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HEIRS OF JOSE REYES, JR. vs AMANDA S. REYES, et al.

G.R. No. 158377 August 13, 2010


Facts:
In 1955, Leoncia and her three sons (Teofilo, Jose Sr., and Jose Jr.) executed a Kasulatan ng
Biling Mabibiling Muli, whereby they sold their land and its existing improvements to the Spouses
Francia for P500.00, subject to the vendors right to repurchase for the same amount sa oras na sila'y
makinabang. Leoncias sons and their respective families remained in possession of the property and paid
the realty taxes thereon. They did not repay the amount of P500.00.
Alejandro, the son of Jose, Sr., paid to the heirs of Spouses Francia the amount for the obligation
of Leoncia, his uncles and his father (still alive at that time) and eventually, Alejandro was able to secure
a deed entitled Pagsasa-ayos ng Pag-aari at Pagsasalin, executed by the heirs of the Spouses Francia
whereby they transferred and conveyed to Alejandro all their rights and interests in the property
for P500.00.
In 1970, Alejandro executed a Kasulatan ng Pagmeme-ari, wherein he declared that he had
acquired all the rights and interests of the heirs of the Spouses Francia, including the ownership of the
property, after the vendors had failed to repurchase within the given period. Nevertheless, Alejandro, his
grandmother (Leoncia), and his father (Jose, Sr.) executed a Magkakalakip na Salaysay, by which
Alejandro acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any
time for the same amount of P500.00.
In 1993, Alejandro died intestate and was survived by his wife, Amanda Reyes, and their children,
(respondents herein). In 1994, respondent Amanda Reyes asked the heirs of Teofilo and Jose, Jr., to
vacate the property because she and her children already needed it.
Issues:
(a) Whether the transaction (Kasulatan ng Biling Mabibiling Muli) entered into by
petitioners predecessors-in-interest was an equitable mortgage and not a pacto de retro sale.
(b) Whether the petitioners now barred from claiming that the transaction under
the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage by their failure to redeem the
property for a long period of time?
Held:
(a) The Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de
retro sale. There was no dispute that the purported vendors had continued in the possession of the
property even after the execution of the agreement; and that the property had remained declared for
taxation purposes under Leoncias name, with the realty taxes due being paid by Leoncia, despite the
execution of the agreement.
(b) The Court ruled that the petitioners are not barred from claiming that the transaction
was an equitable mortgage. It considered as meritorious the contention of the petitioners that prescription,
if it must apply to them, should as well be applied to the respondents, who had similarly failed to enforce
their right under the equitable mortgage within ten years from its execution. Therefore, the original
intention of the parties to the Kasulatan ng Biling Mabibiling Muli should be upheld, without taking
prescription into account, because both parties did not enforce their respective rights within the ten-year
prescriptive period and is more in keeping with fairness and equity.
The Court reasoned that considering that sa oras na silay makinabang, the period of
redemption stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been
stated, the period to redeem should be ten years from the execution of the contract. Upon the expiration of
said 10-year period, mortgagees Spouses Francia or their heirs should have foreclosed the mortgage, but
they did not do so. Instead, they accepted Alejandros payments, until the debt was fully satisfied in 1970.

The acceptance of the payments even beyond the 10-year period of redemption estopped the
mortgagees heirs from insisting that the period to redeem the property had already expired. Their actions
impliedly recognized the continued existence of the equitable mortgage. The conduct of the original
parties as well as of their successors-in-interest manifested that the parties to the Kasulatan ng Biling
Mabibiling Muli really intended their transaction to be an equitable mortgage, not a pacto de retro sale.

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