Baluran vs. Navarro

Second barterer (D) vs. Heir of first barterer (P)
GR L-44428	[T]

Summary: Two property owners agreed to "barter" their respective properties with each other. The agreement was covered by a contract with a condition that requires the return of the property if any of the children of the other party's daughter decided to use it. On inheriting the property from his mother, the son of the other party's daughter filed for recovery of the "exchanged" property.

Rule of Law: To determine the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties.

Facts: Spouses Domingo and Fidela Paraiso owned of a residential lot which they bartered with spouses Avelino and Benilda Baluran (D) for their unirrigated riceland. The agreement was covered by a document entitled "BARTER" wherein they agreed to "barter and exchange" their properties subject to a condition that stated that if any of the children of spouses Paraiso's daughter shall choose to reside in the municipality and build his/her own house in the residential lot, spouses Baluran (D) shall be obliged to return the lot to such children.

Eleven years thereafter, Antonio Obendencio (P) filed a case to recover the bartered property from Baluran (D). In his answer, Baluran (D) alleged that the "barter agreement" transferred to him the ownership of the residential lot in exchange for the unirrigated riceland.

Issues: Was there transfer of ownership of the properties covered in the "barter agreement"?

Ruling: No. 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. (Shell Co. of the Philippines vs. Firemen's Insurance Co., 100 Phil. 757, 1957.) 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. (Borromeo vs. Court of Appeals, 47 SCRA 65, 1972.)

Thus, the use of the term "barter" in describing the agreement is not controlling. The agreement is clear that there was no intention 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. It is also clear that the parties retained the right to alienate their respective properties, which right is an element of ownership.

All that the parties acquired was the right of usufruct which in essence is the right to enjoy the property of another.

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.
   —Article 562, Civil Code

Under the agreement, spouses Paraiso would harvest the crop of the unirrigated riceland while Baluran (D) could build a house on the residential lot, subject to the condition that if any of the children of spouses Paraiso's daughter shall choose to reside in the municipality and build his house on the residential lot, Baluran (D) shall be obliged to return the lot to said children "with damages to be incurred." Thus, the mutual agreement of 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. (Tolentino, Commentaries on the Civil Code of the Philippines, Vol. IV, pp. 140, 143.) The right of "material possession" granted in the agreement ends if and when any of the children of spouses Paraiso's daughter 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, but is dependent on the will of third persons, the same is valid. (Ibid., p. 148-9)
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* Keywords: resolutory condition