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.

FACTS

Spouses Domingo and Fidela Paraiso executed a “Barter Agreement” with spouses Avelino and Benilda Baluran on February 2, 1964. The Paraisos agreed to exchange their residential lot for the Balurans’ unirrigated riceland. The agreement stipulated that each party would enjoy the “material possession” of the other’s property: the Paraisos would reap the fruits of the riceland, and the Balurans could build a house on the residential lot. A critical condition stated that if any child of Natividad Paraiso Obedencio (the Paraisos’ daughter) chose to reside in the municipality and build a house on the residential lot, the Balurans would be obliged to return the lot. The parties also agreed not to alienate their respective properties without the other’s consent. Avelino Baluran took possession, paid taxes, and built a house on the residential lot.
On May 6, 1975, Antonio Obedencio, a son of Natividad, filed a complaint to recover the residential lot from Baluran, alleging he had acquired it from his mother and needed it to build his house as he had taken residence in Sarrat. The trial court declared Obedencio the owner and ordered Baluran to vacate. Baluran appealed, contending the barter transferred ownership and that any right to reclaim the property had prescribed.

ISSUE

Whether the “Barter Agreement” transferred ownership of the properties or merely created a reciprocal right of usufruct subject to a resolutory condition.

RULING

The Supreme Court reversed the trial court, ruling that the agreement did not transfer ownership but created a reciprocal usufruct. The Court emphasized that the title of a contract does not determine its nature; the stipulations control. The agreement’s clear terms showed only “material possession” was transferred, not dominion. The parties retained the right to alienate their properties, an attribute of ownership. The arrangement constituted usufruct—the right to enjoy another’s property while preserving its substance.
The agreement contained a valid resolutory condition under Article 1181 of the Civil Code: Baluran’s right of possession would end if any child of Natividad Obedencio resided in the municipality and built a house on the lot. This condition, dependent on the will of third parties (Natividad and her children), not solely on one contracting party, was valid. The condition happened when Antonio Obedencio, a child of Natividad, decided to reside and build, thereby extinguishing the usufruct. Consequently, Baluran must vacate the residential lot and may remove his improvements, as a usufructuary has no right to indemnity for useful improvements under Article 579.
The Court also ruled that, reciprocally, Baluran remained the owner of the unirrigated riceland, which was in Natividad Obedencio’s possession. Justice required a simultaneous return of properties. Thus, Baluran was ordered to vacate the residential lot only upon restoration of his riceland, either voluntarily or through judicial proceedings. Prescription was not applicable as the right to demand return arose only upon the happening of the resolutory condition.