USUFRUCT | Pre-Finals
RIGHTS OF THE USUFRUCTUARY the owner retaining the jus disponendi or the
9. As to Useful or Luxurious Improvements
made by Usufructuary (Art. 579)
Case 1: Moralidad v Pernes
FACTS:
Mercedes was the aunt of Arlene
Pernes. She was working in the US, and she
comes back to the Philippines only during
vacations. Once, when NPAs were infesting the
place where Arlene and her family resided,
Mercedes sent money to Arlene’s elder sister to
buy a parcel of land in Davao proper where
Arlene and her family could transfer and settle
down. Mercedes executed a document wherein
she expressed her desire for her kin to use the
said property, on the condition that they will
live harmoniously. On that land, Arlene and her
husband built their residence. When Mercedes
retired, she came to the Philippines. Her
relationship with Arlene’s family, however, turned
sour, so she filed a suit for unlawful detainer.
ISSUE:
Whether or not the suit would prosper.
Whether Arlene would be entitled to
reimbursement for the improvements she made
on the property.
HELD:
The Supreme Court ruled that Arlene
and her family were usufructuaries, which
means that they were allowed by Mercedes to
enjoy the property.
Usufruct is defined under Article 562 of
the Civil Code in the following wise:
ART. 562. Usufruct gives a right to enjoy the
property of another with the obligation of
preserving its form and substance, unless the
title constituting it or the law otherwise provides.
Usufruct, in essence, is nothing else but simply
allowing one to enjoy another's property. 9 It
is also defined as the right to enjoy the
property of another temporarily, including
both the jus utendi and the jus fruendi, 10 with
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power to alienate the same.
It was however held by the SC that the usufruct
in this case had already been extinguished
because of the happening of a resolutory
condition provided for in the title creating the
usufruct—there was animosity between them;
there was no harmonious relationship. Thus, the
suit for unlawful detainer would prosper. (It was
the document that created the usufruct, which
also provided for the resolutory condition.
Fulfillment of a resolutory condition is one of the
grounds whereby usufruct is extinguished.)
On the second issue, under Article 579, a
usufructuary may make useful improvements
or expenses for mere pleasure as he may
deem proper; but he shall have no right to be
indemnified. He can only remove such
improvements, provided that it can be done
without causing damage to the property.
Thus, as to the second issue, Arlene, as a
usufructuary, is not entitled to reimbursement for
the improvements she made on Mercedes’
property. She will have to vacate the property
without any right of reimbursement.
EXTINGUISHMENT OF THE USUFRUCT
1. Modes of Extinguishment (Art. 603)
Case 2: Baluran v Navarro
Recit ready: The spouses Paraiso executed an
agreement labeled as a “barter” where the
parties to the contract would barter and
exchange their respective lots. Paraiso spouses
and the Baluran spouses’ barter agreement had
several stipulations which indicated that
ownership is still exercised by them over their
respective properties, in fact they could still
alienate their properties. According to one of the
stipulations: “Nevertheless, in the event any of
the children of Natividad P. Obedencio, 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.” Antonio Obendencio
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an heir of the Natividad Paraiso spouses filed a
case to reacquire the land and the Bularan
remove their improvements built in bad faith.
The lower court ruled in favor of respondent
Obedencio, the SC sustained the ruling. The
court ruled that based on the stipulations in the
contract, what the agreement was, was not a
barter but a usufruct with a resolutory condition.
The happening of the resolutory condition
extinguished the usufruct agreement. Thus,
Antonio reacquires possession of the lot. (Note:
Art. 603. Usufruct is extinguished: (2) By the
expiration of the period for which it was
constituted, OR by the fulfillment of any
resolutory condition provided in the title creating
the usufruct.)
Facts: 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
Paraiso 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. Obedencio, 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.
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"4. That inasmuch as the bartered properties are
not yet registered in accordance with Act No.
496or 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 above-
mentioned 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.
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 possession thereof; and (2) that the plaintiff's
cause of action if any had prescribed.
Respondent 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 property in question, the defendant
is hereby ordered to vacate the same. With
costs against defendant."
Issue:
Avelino Baluran to whom We shall refer as
petitioner, now seeks a review of that decision
under the following assignment of errors: cdphil
"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 re-barter or re-exchange of
USUFRUCT | Pre-Finals
respondent Antonio Obedencio had been barred
by the statute of limitation."
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. 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.
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. 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 possession 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.
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 Baluranshall 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. 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
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condition imposed is not dependent solely on
the will of one of the parties to the contract —
the spouses Paraiso — but is partly dependent
on the will of third persons — Natividad
Obedencio and any of her children — the same
is valid.
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. (Art. 1306
of the Civil Code)
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.
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.
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
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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/or their successors-in-interest are duty
bound to effect a simultaneous transfer of the
respective properties if substantial justice is to
be effected.
WHEREFORE, judgment is hereby rendered: 1)
declaring the petitioner Avelino Baluran and
respondent Antonio Obedencio the respective
owners of 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 remove the
improvements built by him thereon, provided,
however, that he shall not be compelled to do so
unless the unirrigated riceland shall have been
restored to his possession either on volition of
the party concerned or through judicial
proceedings which he may institute for the
purpose.
Note: Case 3 is Moralidad v Pernes, supra
3. Usufruct in favor of Juridical or Non-Juridical
Entities (Art. 605)
Case 4: National Housing Authority (NHA) v CA
Recit-ready Digest
President Marcos issued Proclamation No.
1670, which removed a seven-hectare portion
from the coverage of the NGC. Proclamation No.
1670 gave MSBF usufructuary rights over this
segregated portion. On August 18, 1987, MSBF
leased a portion to BGC.
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On 15 August 1988, acting on the power granted
under MO 127, the NHA gave BGC ten days to
vacate its occupied area. Any structure left
behind after the expiration of the ten-day period
will be demolished by NHA.
BGC wanted to enjoin the NHA from
demolishing BGCs facilities on a lot leased from
Manila Seedling Bank Foundation, Inc. (MSBF).
MSBF allegedly has usufructuary rights over the
lot leased to BGC.
The trial court dismissed the complaint for
injunction filed by Bulacan Garden Corporation
(BGC) against the National Housing Authority
(NHA).
The appellate court reversed the Decision of
Branch 87 of the Regional Trial Court of Quezon
City (trial court) dated 8 March 1994 in Civil
Case No. Q-53464.
The issue in this case is whether MSBF has the
right to determine the location of the 7-hectare
area covered by its usufructuary rights
The SC held that the MSBF has the right to
determine the location of the 7-hectare area
since Proclamation No. 1670 authorised them to
do so.
xxx This parcel of land, which shall embrace 7
hectares, shall be determined by the future
survey based on the technical descriptions xxx
The SC however, decided to remand the petition
to the trial court for a joint survey to determine
finally the metes and bounds of the seven-
hectare area subject to MSBFs usufructuary
rights.
FACTS:
President Ferdinand Marcos issued
Proclamation No. 481 (1968) setting aside a
120-hectare portion of land in Quezon City
owned by the NHA as reserved property for the
site of the National Government Center (NGC).
USUFRUCT | Pre-Finals
Subsequently, President Marcos issued
Proclamation No. 1670 (1977), which removed a
seven-hectare portion from the coverage of the
NGC. Proclamation No. 1670 gave MSBF
usufructuary rights over this segregated portion,
as follows:
This parcel of land, which shall embrace 7
hectares, shall be determined by the future
survey based on the technical descriptions
found in Proclamation No. 481, and most
particularly on the original survey of the area,
dated July 1910 to June 1911, and on the
subdivision survey dated April 19-25, 1968.
MSBF occupied the area granted by
Proclamation No. 1670. Over the years, MSBFs
occupancy exceeded the seven-hectare area
subject to its usufructuary rights. By 1987,
MSBF occupied approximately 16 hectares. By
then the land occupied by MSBF was bounded
by Epifanio de los Santos Avenue (EDSA) to the
west, Agham Road to the east, Quezon Avenue
to the south and a creek to the north.
On 18 August 1987, MSBF leased a portion of
the area it occupied to BGC and other
stallholders. BGC leased the portion facing
EDSA, which occupies 4,590 square meters of
the 16-hectare area.
On 11 November 1987, President Corazon
Aquino issued Memorandum Order No. 127 (MO
127) which revoked the reserved status of the
50 hectares, more or less, remaining out of the
120 hectares of the NHA property reserved as
site of the National Government Center. MO 127
also authorized the NHA to commercialize the
area and to sell it to the public.
On 15 August 1988, acting on the power granted
under MO 127, the NHA gave BGC ten days to
vacate its occupied area. Any structure left
behind after the expiration of the ten-day period
will be demolished by NHA.
BGC then filed a complaint for injunction on 21
April 1988 before the trial court. On 26 May
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1988, BGC amended its complaint to include
MSBF as its co-plaintiff.
RTC — agreed with BGC and MSBF that
Proclamation No. 1670 gave MSBF the right to
conduct the survey, which would establish the
seven-hectare area covered by MSBFs
usufructuary rights.
CA — reversed the Decision of Branch 87 of the
Regional Trial Court of Quezon City (trial court)
dated 8 March 1994 in Civil Case No. Q-53464.
ISSUE
Whether MSBF has the right to determine the
location of the 7-hectare area covered by its
usufructuary rights
RULING:
Yes
Article 565 of the Civil Code states:
ART. 565. The rights and obligations of the
usufructuary shall be those provided in the title
constituting the usufruct; in default of such title,
or in case it is deficient, the provisions contained
in the two following Chapters shall be observed.
In the present case, Proclamation No. 1670 is
the title constituting the usufruct. Proclamation
No. 1670 categorically states that the seven-
hectare area shall be determined by future
survey under the administration of the
Foundation subject to private rights if there
be any. It authorised MSBF to determine the
location of the 7-hectare area. This authority,
coupled with the fact of that the said
proclamation did not state the location of the 7-
hectare area. Thus, it left MSBF the right to
choose the location of its area under its usufruct.
On the other hand, this Court cannot
countenance MSBFs act of exceeding the
seven-hectare portion granted to it by
Proclamation No. 1670. A usufruct is not
USUFRUCT | Pre-Finals
simply about rights and privileges. A
usufructuary has the duty to protect the owners
interests. One such duty is found in Article 601
of the Civil Code which states:
ART. 601. The usufructuary shall be obliged to
notify the owner of any act of a third person, of
which he may have knowledge, that may be
prejudicial to the rights of ownership, and he
shall be liable should he not do so, for damages,
as if they had been caused through his own
fault.
A usufruct gives a right to enjoy the property of
another with the obligation of preserving its form
and substance, unless the title constituting it or
the law otherwise provides.
This controversy would not have arisen had
MSBF respected the limit of the beneficial
use given to it. MSBFs encroachment of its
benefactors property gave birth to the confusion
that attended this case. To put this matter
entirely to rest, it is not enough to remind the
NHA to respect MSBFs choice of the location of
its seven-hectare area. MSBF, for its part, must
vacate the area that is not part of its
usufruct. MSBFs rights begin and end within
the seven-hectare portion of its usufruct. This
Court agrees with the trial court that MSBF has
abused the privilege given it under Proclamation
No. 1670. The direct corollary of enforcing
MSBFs rights within the seven-hectare area is
the negation of any of MSBFs acts beyond it.
SC remanded the petition to the trial court for a
joint survey to determine finally the metes and
bounds of the seven-hectare area subject to
MSBFs usufructuary rights.
8. Usufruct in favor of several persons (Art. 611)
Case 5: Policarpio v Asuncion
Disclaimer: Bulk of the decision uses
original Spanish commentary on the Civil
Code and unfortunately I don’t speak
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Spanish so I’ll just make the digest based on
the syllabus ☺
Doctrine: Art 611. A usufruct constituted in
favour of several persons living at the time of its
constitution shall not be extinguished until the
death of the last survivor.
Recit Ready Digest: In this case, the claims of
both parties stem from the last will and
testament of one Damasa Crisostomo.
Respondent’s title stems from the naked
ownership of the subject property while
petitioner’s title is based on the usufruct of 14
usufructuaries. Upon the death of 3 of the 14
usufructuaries, both parties claim the share of
the deceased usufructuaries. Respondent
claims that the usufruct was partially
extinguished due to the death of the 3 and their
shares reverted back to the naked owner.
However the Supreme Court struck this theory
down on the basis of Article 611 of the Civil
Code which provides that a usufruct constituted
in favour of several persons shall not be
extinguished until the death of the last survivor.
Therefore, the usufruct did not extinguish upon
the death of the 3 and their shares accrued in
favour of the surviving usufructs.
Facts:
The last will and testament of one
Damasa Crisostomo gave the naked ownership
of a fishpond to her sister Teodorica dela Cruz
while its usufruct was given to the 14 children of
her 3 cousins. Subsequently, Dela Cruz
bequeathed in her will all her rights to the
fishpond to respondent Jose Salamat.
Meanwhile, 3 of the 14 usufructuaries died after
the fishpond was leased to petitioner Policarpio.
Upon the death of the 3 usufructuaries,
both the naked owner and the remaining
usufructuaries claimed the shares corresponding
to the deceased’s amounting to P10, 714.
Defendant Salamat avers the special
defense that he is the successor-in-interest of
dela Cruz and as such he is entitled to the
USUFRUCT | Pre-Finals

shares corresponding to the three deceased

usufructuaries becase the usufruct in their
favour was automatically extinguished by death
and became merged with the naked owner.

The surviving usufructuaries, on the

other hand, adhere to the theory that the death
of the 3 did not extinguish the usufruct and the
usufruct continues until the death of the last
usufructuary.

The lower court decided in favour of the

respondent Salamat.

Issue: Whether or not the usufruct was

extinguished upon the death of the
usufructuaries in so much as to their
corresponding shares.

Ruling:

No, if the theory of the respondents

were correct, article 611 of the Civil Code would
be superfluous, because article 603 already
provides that the death of the usufructuary
extinguishes the usufruct unless the contrary
appears. Furthermore, the theory would cause
partial extinction of the usufruct contrary to Art
611 which provides that the usufruct shall not be
extinguished until the death of the last survivor.

The testatrix constituted the usufruct in

favour of the children of her three cousins with
the particular injuction that they are the only
ones to enjoy the same as long as they live,
from which it can be implied that, should any of
them die, the share of the latter shall accrue to
the surviving ones.

Wherefore, the decision appealed from

is REVERSED. The 11 surviving usufructuaries
are hereby declared to be entitled to the shares
of the 3 deceased usufructuaries.

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