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7/11/2015

G.R.No.L44428

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RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION
G.R.No.L44428September30,1977
AVELINOBALURAN,petitioner,
vs.
HON.RICARDOY.NAVARRO,PresidingJudge,CourtofFirstInstanceofIlocosNorte,BranchIand
ANTONIOOBEDENCIO,respondents.
AlipioV.Floresforpetitioner.
RafaelB.Ruizforprivaterespondent.

MUOZPALMA,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"wherebyaspartyofthefirstparttheyagreedto"barterandexchange"withspousesAvelino
and Benilda Baluran their residential lot with the latter's unirrigated riceland situated in Sarrat, Ilocos Norte, of
approximately223squaremeterswithoutanypermanentimprovements,underthefollowingconditions:
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
unirrigatedricelandandthePartyoftheSecondPartshallhavearighttobuildhisownhouseinthe
residentiallot.
2.Nevertheless,intheeventanyofthechildrenofNatividadP.Obencio,daughteroftheFirstPart,
shallchoosetoresideinthismunicipalityandbuildhisownhouseintheresidentiallot,thePartyof
theSecondPartshallbeobligedtoreturnthelotsuchchildrenwithdamagestobeincurred.
3.ThatneitherthePartyoftheFirstPartnorthePartyoftheSecondPartshallencumber,alienateor
disposeofinanymannertheirrespectivepropertiesasbarteredwithouttheconsentoftheother.
4. That inasmuch as the bartered properties are not yet accordance with Act No. 496 or under the
SpanishMortgageLaw,theyfinallyagreedandcovenantthatthisdeedberegisteredintheOfficeof
theRegisterofDeedsofIlocosNortepursuanttotheprovisionsofActNo.3344asamended.(p.28,
rollo)
OnMay6,1975AntonioObendenciofiledwiththeCourtofFirstInstanceofIlocosNortethepresentcomplaintto
recover the abovementioned residential lot from Avelino Baluran claiming that he is the rightful owner of said
residentiallothavingacquiredthesamefromhismother,NatividadParaisoObedencio,andthatheneededthe
propertyforPurposesOfconstructinghishousethereoninasmuchashehadtakenresidenceinhisnativetown,
Sarrat.ObedencioaccordinglyprayedthathebedeclaredowneroftheresidentiallotandthatdefendantBaluran
beorderedtovacatethesameforfeitinghis(Obedencio)favortheimprovementsdefendantBaluranhadbuiltin
badfaith.1
Answeringthecomplaint,AvelinoBaluranallegedinteralia(1)thatthe"barteragreement"transferredtohimthe
ownership of the residential lot in exchange for the unirrigated riceland conveyed to plaintiff's Predecessorin
interest,NatividadObedencio,whoinfactisstillinOnthereof,and(2)thattheplaintiff'scauseofactionifanyhad
prescribed.2
Atthepretrial,thepartiesagreedtosubmitthecasefordecisiononthebasisoftheirstipulationoffacts.Itwas
likewiseadmittedthattheaforementionedresidentiallotwasdonatedonOctober4,1974byNatividadObedencio
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to her son Antonio Obedencio, and that since the execution of the agreement of February 2, 1964 Avelino
Baluranwasinpossessionoftheresidentiallot,paidthetaxesoftheproperty,andconstructedahousethereon
withanvalueofP250.00. 3OnNovember8,1975,thetrialJudgeRicardoY.Navarrorenderedadecisionthedispositive
portionofwhichreadsasfollows:

Consequently,theplaintiffisherebydeclaredownerofthequestion,thedefendantisherebyordered
tovacatethesamewithcostsagainstdefendant.
Avelino Baluran to whom We shall refer as petitioner, now seeks a review of that decision under the following
assignmentoferrors:
IThelowerCourterredinholdingthatthebarteragreementdidnottransferownershipofthelot
insuittothepetitioner.
II The lower Court erred in not holding that the right to rebarter or re exchange of respondent
AntonioObedenciohadbeenbarredbythestatuteoflimitation.(p.14,Ibid.)
The resolution of this appeal revolves on the nature of the undertaking contract of February 2, 1964 which is
entitled"BarterAgreement."
Itisasettledrulethattodeterminethenatureofacontractcourtsarenotboundbythenameortitlegiventoitby
thecontractingparties.4ThisCourthasheldthatcontractsarenotwhatthepartiesmayseefittocallthembutwhatthey
reallyareasdeterminedbytheprinciplesoflaw. 5Thus,intheinstantcase,theuseofthe,term"barter"indescribingthe
agreementofFebruary2,1964,isnotcontrolling.Thestipulationsinsaiddocumentareclearenoughtoindicatethatthere
wasnointentionatallonthepartofthesignatoriestheretotoconveytheownershipoftheirrespectivepropertiesallthat
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
respectivepropertieswhichrightisanelementofownership.

Withthematerialionbeingtheonlyonetransferred,allthatthepartiesacquiredwastherightofusufructwhichin
essenceistherighttoenjoythePropertyofanother.6Underthedocumentinquestion,spousesParaisowouldharvest
thecropoftheunirrigatedricelandwhiletheotherparty,AvelinoBaluran,couldbuildahouseontheresidentiallot,subject,
however,tothecondition,thatwhenanyofthechildrenofNatividadParaisoObedencio,daughterofspousesParaiso,shall
choosetoresideinthemunicipalityandbuildhishouseontheresidentiallot,AvelinoBaluranshallbeobligedtoreturnthe
lottosaidchildren"Withdamagestobeincurred."(ConditionNo.2oftheAgreement)Thus,themutualagreementeach
partyenjoying"materialpossession"oftheother'spropertywassubjecttoaresolutoryconditionthehappeningofwhich
wouldterminatetherightofpossessionanduse.

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(daughterofspousesParaiso,PartyoftheFirstPart)wouldresideinthemunicipalityandbuildhishouseonthe
property.Inasmuchastheconditionopposedisnotdependentsolelyonthewillofoneofthepartiestothecontractthe
spousesParaisobutisPartdependentonthewillofthirdpersonsNatividadObedencioandanyofherchildrenthe
sameisvalid.8

Whenthereisnothingcontrarytolaw,morals,andgoodcustomsOrPublicPolicyinthestipulationsofacontract,
theagreementconstitutesthelawbetweenthepartiesandthelatterareboundbythetermsthereof.9
Art.1306oftheCivilCodestates:
Art.1306.Thecontractingpartiesmayestablishsuchstipulations,clauses,termsandconditionsas
they may deem convenient, provided they are not contrary to law, Morals, good customs, public
order,orpublicpolicy.
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
InsuranceCo.,Inc.vs.Mutuc,61SCRA22)
The trial court therefore correctly adjudged that Antonio Obedencio is entitled to recover the possession of the
residentiallotPursuanttotheagreementofFebruary2,1964.
Petitionersubmitsunderthesecondassignederrorthatthecausa,ofactionifanyofrespondentObedenciohad
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 rebarter or reexchange of the properties
subjectoftheagreementwhichcouldbeexercisedonlywithinfouryearsfromthedateofthecontractunderArt.
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1606oftheCivilCode.
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
partiesofFebruary2,1964,isnotoneofbarter,exchangeorevensalewithrighttorepurchase,butisoneofor
akintheotheristheuseormaterialionorenjoymentofeachother'srealproperty.
Usufructmaybeconstitutedbythepartiesforanyperiodoftimeandundersuchconditionsastheymaydeem
convenientandbeneficialsubjecttotheprovisionsoftheCivilCode,BookII,TitleVIonUsufruct.Themannerof
terminatingorextinguishingtherightofusufructisprimarilydeterminedbythestipulationsofthepartieswhichin
this case now before Us is the happening of the event agreed upon. Necessarily, the plaintiff or respondent
Obedenciocouldnotdemandfortherecoveryofpossessionoftheresidentiallotinquestion,notuntilheacquired
thatrightfromhismother,NatividadObedencio,andwhichhedidacquirewhenhismotherdonatedtohimthe
residentiallotonOctober4,1974.EvenifWeweretogoalongwithpetitionerinhisargumentthatthefulfillment
oftheconditioncannotbelefttoanindefinite,uncertainperiod,nonetheless,inthecaseatbar,therespondent,
inwhosefavortheresolutoryconditionwasconstituted,tookimmediatestepstoterminatetherightofpetitioner
hereintotheuseofthelot.Obedencio'spresentcomplaintwasfiledinMayof1975,barelyseveralmonthsafter
thepropertywasdonatedtohim.
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
stipulationoffacts,Wehavenobasisforawardingdamagestopetitioner.
However,WeapplyArt.579oftheCivilCodeandholdthatpetitionerwillnotforfeittheimprovementhebuilton
thelotbutmayremovethesamewithoutcausingdamagetotheproperty.
Art.579.Theusufructuarymaymakeonthepropertyheldinusufructsuchusefulimprovementsor
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.(Emphasissupplied)
Finally, We cannot close this case without touching on the unirrigated riceland which admittedly is in the
possessionofNatividadObedencio.
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
ricelandandisnowentitledtoitsPossession.Withthehappeningoftheresolutoryconditionprovidedforinthe
agreement,therightofusufructofthepartiesisextinguishedandeachisentitledtoareturnofhisproperty.itis
truethatNatividadObedenciowhoisnowinpossessionofthepropertyandwhohasbeenmadeapartytothis
case cannot be ordered in this proceeding to surrender the riceland. But inasmuch as reciprocal rights and
obligationshavearisenbetweenthepartiestothesocalled"barteragreement",Weholdthatthepartiesandfor
their successorsininterest are duty bound to effect a simultaneous transfer of the respective properties if
substanceatjusticeistobeeffected.
WHEREFORE,Judgmentisherebyrendered:1)declaringthepetitionerAvelinoBaluranandrespondentAntonio
Obedenciotherespectiveownerstheunirrigatedricelandandresidentiallotmentionedinthe"BarterAgreement"
ofFebruary2,19642)orderingAvelinoBalurantovacatetheresidentiallotandremovedimprovementsbuiltby
thereon,provided,howeverthatheshallnotbecompelledtodosounlesstheunirrigatedricelandshallfivebeen
restoredtohispossessioneitheronvolitionofthepartyconcernedorthroughjudicialproceedingswhichhemay
instituteforthepurpose.
Withoutpronouncementastocosts.SoOrdered.
Teehankee(Chairman),Makasiar,Martin,FernandezandGuerrero,JJ.,concur.

Footnotes
1pp.2122,rollo
2p.23,Ibid.
3pp.2627,Ibid.
4ShellCo.ofthePhilippinesLtd.vs.Firemen'sInsuranceCo.ofNewark,N.J.,etal.,100Phil.
757,764(1957)
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5Borromeovs.CourtofAppeals,etal.,47SCRA65(1972)
6Art.562oftheCivilCodeprovides:
"ART.562Usufructgivesarighttoenjoythepropertyofanotherwiththeobligationofpreservingits
formandsubstance,unlessthetitleconstitutingitorthelawotherwiseprovides."
7Tolentino,CommentariesontheCivilCodeofthePhilippines,Vol.IV,pp.140,1431913ed.
8Ibid.,pp.148149
9Iigovs.NationalAbaca&OtherFibersCorp.,95Phil.875Ramosvs.CentralBankofthePhil.41
SCRA565RodrigoEnriquezetal.,vs.SocorroA.Ramos,L23616,September30,1976,73SCRA
116.
TheLawphilProjectArellanoLawFoundation

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