Baluran vs. Navarro

A contract denominated as "barter" is not necessarily a contract of barter if the stipulations show that ownership was not transferred, but only material possession; such an agreement constitutes a mutual grant of usufruct subject to a resolutory condition.

Spouses Domingo Paraiso and Fidela Q. Paraiso owned a residential lot in Sarrat, Ilocos Norte. On February 2, 1964, they executed an agreement with spouses Avelino and Benilda Baluran, exchanging the residential lot for the Balurans' unirrigated riceland. The agreement, titled "Barter," stipulated that both parties would enjoy material possession of the properties, with a condition that the Balurans would return the residential lot if any child of the Paraisos' daughter, Natividad Paraiso Obedencio, chose to reside and build a house thereon.

Spouses Domingo Paraiso and Fidela Q. Paraiso owned a residential lot of around 480 square meters in Sarrat, Ilocos Norte. On February 2, 1964, they executed an agreement entitled "Barter" with spouses Avelino and Benilda Baluran. Under this agreement, the Paraisos exchanged their residential lot with the Balurans' unirrigated riceland of approximately 223 square meters. The agreement provided that both parties would enjoy material possession of their respective properties, with the Paraisos reaping the fruits of the riceland and the Balurans having the right to build a house on the residential lot. A resolutory condition was stipulated: if any child of the Paraisos' daughter, Natividad Paraiso Obedencio, chose to reside in the municipality and build a house on the residential lot, the Balurans were obliged to return the lot to said children. The agreement also prohibited either party from encumbering or alienating the properties without the other's consent.

On October 4, 1974, Natividad Obedencio donated the residential lot to her son, Antonio Obedencio. Thereafter, on May 6, 1975, Antonio Obedencio filed a complaint with the Court of First Instance of Ilocos Norte to recover the residential lot from Avelino Baluran, claiming ownership and the need to build his house thereon. Baluran answered that the barter agreement transferred ownership to him and that Obedencio's cause of action had prescribed. The parties submitted the case for decision based on a stipulation of facts, admitting that Baluran had been in possession of the residential lot since 1964, paid its taxes, and constructed a house thereon valued at P250.00. On November 8, 1975, the trial court declared Obedencio the owner and ordered Baluran to vacate the lot.

• Nature of the Contract: Petitioner argued that the "barter agreement" transferred ownership of the residential lot to him in exchange for the unirrigated riceland conveyed to the respondent's predecessor-in-interest.
• Prescription: Petitioner maintained that the respondent's cause of action had prescribed, asserting that the remedy was to ask for re-barter or re-exchange, which could only be exercised within four years from the date of the contract under Article 1606 of the Civil Code.

• Nature of the Contract: Whether the agreement entitled "Barter" transferred ownership of the properties or merely granted usufruct.
• Prescription: Whether the respondent's cause of action to recover the property had prescribed under Article 1606 of the Civil Code.
• Improvements and Damages: Whether the petitioner is entitled to damages and whether he forfeits the improvements he built on the residential lot.

• Nature of the Contract: No. The agreement did not transfer ownership but merely granted mutual usufruct, as the stipulations clearly provided for the transfer of material possession and retained the right to alienate, which is an element of ownership.
• Prescription: No. Article 1606 of the Civil Code refers to conventional redemption and does not apply to the present situation, which involves a usufruct extinguished by a resolutory condition.
• Improvements and Damages: No damages were awarded due to lack of evidence, but petitioner may remove the improvements without causing damage to the property pursuant to Article 579 of the Civil Code.

• Nature of the Contract: Courts are not bound by the name or title given to a contract by the parties. The stipulations in the agreement clearly indicated no intention to convey ownership; only material possession was transferred. The parties retained the right to alienate their respective properties, an element of ownership. Thus, the parties only acquired a right of usufruct, subject to a resolutory condition—the return of the lot if any child of Natividad Obedencio chose to reside and build thereon. Because the condition was not dependent solely on the will of one party but also on third persons, it was valid. Upon fulfillment of the condition, the usufruct was extinguished, entitling the parties to the return of their properties.
• Prescription: Petitioner's reliance on Article 1606 of the Civil Code was misplaced, as it pertains to conventional redemption. The agreement was one of usufruct, which may be constituted for any period and extinguished according to the parties' stipulations. The respondent could not demand recovery until he acquired the right from his mother via donation on October 4, 1974, and he filed the complaint in May 1975, shortly thereafter. Thus, the action was not barred by prescription.
• Improvements and Damages: In the absence of evidence, as the case was submitted on stipulation of facts, there was no basis for awarding damages. However, applying Article 579 of the Civil Code, the petitioner, as usufructuary, may remove the useful improvements he built on the lot, provided it is possible to do so without damage to the property.

• Nomenclature of Contracts — To determine the nature of a contract, courts are not bound by the name or title given to it by the contracting parties. Contracts are not what the parties may see fit to call them but what they really are as determined by the principles of law.
• Usufruct — 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. It may be constituted for any period of time and under such conditions as the parties may deem convenient.
• Resolutory Condition — A resolutory condition is one which extinguishes rights and obligations already existing. It is valid if not dependent solely on the will of one of the parties but is in part dependent on the will of third persons.

• "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 passage establishes the ratio decidendi that the true nature of a contract is determined by its stipulations and the principles of law, not its given title.
• "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." — This defines the Court's characterization of the agreement as a grant of usufruct rather than a transfer of ownership.
• "A resolutory condition is one which extinguishes rights and obligations already existing." — This provides the definition of a resolutory condition, which the Court applied to the stipulated return of the property.

• Shell Co. of the Philippines Ltd. vs. Firemen's Insurance Co. of Newark, N. J., et al. — Cited to support the rule that courts are not bound by the name or title given to a contract by the contracting parties.
• Borromeo vs. Court of Appeals, et al. — Cited to reinforce the principle that contracts are what they really are as determined by the principles of law, not what parties call them.

• Article 562, Civil Code — Defines usufruct as the right to enjoy the property of another with the obligation of preserving its form and substance. Applied to characterize the agreement as a grant of usufruct.
• Article 1306, Civil Code — Allows contracting parties to establish stipulations, clauses, terms, and conditions as they deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Applied to uphold the validity of the resolutory condition.
• Article 579, Civil Code — Allows the usufructuary to make useful improvements but without the right to indemnification, with the right to remove them if possible without damage to the property. Applied to allow petitioner to remove his improvements.
• Article 1606, Civil Code — Refers to conventional redemption. Distinguished and held inapplicable to the present case involving usufruct.

Teehankee (Chairman), Makasiar, Martin, Fernandez and Guerrero, JJ., concur.