals "fincas situadas" in Ongpin and Sto. Cristo streets, she meant to impose the encumbrance both the building and the land on which it is erected for indeed the building cannot exist without the land. And as this The usufructuary should pay the taxes. We find, however, merit in the contention that the real estate taxes paid by respondent in her capacity as usufractuary for several years previous to the present litigation should be paid by her, as she did, instead of by petitioners not only because she

bound herself to pay such taxes in a formal agreement approved by the court in Civil Case No. 1569 of the Court of First Instance of Manila (Fabie vs. Gutierrez David, supra). In the case, which involved the same parties and the same properties subject to usufruct, the parties submitted an amicable agreement which was approved by the court wherein the usufructuary, herein respondent, bound herself to pay all the real estate taxes, special assessment and insurance premiums, and make all the necessary repairs on each of the properties covered by the usufruct and in accordance with said agreement, respondent paid all the taxes for the years 1945 to 1954.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-44428 September 30, 1977 AVELINO BALURAN, petitioner, vs. HON. RICARDO Y. NAVARRO, Presiding Judge, Court of First Instance of Ilocos Norte, Branch I and ANTONIO OBEDENCIO, respondents. Alipio V. Flores for petitioner. Rafael B. Ruiz for private respondent. MUOZ PALMA, J.: Spouses Domingo Paraiso and Fidela Q. Paraiso were the owners of a residential lot of around 480 square meters located in Sarrat, Ilocos Norte. On or about February 2, 1964, the Paraisos executed an agreement entitled "BARTER" whereby as party of the first part they agreed to "barter and exchange" with spouses Avelino and Benilda Baluran their residential lot with the latter's unirrigated riceland situated in Sarrat, Ilocos Norte, of approximately 223 square meters without any permanent improvements, under the following conditions: 1. That both the Party of the First Part and the Party of the Second Part shall enjoy the material possession of their respective properties; the Party of the First Part shall reap the fruits of the unirrigated riceland and the Party of the Second Part shall have a right to build his own house in the residential lot. 2. Nevertheless, in the event any of the children of Natividad P. Obencio, daughter of the First Part, shall choose to reside in this municipality and build his own house in the residential lot, the Party of the Second Part shall be obliged to return the lot such children with damages to be incurred. 3. That neither the Party of the First Part nor the Party of the Second Part shall encumber, alienate or dispose of in any

manner their respective properties as bartered without the consent of the other. 4. That inasmuch as the bartered properties are not yet accordance with Act No. 496 or under the Spanish Mortgage Law, they finally agreed and covenant that this deed be registered in the Office of the Register of Deeds of Ilocos Norte pursuant to the provisions of Act No. 3344 as amended. (p. 28, rollo) On May 6, 1975 Antonio Obendencio filed with the Court of First Instance of Ilocos Norte the present complaint to recover the abovementioned residential lot from Avelino Baluran claiming that he is the rightful owner of said residential lot having acquired the same from his mother, Natividad Paraiso Obedencio, and that he needed the property for Purposes Of constructing his house thereon inasmuch as he had taken residence in his native town, Sarrat. Obedencio accordingly prayed that he be declared owner of the residential lot and that defendant Baluran be ordered to vacate the same forfeiting his (Obedencio) favor the improvements defendant Baluran had built in bad faith.1 Answering the complaint, Avelino Baluran alleged inter alia (1) that the "barter agreement" transferred to him the ownership of the residential lot in exchange for the unirrigated riceland conveyed to plaintiff's Predecessor-in-interest, Natividad Obedencio, who in fact is still in On thereof, and (2) that the plaintiff's cause of action if any had prescribed. 2 At the pre-trial, the parties agreed to submit the case for decision on the basis of their stipulation of facts. It was likewise admitted that the aforementioned residential lot was donated on October 4, 1974 by Natividad Obedencio to her son Antonio Obedencio, and that since the execution of the agreement of February 2, 1964 Avelino Baluran was in possession of the residential lot, paid the taxes of the property, and constructed a house thereon with an value of P250.00. 3 On November 8, 1975, the trial Judge Ricardo Y. Navarro rendered a decision the dispositive portion of which reads as follows:

Consequently, the plaintiff is hereby declared owner of the question, the defendant is hereby ordered to vacate the same with costs against defendant. Avelino Baluran to whom We shall refer as petitioner, now seeks a review of that decision under the following assignment of errors: I The lower Court erred in holding that the barter agreement did not transfer ownership of the lot in suit to the petitioner. II The lower Court erred in not holding that the right to rebarter or re- exchange of respondent Antonio Obedencio had been barred by the statute of limitation. (p. 14, Ibid.) The resolution of this appeal revolves on the nature of the undertaking contract of February 2, 1964 which is entitled "Barter Agreement." It is a settled rule that to determine the nature of a contract courts are not bound by the name or title given to it by the contracting parties. 4 This Court has held that contracts are not what the parties may see fit to call them but what they really are as determined by the principles of law. 5 Thus, in the instant case, the use of the, term "barter" in describing the agreement of February 2, 1964, is not controlling. The stipulations in said document are clear enough to indicate that there was no intention at all on the part of the signatories thereto to convey the ownership of their respective properties; all that was intended, and it was so provided in the agreement, was to transfer the material possession thereof. (condition No. 1, see page I of this Decision) In fact, under condition No. 3 of the agreement, the parties retained the right to alienate their respective properties which right is an element of ownership. With the material ion being the only one transferred, all that the parties acquired was the right of usufruct which in essence is the right to enjoy the Property of another. 6 Under the document in question, spouses Paraiso would harvest the crop of the unirrigated riceland while the other party, Avelino Baluran, could build a house on the residential lot, subject, however, to the condition, that when any of the children of Natividad Paraiso Obedencio, daughter of spouses Paraiso, shall choose to reside in the municipality and build his house on the residential lot, Avelino Baluran shall be obliged to return the lot to said children "With damages

to be incurred." (Condition No. 2 of the Agreement) Thus, the mutual agreement each party enjoying "material possession" of the other's property was subject to a resolutory condition the happening of which would terminate the right of possession and use. A resolutory condition is one which extinguishes rights and obligations already existing. 7 The right of "material possession" granted in the agreement of February 2, 1964, ends if and when any of the children of Natividad Paraiso, Obedencio (daughter of spouses Paraiso, Party of the First Part) would reside in the municipality and build his house on the property. Inasmuch as the condition opposed is not dependent solely on the will of one of the parties to the contract the spouses Paraiso but is Part dependent on the will of third persons Natividad Obedencio and any of her children the same is valid. 8 When there is nothing contrary to law, morals, and good customs Or Public Policy in the stipulations of a contract, the agreement constitutes the law between the parties and the latter are bound by the terms thereof. 9 Art. 1306 of the Civil Code states: Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, Morals, good customs, public order, or public policy. Contracts which are the private laws of the contracting parties, should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter what their form may be, whenever the essential requisites for their validity are present. (Philippine American General Insurance Co., Inc. vs. Mutuc, 61 SCRA 22) The trial court therefore correctly adjudged that Antonio Obedencio is entitled to recover the possession of the residential lot Pursuant to the agreement of February 2, 1964. Petitioner submits under the second assigned error that the causa, of action if any of respondent Obedencio had Prescribed after the lapse of

four years from the date of execution of the document of February 2, 1964. It is argued that the remedy of plaintiff, now respondent, Was to ask for re-barter or re-exchange of the properties subject of the agreement which could be exercised only within four years from the date of the contract under Art. 1606 of the Civil Code. The submission of petitioner is untenable. Art. 1606 of the Civil Code refers to conventional redemption which petitioner would want to apply to the present situation. However, as We stated above, the agreement of the parties of February 2, 1964, is not one of barter, exchange or even sale with right to repurchase, but is one of or akin the other is the use or material ion or enjoyment of each other's real property. Usufruct may be constituted by the parties for any period of time and under such conditions as they may deem convenient and beneficial subject to the provisions of the Civil Code, Book II, Title VI on Usufruct. The manner of terminating or extinguishing the right of usufruct is primarily determined by the stipulations of the parties which in this case now before Us is the happening of the event agreed upon. Necessarily, the plaintiff or respondent Obedencio could not demand for the recovery of possession of the residential lot in question, not until he acquired that right from his mother, Natividad Obedencio, and which he did acquire when his mother donated to him the residential lot on October 4, 1974. Even if We were to go along with petitioner in his argument that the fulfillment of the condition cannot be left to an indefinite, uncertain period, nonetheless, in the case at bar, the respondent, in whose favor the resolutory condition was constituted, took immediate steps to terminate the right of petitioner herein to the use of the lot. Obedencio's present complaint was filed in May of 1975, barely several months after the property was donated to him. One last point raised by petitioner is his alleged right to recover damages under the agreement of February 2, 1964. In the absence of evidence, considering that the parties agreed to submit the case for decision on a stipulation of facts, We have no basis for awarding damages to petitioner.

However, We apply Art. 579 of the Civil Code and hold that petitioner will not forfeit the improvement he built on the lot but may remove the same without causing damage to the property. Art. 579. The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance; but he shall have no right to be indemnified therefor. He may, however. He may, however, removed such improvements, should it be possible to do so without damage to the property. (Emphasis supplied) Finally, We cannot close this case without touching on the unirrigated riceland which admittedly is in the possession of Natividad Obedencio. In view of our ruling that the "barter agreement" of February 2, 1964, did not transfer the ownership of the respective properties mentioned therein, it follows that petitioner Baluran remains the owner of the unirrigated riceland and is now entitled to its Possession. With the happening of the resolutory condition provided for in the agreement, the right of usufruct of the parties is extinguished and each is entitled to a return of his property. it is true that Natividad Obedencio who is now in possession of the property and who has been made a party to this case cannot be ordered in this proceeding to surrender the riceland. But inasmuch as reciprocal rights and obligations have arisen between the parties to the so-called "barter agreement", We hold that the parties and for their successors-in-interest are duty bound to effect a simultaneous transfer of the respective properties if substance at justice is to be effected. WHEREFORE, Judgment is hereby rendered: 1) declaring the petitioner Avelino Baluran and respondent Antonio Obedencio the respective owners the unirrigated riceland and residential lot mentioned in the "Barter Agreement" of February 2, 1964; 2) ordering Avelino Baluran to vacate the residential lot and removed improvements built by thereon, provided, however that he shall not be compelled to do so unless the unirrigated riceland shall five been restored to his possession either on volition of the party concerned or through judicial proceedings which he may institute for the purpose.

Without pronouncement as to costs. So Ordered.


The manner of terminating the right of usufruct may be stipulated by the parties such as in this case, the happening of a resolutory condition.


Whether or not the contract was a barter or usufruct


IT IS USUFRUCT. First, the contract is what the law defines it to be and not what the parties call it. It is very clear that what the parties

Baluran and Paraiso (ancestor of Obedencio) entered into a contract which they called barter, but in fact stipulated that they would only transfer the material possession of their respective properties to each other. Thus, Baluran will be allowed to construct a residential house on the land of Paraiso while Paraiso is entitled to reap the fruits of the riceland of Baluran. The contract prohibited them from alienating the properties of the other and contained a stipulation that should the heirs of Paraiso desire to re-possess the residential lot, Baluran is obliged to return the lot. Indeed, years after, Obedencio (grandchild of Paraiso) acquired the ownership of the residential lot from his mother and demanded that Baluran, who was in possession, vacate.

exchanged was not ownership, but merely material possession or the right to enjoy the thing.

Now, because it is usufruct, the law allows the parties to stipulate the conditions including the manner of its extinguishment. In this case, it was subject to a resolutory condition which is in case the heir of Paraiso (a third party) desires to repossess the property. Upon the happening of the condition, the contract is extinguished.

Therefore, Baluran must return the land to Obedencia. But since Art. 579 allows the usufructuary to remove improvements he made, Baluran may

Baluran now counters that the barter already transferred ownership.

remove the house he constructed. One last point. At the time of this case, the Obedencias were also in

possession of the riceland of Baluran. Although it was not proper to decide the issue of possession in this case, the Court nevertheless decided on the matter and order the Obedencias to vacate the property inasmuch as there was an extinguishment of a reciprocal obligations and rights.