SALES 7 (FINALS)
1. RAMOS VS. CA, 180 SCRA 635
[G.R. No. L-42108. December 29, 1989.]
OSCAR D. RAMOS and LUZ
AGUDO, petitioners, vs. HON. COURT OF APPEALS,
ADELAIDA RAMOS and LAZARO E. MENESES,respondents.
Godofredo V. Magbiray for petitioners.
Joselito Lim for private respondents.
SYLLABUS
1.CIVIL LAW; CONTRACTS; EQUITABLE MORTGAGE; PRESUMPTION UNDER
ART. 1602 OF THE CIVIL CODE; EXISTENCE OF ANY ONE CIRCUMSTANCE
SUFFICIENT. — Settled is the rule that to create the presumption enunciated by Article
1602, the existence of one circumstance is enough. The said article expressly provides
therefor "in any of the following cases," hence the existence of any of the circumstances
enumerated therein, not a concurrence nor an overwhelming number of such
circumstances, suffices to give rise to the presumption that the contract with the
right of repurchase is an equitable mortgage.
2.ID.; ID.; MANNER OF TERMINATION. — It is well entrenched principle in the
interpretation of contracts that if the terms thereof are clear and leave no doubt as to
the intention of the contracting parties the literal meaning of the stipulation shall control
but when the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.
3.ID.; ID.; SALE WITH A RIGHT TO REPURCHASE; NOT FAVORED. — Sales with a
right to repurchase, as defined by the Civil Code, are not favored. We will not construe
instruments to be sales with a right to repurchase, with the stringent and onerous effects
which follow, unless the terms of the document and the surrounding circumstances
require it. Whenever, under the terms of the writing, any other construction can fairly
and reasonably be made, such construction will be adopted and the contract will be
construed as a mere loan unless the court can see that, if enforced according to its
terms, it is not an unconscionable one.
4.ID.; ID.; ID.; REGARDED AS EQUITABLE MORTGAGE WHEN GIVEN AS
SECURITY FOR A LOAN. — The contracts purport to be sales with pacto de retro;
however, since the same were actually executed in consideration of the aforesaid loans
said contracts are indubitably equitable mortgages. The rule is firmly settled that
whenever it is clearly shown that a deed of sale with pacto de retro, regular on its face,
is given as security for a loan, it must be regarded as an equitable mortgage.
5.REMEDIAL LAW; COURT OF FIRST INSTANCE (NOW REGIONAL
TRIAL COURT); PROBATE JURISDICTION, EXPLAINED. — The probate
jurisdiction of the former court of first instance or the present regional trial court relates
only to matters having to do with the settlement of the estate and
probate of wills of deceased persons, and the appointment and
removal of administrators, executors, guardians and trustees. Subject to settled
exceptions not present in this case, the law does not extend the jurisdiction of a
probate court to the determination of questions of ownership that arise during the
proceeding. The parties concerned may choose to bring a separate action as a
matter of convenience in the preparation or presentation of evidence. Obviously, the
approval by the probate court of the conditional sale was without prejudice to the
filing of the proper action for consolidation of ownership and/or
reformation of instrument in the proper court within the statutory period of prescription.
6.ID.; ID.; WHEN ACTING AS A CADASTRAL COURT, HAS NO JURISDICTION
OVER ACTION FOR CONSOLIDATION OF OWNERSHIP. — The court offirst
instance or the regional trial court, acting as cadastral court, acts with limited
competence. It has no jurisdiction to take cognizance of an action for
consolidation of ownership, much less to issue an order to that effect, such action must
have been filed in the former court of first instance, now in the regional trial court, in the
exercise of its general jurisdiction. That remedy, and the procedure therefor, is now
governed by Rule 64 of the Rules of Court as a special civil action cognizable by the
regional trial court in the exercise of original general jurisdiction.
7.ID.; SPECIAL CIVIL ACTION; PETITION FOR CONSOLIDATION OF OWNERSHIP;
VENDOR A RETRO MUST BE NAMED RESPONDENT. — In Crisologo, et al. vs.
Centeno, et al., (26 scra 48) we ruled that said Article 1607 contemplates a contentious
proceeding wherein the vendor a retro must be named respondent in the caption and
title of the petition for consolidation of ownership and duly summoned and heard. An
order granting the vendee's petition for consolidation of ownership, without the vendor a
retro being named as respondent, summoned and heard, is a patent nullity for
want of jurisdiction of the court over the person of the latter.
8.ID.; JUDGMENTS; REMEDIES AVAILABLE AGAINST A VOID
ORDER OF JUDGMENT. — The questioned order of consolidation issued by the
cadastral court, being void for lack of jurisdiction, is in contemplation of law non-existent
and may be wholly disregarded. Such judgment may be assailed any time, either
directly or collaterally, by means of a separate action or by resisting such judgment in
any action or proceeding whenever it is invoked. It is not necessary to take any step to
vacate or avoid a void judgment; it may simply be ignored.
9.CIVIL LAW; PRESCRIPTION; PRESCRIPTIVE PERIOD FOR ACTIONS BASED
UPON A WRITTEN CONTRACT AND FOR REFORMATION. — On the
issue of prescription, in addition to what has been said, the present case, having been
filed on February 28, 1960, approximately seven (7) years from the execution of the
questioned deeds, was seasonably instituted. The prescriptive period for actions based
upon a written contract and for reformation is ten (10) years under Article 1144 of the
Civil Code. Such right to reformation is expressly recognized in Article 1365 of the same
code.
10.ID.; CONTRACTS; RATIONALE OF THE PRESUMPTION OF AN EQUITABLE
MORTGAGE. — Article 1602 of the Civil Code is designed primarily to curtail the evils
brought about by contracts of sale with right of repurchase, such as the
SALES 7 (FINALS)
circumvention of the laws against usury and pactum commissorium. In the present case
before us, to rule otherwise would contravene the legislative intent to accord the
vendor a retro maximum safeguards for the protection of his legal rights under the true
agreement of the parties. The judicial experience in cases of this nature and the
rationale for the remedial legislation are worth reiterating, considering that such
nefarious practices still persist: "It must be admitted that there are some cases where
the parties really intend a sale with right to repurchase. Although such cases are rare,
still the freedom of contract must be maintained and respected. Therefore, the contract
under consideration is preserved, but with adequate safeguards and restrictions.
"One of the gravest problems that must be solved is that raised by the contract of sale
with right of repurchase or pacto de retro. The evils arising from this contract have
festered like a sore on the body politic. . . . "It is a matter of common knowledge that in
practically all of the so-called contracts of sale with light of repurchase, the real
intention of the parties is that the pretended purchase-price is money loaned, and in
order to secure the payment of the loan a contract purporting to be a sale with pacto
de retro is drawn up. It is thus that the provisions contained in articles 1859 and
1858 of the present Civil Code which respectively prohibit the creditor from
appropriating the things given in pledge or mortgage and ordering that said things be
sold or alienated when the principal obligation becomes due, are circumvented. "It is
high time these transgressions of the law were stopped. It is believed by the
Commission that the plan submitted for the solution of the problem will meet with the
approval of an enlightened public opinion, and in general, of everyone moved by a
sense of justice. . . ."
DECISION
REGALADO, J p:
The instant petition for review on certiorari impugns the
decision of the Court of Appeals dated October 7, 1975, 1 which affirmed in toto the
decision of the Court of First Instance of Tarlac in Civil Case No. 4168, entitled
"Adelaida Ramos, et al vs. Oscar D. Ramos, et al.," holding that the contracts between
the parties are not ventas con pacto de retro but are equitable mortgages. LibLex
Sometime in January, 1959, private respondent Adelaida Ramos borrowed from her
brother, petitioner Oscar D. Ramos, the amounts of P5,000.00 and P9,000.00 in
connection with her business transaction with one Flor Ramiro, Fred Naboa and Atty.
Ruperto Sarandi involving the recovery of a parcel of land in Tenejeros, Malabon. The
said amount was used to finance the trip to Hawaii of Ramiro, Naboa and Atty. Sarandi.
As security for said loan, private respondent Adelaida Ramos executed in
favor of petitioners two (2) deeds of conditional sale dated May 27, 1959 and August
30, 1959, of her rights, shares, interests and participation respectively over Lot No.
4033 covered by Original Certificate of Title No. 5125 registered in the name of their
parents, Valente Ramos and Margarita Denoga, now deceased, 2 and Lot No. 4221
covered by Transfer Certificate of Title No. 10788 then registered in the
names of Socorro Ramos, Josefina Ramos and Adelaida Ramos, 3 said properties
being of the Cadastral Survey of Paniqui, Tarlac. llcd
Upon the failure of said private respondent as vendor a retro to exercise her
right of repurchase within the redemption period, aforenamed petitioner filed a petition
for consolidation and approval of the conditional sale of Lot No. 4033 in Special
Proceedings No. 5174, entitled "Intestate Estate of the late Margarita Denoga," 4 and
a petition for approval of the pacto de retro sale of Lot No. 4221 in the
former Court of First Instance ofTarlac acting as a cadastral court. 5 On January 22,
1960, the said probate court issued an order with the following disposition:
"WHEREFORE, the deed of CONDITIONAL SALE executed on
May 27, 1959, by Adelaida Ramos in favor of spouses Oscar
D. Ramos and Luz Agudo, conveying to the latter by way of pacto
de retro sale whatever rights and interests the former may have in
Lot No. 4033 of the Cadastral Survey of Paniqui, which
deed of conditional sale is known as Document No. 14, Page 26,
Book VI, Series of 1959, of the notarial register ofNotary Public
Jose P. Sibal, is hereby approved." 6
The cadastral Court also issued a similar order dated April 18, 1960, the dispositive
portion of which reads:
"WHEREFORE, by way of granting the petition, the Court orders
the consolidation of ownership and dominion in petitioners-
spouses Oscar D. Ramos and Luz Agudo over the rights, shares
and interests of Adelaida Ramos in Lot No. 4221 of the Cadastral
Survey of Paniqui, Tarlac, which the latter sold to the former under
a pacto de retro sale executed in a public instrument known as
Document No. 22, Page 28, Book No. VI. Series of 1959, of the
Notarial Registry of Notary Public Jose P. Sibal but which she
failed to repurchase within the period specified in said
Document." 7
Private respondents had been and remained in possession of these properties until
sometime in 1964 when petitioner took possession thereof.
On February 28, 1968, private respondent filed Civil Case No. 4168 with the
then Court of First Instance of Tarlac for declaration of nullity of orders,
reformation of instrument, recovery of possession with preliminary injunction and
damages. The complaint therein alleged that the deeds ofconditional sale, dated May
27, 1959 and August 30, 1959, are mere mortgages and were vitiated by
misrepresentation, fraud and undue influence and that the orders dated January 22,
1960 and April 18, 1960, respectively issued by the probate and cadastral courts, were
null and void for lack ofjurisdiction. Petitioners, in their answer to the complaint,
specifically deny the allegations of fraud and misrepresentation and interposed as
defense the fact that the questioned conditional sales of May 27, 1959 and August 30,
1959 were voluntarily executed by private respondent Adelaida Ramosand truly
expressed the intention of the parties; that the action, if any, has long prescribed; that
the questioned orders of January 22, 1960 and April 18, 1960, approving the
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consolidation of ownership of the lands in question in favor of petitioner were within the
jurisdiction of the lower court, in its capacity as a probate court insofar as Lot No. 4033
is concerned, and acting as a cadastral court with respect to Lot No. 4221; and that
said lands subject of the conditional sales were in custodia legis in connection with the
settlement of the properties of the late Margarita Denoga, the predecessor in
interest of both petitioners and private respondents.
On January 7, 1970, the court below issued a pre-trial order to the effect that petitioners
admit the genuineness and due execution of the promissory notes marked as Exhibits
"F" and "F-1" and that the principal triable issue is whether or not the documents
purporting to be deeds ofconditional sale, marked as Exhibits "B", "B-1" and "G" were
in fact intended to be equitable mortgages. 8 In its order dated February 17, 1971, the
trial court also declared: "Both parties agreed and manifested in open court the principal
obligation in the transaction reflected in Exhibits 'B' and 'B-1' and 'G' is one of loan. The
parties differ, however, on the nature of the security described therein." 9
On May 17, 1971, the court a quo rendered a decision the decretal part of which reads:
"WHEREFORE, judgment is hereby rendered:
1)Denying defendants' motion to dismiss of February 23, 1970;
2)Declaring Exhibits 'B', 'B-1' and 'G' as loan transaction secured
by real estate mortgages;
3)Annulling and setting aside Exhibits 'D', 'D-1', 'I', 'I-1' and 'I-2';
4)Ordering plaintiffs, jointly and severally to pay (within ninety [90]
days from receipt of a copy of this judgment) defendants the
sum ofP5,000.00 specified in Exhibit 'B', with interest thereon at
the legal rate from November 28, 1959 until full payment together
with the sum ofP9,308.00 specified in Exhibit 'G' with interest there
on at the legal rate from December 1, 1959 until full payment, and
in default of such payment, let the properties mortgaged under
Exhibits 'B', 'B-1' and 'G' be sold to realize the mortgage debt and
costs; and
5)Dismissing defendants' counter-claim.
With costs against defendants." 10
On June 14, 1971, petitioners appealed said decision to the Court of Appeals which,
on October 7, 1975; affirmed in all respects the judgment of the trial court. Petitioners'
motion for reconsideration of said decision was denied on November 27, 1975. 11
On January 8, 1976, petitioners filed the petition at bar anchored on the following
assignments of errors:
"1.The Hon. Court of Appeals erred in not applying the correct
provisions of law interpreting the conditional sales dated May 27,
1959 and August 30, 1959, Exhibits 'B' and 'G' as equitable
mortgages.
"2.That as a consequence of its ruling that the conditional sales
Exhibits 'B' and 'G', are equitable mortgages, the
Hon. Court of Appealserred in ordering the reformation of the
same.
"3.The Honorable Court of Appeals erred in holding that the order
dated January 22, 1960, Exhibit C or 2, and the order dated April
18, 1960, Exhibit H or 6, issued by the probate court in Sp. Proc.
No. 5174 and by the cadastral court in G.L.R.O. Rec. No. 395,
respectively, are null and void for lack of jurisdiction.
"4.The Hon. Court of Appeals erred in not applying the applicable
provisions of law on the prescription of action and in not dismissing
the complaint fled in the lower court. 12
We find the petition devoid of merit.
Article 1602 of the Civil Code provides:
"The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(1)When the price of a sale with right to repurchase is unusually
inadequate;
2)When the vendor remains in possession as lessee or otherwise;
(3)When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting
a new period is executed;
(4)When the purchaser retains for himself a part of the purchase
price;
(5)When the vendor binds himself to pay the taxes on the thing
sold;
(6)In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment ofa debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits or other benefit to
be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws."
The Court of Appeals, in holding that the two (2) deeds purporting to be pacto de
retro sale contracts are equitable mortgages, relied on the following factual
findings of the trial court, to wit:
"Several undisputed circumstances persuade this Court (that) the
questioned deeds should be construed as equitable mortgages as
contemplated in Article 1602 of the Civil Code, namely: (1) plaintiff
vendor remained in possession until 1964 of the properties she
allegedly sold in 1959 to defendants; (2) the sums representing the
SALES 7 (FINALS)
alleged purchase price were actually advanced to plaintiff by
way of loans, as expressly admitted by the parties at the
hearing of February 17, 1971, reflected in an Order of the same
date: and (3) the properties allegedly purchased by defendant
Oscar Ramos and his wife have never been declared for taxation
purposes in their names. Exhibits K, K-1, L end L-1." 13
Even if we indulge the petitioners in their contention that they are justified in not taking
possession of the lots considering that what were allegedly sold to them were only the
rights, shares, interests and participation of private respondent Adelaida Ramos in the
said lots which were under administration, 14 however, such fact will not justify a
reversal of the conclusion reached by respondent court that the purported
deeds of sale con pacto de retro are equitable mortgages. Such a conclusion is
buttressed by the other circumstances catalogued by respondent court especially the
undisputed fact that the two deeds were executed by reason of the loan extended by
petitioner Oscar Ramos to private respondent Adelaida Ramosand that the purchase
price stated therein was the amount of the loan itself.
The above-stated circumstances are more than sufficient to show that the true
intention of the parties is that the transaction shall secure the payment of said debt and,
therefore, shall be presumed to be an equitable mortgage under Paragraph 6 of Article
1602 herein before quoted. Settled is the rule that to create the presumption enunciated
by Article 1602, the existence of one circumstance is enough. 15 The said article
expressly provides therefor "in any of the following cases," hence the
existence of any of the circumstances enumerated therein, not a concurrence nor an
overwhelming number of such circumstances, suffices to give rise to the presumption
that the contract with the right of repurchase is an equitable mortgage. As aptly stated
by the Court of Appeals:
"Thus, it may be fairly inferred that the real intention of the parties
is that the transactions in question were entered into to secure the
payment of the loan and not to sell the property (Article 1602, Civil
Code). Under Article 1603 of the Civil Code it is provided that: 'In
case ofdoubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage.' In this
case, we have no doubt that the transaction between the parties is
that of a loan secured by said properties by way of mortgage.
Hence, we find that Exhibits B and G do not reflect the true and
real intention of the parties and should accordingly be reformed
and construed as equitable mortgages." 16
Equally puerile is the other contention of petitioners that respondent court erred in not
applying the exclusionary parol evidence rule in ascertaining the true intendment of the
contracting parties. The present case falls squarely under one of the exceptions to said
rule as provided in then Section 7 of Rule 130, thus:
xxx xxx xxx
(a)Where a mistake or imperfection of the writing or its failure to
express the true intent and agreement of the parties, or the
validity of the agreement is put in issue by the pleadings;" 17
xxx xxx xxx
Moreover, it is a well entrenched principle in the interpretation of contracts that if the
terms thereof are clear and leave no doubt as to the intention of the contracting parties
the literal meaning of the stipulation shall control but when the words appear to be
contrary to the evident intention ofthe parties, the latter shall prevail over the former. 18
The admission of parol testimony to prove that a deed, absolute in form, was in fact
given and accepted as a mortgage does not violate the rule against the
admission of oral evidence to vary or contradict the terms of a written
instrument. 19 Sales with a right to repurchase, as defined by the Civil Code, are not
favored. We will not construe instruments to be sales with a right to repurchase, with
the stringent and onerous effects which follow, unless the terms of the document and
the surrounding circumstances require it. Whenever, under the terms of the writing, any
other construction can fairly and reasonably be made, such construction will be adopted
and the contract will be construed as a mere loan unless the court can see that, if
enforced according to its terms, it is not an unconscionable one. 20
On the faces thereof, the contracts purport to be sales with pacto de retro; however,
since the same were actually executed in consideration of the aforesaid loans said
contracts are indubitably equitable mortgages. The rule is firmly settled that whenever
it is clearly shown that a deed of sale with pacto de retro, regular on its face, is given
as security for a loan, it must be regarded as an equitable mortgage. 21
With respect to the orders dated January 22, 1960 and April 18, 1960, issued by
the Court below acting as a probate court and cadastral court, respectively, the same
could not preclude the institution of the case now under review.
A reading of the order of the probate court will show that it is merely an approval of the
deed of conditional sale dated May 27, 1959 executed by petitioner Adelaida Ramos in
favor of petitioners. There is nothing in said order providing for the
consolidation of ownership over the lots allegedly sold to petitioners nor was the
issue of the validity of said contract discussed or resolved therein. "To give approval"
means in its essential and most obvious meaning, to confirm, ratify, sanction or consent
to some act or thing done by another. 22 The approval of the probate court of the
conditional sale is not a conclusive determination of the intrinsic or extrinsic
validity of the contract but a mere recognition of the right of private respondent
Adelaida Ramos as an heir, to dispose of her rights and interests over her inheritance
even before partition. 23 As held in Duran, et al., vs. Duran, 24 the approval by the
settlement court of the assignment pendente lite, made by one heir in favor of the other
during the course of the settlement proceedings, is not deemed final until the estate is
closed and said order can still be vacated, hence the assigning heir remains an
interested person in the proceeding even after said approval. LLphil
Moreover, the probate jurisdiction of the former court of first instance or the present
regional trial court relates only to matters having to do with the settlement of the estate
and probate of wills of deceased persons, and the appointment and
removal of administrators, executors, guardians and trustees. Subject to settled
exceptions not present in this case, the law does not extend the jurisdiction of a
probate court to the determination of questions of ownership that arise during the
SALES 7 (FINALS)
proceeding. The parties concerned may choose to bring a separate action as a
matter ofconvenience in the preparation or presentation of evidence. 25 Obviously, the
approval by the probate court of the conditional sale was without prejudice to the
filing of the proper action for consolidation of ownership and/or
reformation of instrument in the proper court within the statutory
period of prescription. prLL
The same jurisdictional flaw obtains in the order of consolidation issued by the
cadastral court. The court of first instance or the regional trial court, acting as
cadastral court, acts with limited competence. It has no jurisdiction to take
cognizance of an action for consolidation of ownership, much less to issue an order to
that effect, such action must have been filed in the former court of first instance, now in
the regional trial court, in the exercise of its general jurisdiction. That remedy, and the
procedure therefor, is now governed by Rule 64 of the Rules of Court as a special civil
action cognizable by the regional trial court in the exercise of original general
jurisdiction.
Antecedent thereto, Article 1607 of the Civil Code provided for consolidation as follows:
"In case of real property, the consolidation of ownership in the
vendee by virtue of the failure of the vendor to comply with the
provisions ofarticle 1616 shall not be recorded in the
Registry of Property without a judicial order, after the vendor has
been duly heard."
Hence in Crisologo, et al. vs. Centeno, et al., 26 we ruled that said Article 1607
contemplates a contentious proceeding wherein the vendor a retromust be named
respondent in the caption and title of the petition for consolidation of ownership
and duly summoned and heard. An order granting the vendee's petition for
consolidation of ownership, without the vendor a retro being named as respondent,
summoned and heard, is a patent nullity for want of jurisdiction of the court over
the person of the latter.
The questioned order of consolidation issued by the cadastral court, being void for
lack of jurisdiction, is in contemplation of law non-existent and may be wholly
disregarded. Such judgment may be assailed any time, either directly or collaterally, by
means of a separate action or by resisting such judgment in any action or proceeding
whenever it is invoked. 27 It is not necessary to take any step to vacate or avoid a void
judgment; it may simply be ignored. 28
On the issue of prescription, in addition to what has been said, the present case, having
been filed on February 28, 1960, approximately seven (7) years from the
execution of the questioned deeds, was seasonably instituted. The prescriptive period
for actions based upon a written contract and for reformation is ten (10) years under
Article 1144 of the Civil Code. Such right to reformation is expressly recognized in
Article 1365 of the same code. 29
Article 1602 of the Civil Code is designed primarily to curtail the evils brought about by
contracts of sale with right of repurchase, such as the circumvention of the laws against
usury and pactum commissorium. 30 In the present case before us, to rule otherwise
would contravene the legislative intent to accord the vendor a retro maximum
safeguards for the protection of his legal rights under the true agreement of the parties.
The judicial experience in cases of this nature and the rationale for the remedial
legislation are worth reiterating, considering that such nefarious practices still persist:
"It must be admitted that there are some cases where the parties
really intend a sale with right to repurchase. Although such cases
are rare, still the freedom of contract must be maintained and
respected. Therefore, the contract under consideration is
preserved, but with adequate safeguards and restrictions.
"One of the gravest problems that must be solved is that raised by
the contract of sale with right of repurchase or pacto de retro. The
evils arising from this contract have festered like a sore on the body
politic. . . .
xxx xxx xxx
"It is a matter of common knowledge that in practically all of the so-
called contracts of sale with light of repurchase, the real
intention of the parties is that the pretended purchase-price is
money loaned, and in order to secure the payment of the loan a
contract purporting to be a sale with pacto de retro is drawn up. It
is thus that the provisions contained in articles 1859 and
1858 of the present Civil Code which respectively prohibit the
creditor from appropriating the things given in pledge or mortgage
and ordering that said things be sold or alienated when the
principal obligation becomes due, are circumvented.
"Furthermore, it is well-known that the practice in these so-called
contracts of sale with pacto de retro is to draw up another contract
purporting to be a lease of the property to the supposed vendor,
who pays in money or in crops a so-called rent. It is, however, no
secret to anyone that this simulated rent is in truth and in fact
interest on the money loaned. In many instances, the interest is
usurious. Thus, the usury law is also circumvented.
"It is high time these transgressions of the law were stopped. It is
believed by the Commission that the plan submitted for the
solution of the problem will meet with the approval of an
enlightened public opinion, and in general, of everyone moved by
a sense of justice.
"During the deliberations of the Commission the question arose as
to whether the contract of purchase with pacto de retro should be
abolished and forbidden. On first impression, this should be done,
but there is every reason to fear that in such a case the usurious
money-lenders would demand of the borrowers that, although the
real agreement is one of loan secured with a mortgage, the
instrument to be signed should purport to be an absolute
sale of the property involved. Should this happen, the problem
would become aggravated. Moreover, it must be admitted that
there are some cases where the parties really intend a sale with
right to repurchase. Although such cases are rare, still the
SALES 7 (FINALS)
freedom of contract must be maintained and respected. Therefore,
the contract under consideration is preserved in the Project of Civil
Code, but with adequate safeguards and restrictions." 31
WHEREFORE, the instant petition is hereby DENIED and the
decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
||| (Ramos v. Court of Appeals, G.R. No. L-42108, [December 29, 1989], 259 PHIL
1122-1138)
2. DE LEON VS. SALVADOR, 36 SCRA 567
[G.R. No. L-30871. December 28, 1970.]
AURORA P. DE LEON, petitioner, vs. HON. SERAFIN
SALVADOR, as Judge of Branch XIV of the Court of First
Instance of Rizal (Caloocan City), and EUSEBIO BERNABE,
ALBERTO A. VALINO, Special Deputy Sheriff of the Office of
the Provincial Sheriff, Province of Rizal, and the REGISTER
OF DEEDS for Caloocan City, respondents.
[G.R. No. L-31603. December 28, 1970]
EUSEBIO BERNABE, petitioner, vs. THE HONORABLE JUDGE
FERNANDO A. CRUZ of the Court of First Instance of Rizal,
Caloocan City, Branch XII, SPECIAL DEPUTY SHERIFF,
ALBERTO A. VALINO of the Provincial Sheriff of Rizal and
AURORA P. DE LEON,respondents.
Jose A. Garcia and Ismael M. Estrella for petitioner.
De los Santos, De los Santos & De los Santos and Felipe L. Abel for respondents.
Felipe L. Abel for petitioner.
Ismael M. Estrella and Jose A. Garcia for respondents.
DECISION
TEEHANKEE, J p:
Joint decision of two special civil actions which were ordered consolidated since they
involve the same properties and the common issue of conflict of jurisdiction of the two
Caloocan City branches of the Court of First Instance of Rizal.
assailed Case L-30871 arose from the following facts: A judgment for P35,000.00-actual, moral
and exemplary damages obtained by Enrique de Leon against private respondent
Eusebio Bernabe in Civil Case No. C-189 of Branch XII of the Rizal court of first
instance, Caloocan City branch presided by Judge Fernando A. Cruz, having become
final and executory, a writ of execution was issued by said court. Pursuant thereto, the
city sheriff, on November 8, 1966 levied on execution on two parcels of land of 682.5
square meters each registered in the names of Bernabe under T.C.T. Nos. 94985 and
94986 of Caloocan City. At the execution sale held on February 14, 1967, the city sheriff
sold the said properties to herein petitioner, Aurora (sister of the judgment creditor) as
the highest bidder for the total sum of P30,194.00, (the property then being subject to
an existing mortgage lien in the amount of P120,000.00). The sheriff executed the
corresponding certificate of sale in her favor, which was duly registered on February
21, 1967 with the Caloocan City register of deeds.
On February 7, 1968, just about two weeks before the expiration of the one-year period
to redeem the properties sold in execution, the judgment debtor Bernabe filed a
separate civil action docketed as Civil Case No. C-1217 against his judgment creditor
Enrique de Leon, herein petitioner Aurora P. de Leon as purchaser and the sheriff as
defendants for the setting aside or annulment of the execution sale on February 14,
1967 "for being anomalous and irregular," and for the ordering of a new auction sale.
This second case, instead of being referred to Judge Cruz presiding over Branch XII
which had issued the writ of execution, was assigned to Branch XIV, the other Caloocan
City branch of the Rizal Court of First Instance presided by Judge Serafin Salvador,
who issued on February 19, 1968 a writ of preliminary injunction enjoining therein
defendants, particularly the sheriff to desist "from taking further proceedings against
the properties of the plaintiff [Bernabe] that were sold at public auction on February 14,
1967, and from issuing a sheriff's deed of sale at the expiration of the period of
redemption on February 21, 1968 in favor of defendant Aurora P. de Leon." Aurora
moved to dissolve the injunction and to dismiss this second case on the grounds of
laches and lack of jurisdiction of Judge Salvador's court to interfere with the execution
proceedings pending in the first case before Judge Cruz' court which is of equal and
co-ordinate jurisdiction, but Judge Salvador denied the same for not being indubitable
and tried the case, notwithstanding Aurora's pleas before and after the trial to resolve
the issue of his court's lack of jurisdiction.
Pending his decision, Judge Salvador issued on May 20, 1969 an order granting two
ex-parte motions of Bernabe of May 12, and May 15, 1969 and ordering the sheriff to
allow Bernabe to redeem the two properties sold at public auction more than two years
ago on February 14, 1967 under the writ of execution issued by Judge Cruz' court in
the first case. On the following day, May 21, 1969, Bernabe deposited with the sheriff
the sum of P33,817.28 as the redemption price (P15,987,00 per lot plus interests), who
issued a certificate of redemption. Bernabe then registered on the following day, May
22, 1969, the sheriff's certificate of redemption with the register of deeds, who in turn
cancelled the entry of the execution sale in favor of Aurora, as well as registered on
SALES 7 (FINALS)
one of the properties covered by T.C.T. No. 94986 a deed of first mortgage executed
on May 20, 1969 by Bernabe in favor of one Antonio de Zuzuarregui to secure a loan
of P130,000.00. Aurora's motion of May 28, 1969 in the second case to set aside the
order and certificate of redemption and registration of mortgage on the ground of lack
of jurisdiction was denied by Judge Salvador, who ruled in his order of June 23, 1969
that "there is no question that this Court has jurisdiction to hear and determine this case
which questions the regularity and legality of the auction sale of properties held on
February 14, 1967, hence the authority granted by the Court to redeem said properties
within the redemption period in order to write finis to the pending case." 1 Hence, this
action for certiorari filed by Aurora impleading the sheriff and the register of deeds for
the annulment and setting aside for lack of jurisdiction of the questioned orders of Judge
Salvador's court as well as of the challenged actuations of the other respondent officials
pursuant thereto. As prayed for, the Court issued a writ of preliminary injunction
enjoining said respondents from doing or taking any other act in connection with the
said properties.
On May 30, 1969, Aurora also filed in the first case before Judge Cruz' court a motion
with proper notice for consolidation of title and for the court to order the sheriff to issue
in her favor a final deed of sale over the subject parcels of land. Judge Cruz' order of
September 5, 1969, granting Aurora's motion over Bernabe's opposition that he had
redeemed on May 21, 1969 the said properties by virtue of Judge Salvador's order of
May 20, 1969 in the second case and ordering Bernabe to surrender his owner's
duplicates of title for transfer to Aurora, in turn gave rise to Case L-31603 filed by
Bernabe. After Bernabe's motion for reconsideration urging Judge Cruz to hold in
abeyance Aurora's motion for consolidation of title until this Court's decision in Case L-
30871 "which will end once and for all the legal controversy" over the conflict of
jurisdiction between the two courts, was denied by Judge Cruz' order of January 8,
1970, he filed this action for certiorari, impleading the sheriff, for the annulment and
revocation of the questioned orders of Judge Cruz, on the ground of the latter's lack of
jurisdiction to issue the same. As prayed for, the Court also issued a writ of preliminary
injunction against the enforcement of Judge Cruz' orders, until the conflict between the
parties could be finally resolved.
The decisive issue at bar is a simple one of jurisdiction: which court, Branch XII presided
by Judge Cruz or Branch XIV presided by Judge Salvador has exclusive jurisdiction to
set aside for alleged irregularities the execution sale held on February 14, 1967 by
virtue of the writ for the execution of the final judgment in the first case (No. C-189)
issued by Judge Cruz' court and to order a new auction sale — which was the relief
sought by the judgment debtor in the second case (No. C-1217) in Judge Salvador's
court?
It is patent that such exclusive jurisdiction was vested in Judge Cruz' court. Having
acquired jurisdiction over Case No. C-189 and rendered judgment that had become
final and executory, it retained jurisdiction over its judgment, to the exclusion of all other
co-ordinate courts for its execution and all incidents thereof, and to control, in
furtherance of justice, the conduct of its ministerial officers in connection
therewith. 2 Execution of its judgment having been carried out by the sheriff with the
levy and sale of the judgment debtor's properties, Eusebio Bernabe as judgment debtor
could not in the guise of a new and separate second action (Case No. 1217) ask
another court of coordinate jurisdiction, Judge Salvador's court, to interfere by
injunction with the execution proceedings, to set them aside and to order the holding of
a new execution sale — instead of seeking such relief by proper motion and application
from Judge Cruz' court which had exclusive jurisdiction over the execution proceedings
and the properties sold at the execution sale.
As early as 1922, in Cabigao vs. del Rosario, 3 this Court laid down the doctrine that
"no court has power to interfere by injunction with the judgments or decrees of a court
of concurrent or coordinate jurisdiction having power to grant the relief sought by
injunction," pointing out that "(T)he various branches of the Court of First Instance of
Manila are in a sense coordinate courts and to allow them to interfere with each other's
judgments or decrees by injunctions would obviously lead to confusion and might
seriously hinder the administration of justice."
The Court similarly ruled in Hubahib vs. Insular Drug Co., Inc., 4 with reference to
Branch II of the Cebu court of first instance having taken cognizance of an independent
action for the annulment of a writ of execution issued by Branch III of the same court
which has rendered the judgment, that "the institution of said action was not only
improper but also absolutely unjustified, on the ground that the appellant had the
remedy of applying to the same Branch III of the lower court, which issued the orders
in question, for reconsideration thereof . . . or of appealing from said orders or from that
denying his motion in case such order has been issued. The various branches of a
Court of First Instance of a province or city, having as they have the same or equal
authority and exercising as they do concurrent and coordinate jurisdiction, should not,
cannot, and are not permitted to interfere with their respective cases, much less with
their orders or judgments, by means of injunction."
In National Power Corporation vs. De Veyra, 5 the Court, through former Chief Justice
Bengzon, thus explained that the garnishment or levy of property on execution brings
the property into custodia legis of the court issuing the writ of execution, beyond the
interference of all other co-ordinate courts, thereby avoiding conflicts of power between
such courts: "(T)he garnishment of property to satisfy a writ of execution 'operates as
an attachment and fastens upon the property a lien by which the property is brought
under the jurisdiction of the court issuing the writ." It is brought into custodia legis, under
the sole control of such court. Property is in the custody of the court when it has been
seized by an officer either under a writ of attachment on mesne process or under a writ
of execution. A court which has control of such property, exercises exclusive jurisdiction
over the same. No court, except one having a supervisory control or superior jurisdiction
in the premises, has a right to interfere with and change that possession."
The Court in striking down the Baguio court's issuance of a writ of preliminary injunction
against the Baguio City sheriff's garnishment of cash funds of Baguio City deposited in
the Baguio branch of the Philippine National Bank pursuant to a writ of execution issued
by the Manila court of first instance for the satisfaction of a final judgment rendered in
favor of the National Power Corporation, and its assuming cognizance of the separate
complaint filed with it, duly indicated the proper procedure in such cases and the
fundamental reason therefor: "(T)he reason advanced by the respondent court of
Baguio City that it should grant relief when 'there is apparently an illegal service of the
writ' (the property garnished being allegedly exempt from execution ) may not be
upheld, there being a better procedure to follow, i.e., a resort to the Manila court,
wherein the remedy may be obtained, it being the court under whose authority the
SALES 7 (FINALS)
illegal levy had been made. Needless to say, an effective ordering of legal relationships
in civil society is possible only when each court is granted exclusive jurisdiction over
the property brought to it." 6
The Court time and again has applied this long established doctrine admonishing court
and litigant alike last year in Luciano vs. Provincial Governor7 that a judge of a branch
of a court may not interfere with the proceedings before a judge of another branch of
the same court.
The properties in question were brought into custodia legis of Judge Cruz court and
came under its exclusive jurisdiction when they were levied upon by the sheriff pursuant
to the writ for execution of the judgment rendered by said court. The levy is the essential
act by which the judgment debtor s property is set apart for the satisfaction of the
judgment and taken into custody of the law, and from such time the court issuing the
execution acquires exclusive jurisdiction over the property and all subsequent claims
of other parties are subordinated thereto, irrespective of the time when the property is
actually sold. 8 The execution sale having been carried out upon order of Judge Cruz
court, any and all questions concerning the validity and regularity of the sale necessarily
had to be addressed to his court which had exclusive jurisdiction over the properties
and were beyond interference by Judge Salvador s court. Justice Cruz court alone had
jurisdiction — subject only to the supervisory control or appellate jurisdiction of superior
courts — to rule upon the regularity and validity of the sale conducted by its ministerial
officers from the sheriff's office, and his affirmative ruling thereon could not be interfered
with by injunction of, nor sought to be foreclosed by, the challenged orders of Judge
Salvador's court.
Bernabe's contention that "he does not attempt to annul or nullify the judgment or order
issued by (Judge Cruz' court) . . . If (Judge Salvador's Court) finds the allegations of
the complaint to be true, then it has the jurisdiction to order a new auction sale, which
has nothing to do with the judgments or decrees issued by Judge Cruz' court)" 9 is
untenable. As above stated, the properties upon being levied on and sold by virtue of
Judge Cruz' order of execution were brought into the exclusive custodia legis of Judge
Cruz' court This is but in accordance with the established principle that "A case in which
an execution has been issued is regarded as still pending, so that all proceedings on
the execution are proceedings in the suit" 10 and that " (A)n execution is the fruit and
end of the suit, and is very aptly called the life of the law. The suit does not terminate
with the judgment; and all proceedings on the execution, are proceedings in the suit,
and which are expressly, by the act of Congress, put under the regulation and control
of the Court of which it issues. It is a power incident to every Court from which process
issues, when delivered to the proper officer, to enforce upon such officer a compliance
with his duty." 11 Any and all questions involving the execution sale concerned the
proceedings in Judge Cruz' court and had to be raised and determined in that court,
subject to review by the higher courts. They could not be improperly passed upon by
another co-ordinate court — behind the back, as it were — of Judge Cruz' court.
Judge Salvador's order of May 20, 1969 granting two ex-parte motions of the judgment
debtor Bernabe and directing the sheriff to allow the redemption of the properties
notwithstanding that the one-year redemption period had already lapsed more than one
year ago on February 21, 1968 (one year after registration on May 21, 1967 of the
sheriff's sale of May 14, 1967) was equally untenable. It must be noted that Bernabe's
action in Judge Salvador's court filed on February 7, 1968 two weeks before the
expiration of the redemption period sought to set aside the execution sale and to have
a new auction sale ordered, on the grounds that the sheriff had allegedly sold the two
parcels of land jointly instead of separately, and that the total sales price of P30,194.00
was shocking to the conscience, alleging that the two parcels, if sold separately, could
easily be sold at P235,000.00 and P150,000.00. Pending decision and without ruling
squarely on his court's lack of jurisdiction over the properties, Judge Salvador
peremptorily issued his redemption order on Bernabe's bare manifestation that "(he)
has but barely two days left of the one (1) year period granted by law to redeem" and
that " (he) is now ready and willing to redeem" the properties.
Aside from the basic lack of jurisdiction of Judge Salvador's court to issue the
redemption order, the order per se suffered from other grave flaws. Bernabe's motions
in effect amounted to an abandonment of his position on the alleged irregularity of the
execution sale, and the logical consequence thereof which have been the dismissal of
his suit. (Thus, soon after Aurora's filing of her action for certiorari in this Court, Bernabe
filed his so-called "Urgent Motion to Dismiss" of August 27, 1969 with Judge Salvador's
court praying for the dismissal of the very case filed by him on the ground that having
redeemed the properties, "the case can therefore be considered closed and terminated
considering that defendants [Aurora, et al.] did not interpose any appeal" from the
redemption order ) But Bernabe's motions were presented on May 12 and May 15,
1969 and it was self-evident from the record that the one-year period for redemption
had long expired more than a year ago on February 21, 1968 as above stated and that
Bernabe's allegations that he had two days left — of the redemption period was a
gratuitous one. Nothing in the record indicates that Bernabe had ever timely made a
valid offer of redemption so as to safeguard his right thereto prior to his filing his
separate action questioning the validity of the execution sale. It was therefore void and
illogical for Judge Salvador to rule, in denying Aurora's motion for reconsideration, that
"there is no question that this Court has jurisdiction to hear and determine this case
which questions the regularity and legality of the auction sale of properties held on
February 14, 1967, hence the authority granted by the Court to redeem said properties
within the redemption period in order to write finis to the pending case." For Judge
Salvador thereby begged the basic prejudicial questions of his court's lack of jurisdiction
and the expiration over a year ago of Bernabe's alleged right of redemption, not to
mention that any grant of such right to redeem could not be decreed in a summary
unreasoned order but would have to be adjudged in a formal decision reciting the facts
and the law on which it is based, and which may not be immediately executed, without
a special order therefor. Under Judge Salvador's void orders, all that a judgment debtor
whose properties have been sold at execution sale but who does not have the funds to
effect redemption has to do to unilaterally extend the one-year redemption period would
be to file a separate action before another court of co-ordinate jurisdiction questioning
the regularity of the execution sale and upon his getting the funds, notwithstanding the
expiration of the redemption period, get an order of redemption and ask the court "to
write finis to the pending case" — which should have been dismissed in the first
instance for lack of jurisdiction.
The doctrine cited that a court or a branch thereof may not interfere with the
proceedings before a judge of another court or branch of the same court since they are
all courts of equal and co-ordinate jurisdiction is an elementary doctrine that has been
established with the very system of courts. Understandable as Bernabe's plight and
financial predicament may be, still it is incomprehensible why he should futilely resort,
SALES 7 (FINALS)
as he did, to filing his separate action with Judge Salvador's court which patently lacked
jurisdiction over the properties sold in execution instead of questioning the regularity of
the execution sale before Judge Cruz' court as the court of competent and exclusive
jurisdiction, and properly applying, if he had just grounds, for extension of the
redemption period.
As to the alleged gross inadequacy of the price of P30,194.00 paid by Aurora when
according to Bernabe the properties could have been easily sold for a total price of
P385,000.00, Bernabe has admitted that there was an existing mortgage lien on the
properties in the amount of P120,000,00 which necessarily affected their value. This
question was not raised at all before Judge Cruz' court nor did Judge Salvador rule
thereupon, since he merely issued his void order of redemption. Suffice it to state on
the basis of the record, however, that the failure of Bernabe to timely sell the properties
for their fair value through negotiated sales with third persons either before or after the
execution sale in order to be able to discharge his judgment debt or redeem the
properties within the redemption period, or to raise the necessary amount therefrom to
so effect redemption notwithstanding that they have been collecting the substantial
monthly rentals thereof of P2,500.00 monthly even up to now 12 can be attributed only
to his own failings and gross improvidence. They cannot be cited in law or in equity to
defeat the lawful claim of Aurora nor to give validity to the void orders of Judge
Salvador's court. The applicable rule on forced sales where the law gives the owner the
right of redemption was thus stated by the Court in Velasquez vs.
Coronel: 13 "However, while in ordinary sales for reasons of equity a transaction may
be invalidated on the ground of inadequacy of price, or when such inadequacy shocks
one's conscience as to justify the courts to interfere, such does not follow when the law
gives to the owner the right to redeem, as when a sale is made at public auction, upon
the theory that the lesser the price the easier it is for the owner to effect the
redemption. And so it was aptly said: 'When there is the right to redeem, inadequacy of
price should not be material, because the judgment debtor may reacquire the property
or also sell his right to redeem and thus recover the loss he claims to have suffered by
reason of the price obtained at the auction sale.' "
Bernabe's petition challenging the jurisdiction of Judge Cruz' court to issue its orders of
September 5, 1969 and January 5, 1970, confirming Aurora's acquisition of title to the
properties by virtue of the execution sale and ordering Bernabe to transfer possession
thereof to her, because of the separate civil action filed by him in Judge Salvador's
court, must necessarily fail — since said orders were within the exclusive competence
and jurisdiction of Judge Cruz' court.
ACCORDINGLY, in Case L-30871, the writ of certiorari prayed for his granted;
respondent Judge Salvador's court is declared without jurisdiction over Civil Case No.
C-1217 other than to dismiss the same and the writ of preliminary injunction of February
19, 1968 therein issued and the orders of May 20, 1969 and June 23, 1969 therein
issued, as well as respondent sheriff's certificate of redemption issued on May 21, 1969
are set aside and declared null and void; and the writ of preliminary injunction issued
by the Court on September 2, 1969, is made permanent. In Case L-31603, the petition
for certiorari is dismissed and the writ of preliminary injunction issued by this Court on
February 11, 1970 is dissolved. No pronouncement as to costs.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Barredo, Villamor and Makasiar,
JJ., concur.
Concepcion, C.J., concurs in the result.
Castro, J., did not take part.
||| (De Leon v. Salvador, G.R. No. L-30871, [December 28, 1970], 146 PHIL 1051-1065)
3. FLORES VS. SO, 162 SCRA 117
[G.R. No. L-28527. June 16, 1988.]
ALFONSO FLORES AND VALENTIN GALLANO, defendants-
appellants, vs. JOHNSON SO, plaintiff-appellee.
DECISION
YAP, C.J p:
This case was certified to us by the Court of Appeals there being no question of fact
involved, but the application of the pertinent provisions of the old and new Civil Code
on the "Pacto de Retro Sale" executed by defendant Valentin Gallano on February 27,
1950 in favor of defendant-appellant Alfonso Flores over the land in question which
sale is contested by plaintiff-appellee Johnson So on the ground that in truth and in
fact, it was an equitable mortgage to secure a loan of P2,550.00, the supposed
purchase price. Valentin Gallano, impleaded as co-defendant by order of the lower
court, has aligned himself with the cause of Johnson So.
The antecedent facts are:
On August 2, 1958, Johnson So filed an action for specific performance before the
Court of First Instance (now Regional Trial Court) of Sorsogon, Tenth Judicial District,
and docketed as Civil Case No. 1305, against Alfonso Flores to effect the redemption
of a parcel of coconut and rice land situated in Matnog, Sorsogon, containing an area
of 165,056 square meters which was alleged to have been ostensibly sold to the latter
by Valentin Gallano on February 27, 1950, with right of repurchase within four (4) years
from the date of the sale, for a price of P2,550.00. Valentin Gallano sold in an absolute
manner the same land to Johnson So on February 26, 1958 for the price of P5,000.00.
On the allegation that the Pacto de Retro Sale did not embody the real intent and nature
of the agreement between the parties, the transaction being a mere mortgage to secure
a loan, Johnson So prayed that the court declare the said Pacto de Retro Sale as a
mere equitable mortgage and order Alfonso Flores to receive the sum of P2,550.00
deposited with the court in Civil Case No. 1224 and to consider the land in question
redeemed from the latter for all legal purposes. On September 24, 1960, the lower court
ruled that, on the issue of the nature of the contract in question, it is a contract of sale
SALES 7 (FINALS)

of a parcel of land with the reservation in favor of the vendor a retro of the right to "Art. 2252. — Changes made and new provisions and rules laid
repurchase it within a period of four (4) years from execution thereof; that the execution down by this Code which may prejudice or impair vested or
of the affidavit of consolidation of ownership by Flores on March 6, 1958 and its acquired rights in accordance with the old legislation shall have no
subsequent registration in the Office of the Register of Deeds of Sorsogon did not make retroactive effect. . . . ."
his ownership over the land in question absolute and indefeasible because of non-
compliance with Articles 1606 and 1607 of the New Civil Code, which require a judicial Furthermore, Article 2255 thereof states that:
order for consolidation of the title of vendee a retro; and that the right of redemption
"Art. 2255. — The former laws shall regulate acts and contracts
belonging to Valentin Gallano was, ipso facto, acquired by Johnson So when he
with a condition or period which were executed or entered into
brought the land in question. Thus, the Court ordered Alfonso Flores to deliver the
before the effectivity of this Code, even though the condition or
possession of the land in question to Johnson So and to execute the necessary deed
period may still be pending at the time this body of laws goes into
of resale in favor of the latter and authorized Flores to withdraw for his own use and
effect."
benefit the redemption money in the sum of P2,550.00. Valentin Gallano was absolved
from liability. In Manalansan v. Manalang, 108 Phil. 1041, we held that in a sale with the right of
redemption, the ownership over the thing sold is transferred to the vendee upon
Alfonso Flores moved for a reconsideration of the above decision but the motion was
execution of the contract, "subject only to the resolutory condition that the vendor
denied. On appeal to the Court of Appeals, the latter certified the case to this Court as
exercise his right of repurchase within the period agreed upon." Consequently, since
involving purely questions of law. LLjur
the pacto de retro sale in question, which was executed in February of 1950, before the
In essence, the question to be resolved is whether or not the execution of the affidavit effectivity of the New Civil Code in August of 1950, was a contract with a resolutory
of consolidation of ownership by Alfonso Flores and its subsequent registration in the condition, and the condition was still pending at the time the new law went into effect,
Office of the Register of Deeds of Sorsogon made his ownership over the land in the provisions of the old Civil Code would still apply. cdrep
question absolute and indefeasible.
The trial court, therefore, erred in allowing redemption of the subject property by
In its determination of the nature of the contract, the lower court ruled that, based on plaintiff-appellee, Johnson So. Valentin Gallano was no longer the owner of the same
the document itself which is the only evidence, its terms being clear, explicit and without at the time of sale to Johnson So, thus, no right whatsoever was transmitted to the
any confusion, it is a pacto de retro sale with the vendor a retro being given four years latter, except the right to redeem the property. Ownership over the subject property had
from execution thereof to redeem the subject property; however, notwithstanding the long vested upon the defendant appellant Alfonso Flores.
fact that Valentin Gallano had four years from February 27, 1950, or until February 27,
In view of the foregoing, the decision appealed from is reversed and defendant-
1954 only to redeem the property, he could still exercise the right of redemption in 1958
appellant Alfonso Flores is hereby declared the absolute owner of the land subject of
when he sued the vendee, Flores, for redemption, since, upon the effectivity of the New
the controversy. Plaintiff-appellee Johnson So is hereby ordered to pay the defendant-
Civil Code on August 30, 1950, Flores' right of ownership over the land was not yet
appellant the sum of P500.00 as attorney's fees plus costs of suit pursuant to their
absolute and indefeasible for his failure to comply with the requirements of Articles 1606
agreement. 1
and 1607 of the said Code.
SO ORDERED.
We disagree. The pacto de retro sale between Gallano and Flores was executed when
the Civil Code of Spain was still in effect. It is provided in Article 1509 thereof that if the ||| (Flores v. So, G.R. No. L-28527, [June 16, 1988], 245 PHIL 93-98)
vendor does not comply with the provisions of Article 1518, (i.e. to return the price, plus
expenses) the vendee shall acquire irrevocably the ownership of the thing sold.
4. ALONZO VS. IAC, 150 SCRA 259
Under the old Civil Code, the ownership was consolidated in the vendee a retro by
operation of law. Accordingly, upon the failure of Valentin Gallano, as the vendor a [G.R. No. L-72873. May 28, 1987.]
retro, to redeem the property subject of the pacto de retro sale within the period agreed
upon, the vendee a retro, Alfonso Flores, became the absolute owner of the subject
CARLOS ALONZO and CASIMIRA
property.
ALONZO, petitioners, vs. INTERMEDIATE APPELLATE COURT and
This right of ownership which had already vested in Alfonso Flores way back in 1954 TECLA PADUA, respondents.
upon Gallano's failure to redeem within the stipulated period cannot be defeated by the
application of Articles 1606 and 1607 of the New Civil Code which requires registration
of the consolidation of ownership in the vendee a retro only by judicial order. Article Perpetuo L.B. Alonzo for petitioners.
2252 on Transitional Provisions in the New Civil Code provides that:
Luis R. Reyes for private respondent.
SALES 7 (FINALS)
SYLLABUS
1. REMEDIAL LAW; STATUTORY CONSTRUCTION; STATUTES; INTERPRETED
AND APPLIED IN CONSONANCE WITH JUSTICE. — As has been aptly observed,
we test a law by its results; and likewise, we may add, by its purposes. It is a cardinal
rule that, in seeking the meaning of the law, the first concern of the judge should be to
discover in its provisions the intent of the lawmaker. Unquestionably, the law should
never be interpreted in such a way as to cause injustice as this is never within the
legislative intent. An indispensable part of that intent, in fact, for we presume the good
motives of the legislature, is to render justice. Thus, we interpret and apply the law not
independently of but in consonance with justice. Law and justice are inseparable, and
we must keep them so. To be sure, there are some laws that, while generally valid,
may seem arbitrary when applied in a particular case because of its peculiar
circumstances. In such a situation, we are not bound, because only of our nature and
functions, to apply them just the same, in slavish obedience to their language. What we
do instead is find a balance between the word and the will, that justice may be done
even as the law is obeyed. Justice is always an essential ingredient of its decisions.
Thus when the facts warrants, we interpret the law in a way that will render justice,
presuming that it was the intention of the lawmaker, to begin with, that the law be
dispensed with justice. So we have done in this case.
2. ID.; ID.; ID.; MUST BE READ ACCORDING TO ITS SPIRIT AND INTENT. — While
we admittedly may not legislate, we nevertheless have the power to interpret the law in
such a way as to reflect the will of the legislature. While we may not read into the law a
purpose that is not there, we nevertheless have the right to read out of it the reason for
its enactment. In doing so, we defer not to "the letter that killeth" but to "the spirit that
vivifieth," to give effect to the lawmaker's will. "The spirit, rather than the letter of a
statute determines its construction, hence, a statute must be read according to its spirit
or intent. For what is within the spirit is within the statute although it is not within the
letter thereof, and that which is within the letter but not within the spirit is not within the
statute. Stated differently, a thing which is within the intent of the lawmaker is as much
within the statute as if within the letter; and a thing which is within the letter of the statute
is not within the statute unless within the intent of the lawmakers."
3. CIVIL LAW; CONTRACTS; PACTO DE RETRO SALE; EXCEPTION TO THE
GENERAL RULE ADOPTED IN CASE AT BAR. — In arriving at our conclusion today,
we are deviating from the strict letter of the law, which the respondent court
understandably applied pursuant to existing jurisprudence. The said court acted
properly as it had no competence to reverse the doctrines laid down by this Court in
the above-cited cases. In fact, and this should be clearly stressed, we ourselves
are not abandoning the De Conejero and Buttle doctrines. What we are doing simply is
adopting an exception to the general rule, in view of the peculiar circumstances of this
case. The co-heirs in this case were undeniably informed of the sales although no
notice in writing was given them. And there is no doubt either that the 30-day period
began and ended during the 14 years between the sales in question and the filing of
the complaint for redemption in 1977, without the co-heirs exercising their right of
redemption. These are the justifications for this exception.
DECISION
CRUZ, J p:
The question is sometimes asked, in serious inquiry or in curious conjecture, whether
we are a court of law or a court of justice. Do we apply the law even if it is unjust or do
we administer justice even against the law? Thus queried, we do not equivocate. The
answer is that we do neither because we are a court both of law and of justice. We
apply the law with justice for that is our mission and purpose in the scheme of our
Republic. This case is an illustration.
Five brothers and sisters inherited in equal pro indiviso shares a parcel of land
registered in the mane of their deceased parents under OCT No. 10977 of the Registry
of Deeds of Tarlac. 1
On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of
the herein petitioners for the sum of P550.00 by way of absolute sale. 2 One year later,
on April 22, 1964, Eustaquia Padua, his sister, sold her own share to the same
vendees, in an instrument denominated "Con Pacto de Retro Sale," for the sum of
P440.00. 3
By virtue of such agreements, the petitioners occupied, after the said sales, an area
corresponding to two-fifths of the said lot, representing the portions sold to them. The
vendees subsequently enclosed the same with a fence. In 1975, with their consent,
their son Eduardo Alonzo and his wife built a semi-concrete house on a part of the
enclosed area. 4
On February 25, 1976, Mariano Padua, one of the five co-heirs, sought to redeem the
area sold to the spouses Alonzo, but his complaint was dismissed when it appeared
that he was an American citizen. 5 On May 27, 1977, however, Tecla Padua, another
co-heir, filed her own complaint invoking the same right of redemption claimed by her
brother. 6
The trial court * also dismiss this complaint, now on the ground that the right had lapsed,
not having been exercised within thirty days from notice of the sales in 1963 and 1964.
Although there was no written notice, it was held that actual knowledge of the sales by
the co-heirs satisfied the requirement of the law. 7
In truth, such actual notice as acquired by the co-heirs cannot be plausibly denied. The
other co-heirs, including Tecla Padua, lived on the same lot, which consisted of only
604 square meters, including the portions sold to the petitioners. 8 Eustaquia herself,
who had sold her portion, was staying in the same house with her sister Tecla, who
later claimed redemption. 9 Moreover, the petitioners and the private respondents were
close friends and neighbors whose children went to school together. 10
It is highly improbable that the other co-heirs were unaware of the sales and that they
thought, as they alleged, that the area occupied by the petitioners had merely been
mortgaged by Celestino and Eustaquia. In the circumstances just narrated, it was
impossible for Tecla not to know that the area occupied by the petitioners had been
SALES 7 (FINALS)
purchased by them from the other co-heirs. Especially significant was the erection
thereon of the permanent semi-concrete structure by the petitioners' son, which was
done without objection on her part or of any of the other co-heirs.
The only real question in this case, therefore, is the correct interpretation and
application of the pertinent law as invoked, interestingly enough, by both the petitioners
and the private respondents. This is Article 1088 of the Civil Code, providing as follows:
"Art. 1088. Should any of the heirs sell his hereditary rights to a
stranger before the partition, any or all of the co-heirs may be
subrogated to the rights of the purchaser by reimbursing him for
the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the
vendor."
In reversing the trial court, the respondent court ** declared that the notice required by
the said article was written notice and that actual notice would not suffice as a
substitute. Citing the same case of De Conejero v. Court of Appeals 11 applied by the
trial court, the respondent court held that decision, interpreting a like rule in Article 1623,
stressed the need for written notice although no particular form was required.
Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court, furnishing
the co-heirs with a copy of the deed of sale of the property subject to redemption would
satisfy the requirement for written notice. "So long, therefore, as the latter (i.e., the
redemptioner) is informed in writing of the sale and the particulars thereof," he declared,
"the thirty days for redemption start running."
In the earlier decision of Butte v. Uy, 12 the Court, speaking through the same learned
jurist, emphasized that the written notice should be given by the vendor and not the
vendees, conformably to a similar requirement under Article 1623, reading as follows:
"Art. 1623. The right of legal predemption or redemption shall not
be exercised except within thirty days from the notice in writing by
the prospective vendor, or by the vendors, as the case may be.
The deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
"The right of redemption of co-owners excludes that of the
adjoining owners."
As "it is thus apparent that the Philippine legislature in Article 1623 deliberately selected
a particular method of giving notice, and that notice must be deemed exclusive," the
Court held that notice given by the vendees and not the vendor would not toll the
running of the 30-day period. Cdpr
The petition before us appears to be an illustration of the Holmes dictum that "hard
cases make bad laws" as the petitioners obviously cannot argue against the fact that
there was really no written notice given by the vendors to their co-heirs. Strictly applied
and interpreted, Article 1088 can lead to only one conclusion, to wit, that in view of such
deficiency, the 30-day period for redemption had not begun to run, much less expired
in 1977.
But as has also been aptly observed, we test a law by its results; and likewise, we may
add, by its purposes. It is a cardinal rule that, in seeking the meaning of the law, the
first concern of the judge should be to discover in its provisions the intent of the
lawmaker. Unquestionably, the law should never be interpreted in such a way as to
cause injustice as this is never within the legislative intent. An indispensable part of that
intent, in fact, for we presume the good motives of the legislature, is to render justice.
Thus, we interpret and apply the law not independently of but in consonance with
justice. Law and justice are inseparable, and we must keep them so. To be sure, there
are some laws that, while generally valid, may seem arbitrary when applied in a
particular case because of its peculiar circumstances. In such a situation, we are not
bound, because only of our nature and functions, to apply them just the same, in slavish
obedience to their language. What we do instead is find a balance between the word
and the will, that justice may be done even as the law is obeyed.
As judges, we are not automatons. We do not and must not unfeelingly apply the law
as it is worded, yielding like robots to the literal command without regard to its cause
and consequence. "Courts are apt to err by sticking too closely to the words of a law,"
so we are warned, by Justice Holmes again, "where these words import a policy that
goes beyond them." 13 While we admittedly may not legislate, we nevertheless have
the power to interpret the law in such a way as to reflect the will of the legislature. While
we may not read into the law a purpose that is not there, we nevertheless have the right
to read out of it the reason for its enactment. In doing so, we defer not to "the letter that
killeth" but to "the spirit that vivifieth," to give effect to the lawmaker's will.
"The spirit, rather than the letter of a statute determines its
construction, hence, a statute must be read according to its spirit
or intent. For what is within the spirit is within the statute although
it is not within the letter thereof, and that which is within the letter
but not within the spirit is not within the statute. Stated differently,
a thing which is within the intent of the lawmaker is as much within
the statute as if within the letter; and a thing which is within the
letter of the statute is not within the statute unless within the intent
of the lawmakers." 14
In requiring written notice, Article 1088 seeks to ensure that the redemptioner is
properly notified of the sale and to indicate the date of such notice as the starting time
of the 30-day period of redemption. Considering the shortness of the period, it is really
necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to
obviate any problem of alleged delays, sometimes consisting of only a day or two. prcd
The instant case presents no such problem because the right of redemption was
invoked not days but years after the sales were made in 1963 and 1964. The complaint
was filed by Tecla Padua in 1977, thirteen years after the first sale and fourteen years
after the second sale. The delay invoked by the petitioners extends to more than a
decade, assuming of course that there was a valid notice that tolled the running of the
period of redemption.
Was there a valid notice? Granting that the law requires the notice to be written, would
such notice be necessary in this case? Assuming there was a valid notice although it
SALES 7 (FINALS)

was not in writing, would there be any question that the 30-day period for redemption
had expired long before the complaint was filed in 1977?
In the face of the established facts, we cannot accept the private respondents' pretense
that they were unaware of the sales made by their brother and sister in 1963 and 1964.
By requiring written proof of such notice, we would be closing our eyes to the obvious
truth in favor of their palpably false claim of ignorance, thus exalting the letter of the law
over its purpose. The purpose is clear enough: to make sure that the redemptioners
are duly notified. We are satisfied that in this case the other brothers and sisters were
actually informed, although not in writing, of the sales made in 1963 and 1964, and that
such notice was sufficient.
Now, when did the 30-day period of redemption begin?
While we do not here declare that this period started from the dates of such sales in
1963 and 1964, we do say that sometime between those years and 1976, when the
first complaint for redemption was filed, the other co-heirs were actually informed of the
sale and that thereafter the 30-day period started running and ultimately expired. This
could have happened any time during the interval of thirteen years, when none of the
co-heirs made a move to redeem the properties sold. By 1977, in other words, when
Tecla Padua filed her complaint, the right of redemption had already been extinguished
because the period for its exercise had already expired.
for redemption in 1977, without the co-heirs exercising their right of redemption. These
are the justifications for this exception.
More than twenty centuries ago, Justinian defined justice "as the constant and
perpetual wish to render every one his due." 16 That wish continues to motivate this
Court when it assesses the facts and the law in every case brought to it for decision.
Justice is always an essential ingredient of its decisions. Thus when the facts warrants,
we interpret the law in a way that will render justice, presuming that it was the intention
of the lawmaker, to begin with, that the law be dispensed with justice. So we have done
in this case.
WHEREFORE, the petition is granted. The decision of the respondent court is
REVERSED and that of the trial court is reinstated, without any pronouncement as to
costs. It is so ordered.
Teehankee, C.J., Yap, Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Gancayco,
Padilla, Bidin, Sarmiento and Cortes, JJ., concur.
Fernan andFeliciano, JJ., on leave.
||| (Alonzo v. Intermediate Appellate Court, G.R. No. L-72873, [May 28, 1987], 234 PHIL
267-276)

The following doctrine is also worth noting: 5. LAO VS. CA, 275 SCRA 237
"While the general rule is, that to charge a party with laches in the [G.R. No. 115307. July 8, 1997.]
assertion of an alleged right it is essential that he should have
knowledge of the facts upon which he bases his claim, yet if the
circumstances were such as should have induced inquiry, and the MANUEL LAO, petitioner, vs. COURT OF APPEALS and
means of ascertaining the truth were readily available upon inquiry, BETTER HOMES REALTY & HOUSING
but the party neglects to make it, he will be chargeable with laches, CORPORATION, respondents.
the same as if he had known the facts." 15

It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo,
who were not among them, should enclose a portion of the inherited lot and build Ray Anthony F . Fajarito for petitioner.
thereon a house of strong materials. This definitely was not the act of a temporary Teofilo F . Manalo for private respondents.
possessor or a mere mortgagee. This certainly looked like an act of ownership. Yet,
given this unseemly situation, none of the co-heirs saw fit to object or at least inquire,
to ascertain the facts, which were readily available. It took all of thirteen years before
SYNOPSIS
one of them chose to claim the right of redemption, but then it was already too late. llcd

We realize that in arriving at our conclusion today, we are deviating from the strict letter
The private respondent filed with the Metropolitan Trial Court of Quezon City (MTC) a
of the law, which the respondent court understandably applied pursuant to existing
complaint for unlawful detainer on the ground that it is the owner of the premises
jurisprudence. The said court acted properly as it had no competence to reverse the
situated at Unit 1, No. 21 N. Domingo Street, Quezon City; that petitioner occupied the
doctrines laid down by this Court in the above-cited cases. In fact, and this should be
property without rent but on pure liberality with the understanding that he would vacate
clearly stressed, we ourselves are not abandoning the De Conejero and Buttle
the property upon demand. In his answer, petitioner claimed that he is the true owner
doctrines. What we are doing simply is adopting an exception to the general rule, in
of the property; that he purchased the same from N. Domingo Realty and Development
view of the peculiar circumstances of this case.
Corporation, but the agreement was actually a loan secured by a mortgage.
The co-heirs in this case were undeniably informed of the sales although no notice in
The MTC rendered judgment ordering petitioner to vacate the subject premises. On
writing was given them. And there is no doubt either that the 30-day period began and
appeal, the Regional Trial Court of Quezon City reversed the decision of the MTC. It
ended during the 14 years between the sales in question and the filing of the complaint
SALES 7 (FINALS)
held that the property was acquired by N. Domingo Realty by way of a deed of sale and
the private respondent is the registered owner thereof, but in truth the petitioner is the
beneficial owner because the real transaction was not a sale but a loan secured by a
mortgage.
On appeal, the Court of Appeals reversed the decision of the Regional Trial Court and
affirmed the MTC decision. It held that as a general rule, the issue in an ejectment suit
is possession de facto, not possession de jure, and that in the event the issue of
ownership is raised as a defense, the issue is taken up for the limited purpose of
determining who between the contending parties has the better right to possession.
However, where neither of the parties objects to the allegation of the question of
ownership in an ejectment suit and, indeed, both present evidence thereon, argue the
question in their various submissions and participate in all aspects of the trial without
objecting to the MTC's jurisdiction to decide the question of ownership, the Regional
Trial Court, in the exercise of its original jurisdiction under Sec. 11, Rule 40 of the Rules
of Court, may rule on the issue, including the corollary question of whether the subject
deed is one of sale or of equitable mortgage.
The agreement between the private respondent and N. Domingo Realty &
Development Corporation, petitioner's family corporation, is one of equitable mortgage.
Possession of the property remained with petitioner, the option given to him to purchase
the property had been extended twice; petitioner and his brother were in dire need of
money that they mortgaged their property to the private respondent.
Since there was no sale, the disputed property still belongs to petitioner's family
corporation. Private respondent, being a mere mortgagee, has no right to eject
petitioner and cannot appropriate the things given by way of pledge or mortgage, or
dispose of them.
Decision of CA reversed and set aside and the Decision of the RTC is reinstated and
affirmed.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; EJECTMENT; MAIN ISSUE IN
POSSESSION. — As a general rule, the main issue in an ejectment suit it
possession de facto, not possession de jure. In the event the issue of ownership is
raised in the pleadings, such issue shall be taken up only for the limited purpose of
determining who between the contending parties has the better right to possession.
2. ID.; ID.; ID.; ID.; EXCEPTION. — However, where neither of the parties objects to
the allegation of the question of ownership — which may be initially improvident or
improper — in an ejectment suit and, instead, both present evidence thereon, argue
the question in their various submissions and participate in all aspects of the trial
without objecting to the Metropolitan (or Municipal) Trial Court's jurisdiction to decide
the question of ownership, the Regional Trial Court — in the exercise of its original
jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court — may rule on
the issue and the corollary question of whether the subject deed is one of sale or of
equitable mortgage.
3. ID.; METROPOLITAN TRIAL COURT; WITHOUT JURISDICTION TO RULE ON
ISSUE OF OWNERSHIP IN EJECTMENT CASES. — The Court of Appeals held that
as a general rule, the issue in an ejectment suit is possession de facto, not
possession de jure, and that in the event the issue of ownership is raised as a defense,
the issue is taken up for the limited purpose of determining who between the contending
parties has the better right to possession. Beyond this, the MTC acts in excess of its
jurisdiction. However, we hold that this is not a hard and fast rule that can be applied
automatically to all unlawful detainer cases.
4. ID.; REGIONAL TRIAL COURT; MAY TRY AN EJECTMENT CASE INVOLVING
ISSUE OF OWNERSHIP PREVIOUSLY DECIDED BY AN INFERIOR COURT
WITHOUT JURISDICTION IN THE EXERCISE OF ITS ORIGINAL JURISDICTION. —
Section 11, Rule 40 of the Rules of Court provides that "[a] case tried by an inferior
court without jurisdiction over the subject matter shall be dismissed on appeal by the
Court of First Instance. But instead of dismissing the case, the Court of First Instance,
in the exercise of its original jurisdiction, may try the case on the merits if the parties
therein file their pleadings and go to the trial without any objection to such jurisdiction."
After a thorough review of the records of this case, the Court finds that the respondent
appellate court failed to apply this Rule and erroneously reversed the RTC Decision.
5. ID.; ID.; ID. — An Action for unlawful detainer "is inadequate for the ventilation of
issues involving title or ownership of controverted real property, [i]t is more in keeping
with procedural due process that where issues of title or ownership are raised in the
summary proceedings for unlawful detainer, said proceeding should be dismissed for
lack of jurisdiction, unless, in the case of an appeal from the inferior court to the Court
of First Instance, the parties agree to the latter Court hearing the case in its original
jurisdiction in accordance with Section 11, Rule 40 . . ."
6. ID.; ID.; ID.; CASE AT BAR. — In the case at bar, a determination of the issue of
ownership is indispensable to resolving the rights of both parties over the property in
controversy, and is inseparable from a determination of who between them has the
right to posses the same. Indeed, the very complaint for unlawful detainer filed in the
Metropolitan Trial court of Quezon City is anchored on the alleged ownership of private
respondent over the subject premises. The parties did not object to the incongruity of a
question of ownership being brought in an ejectment suit. Instead they both submitted
evidence on such question, and the Metropolitan Trial Court decided on the issue.
When the MTC decision was appealed to the Regional Trial Court, not one of the parties
questioned the Metropolitan Trial Court's jurisdiction to decide the issue of ownership.
In fact, the records show that both petitioner and private respondent discussed the
issue in their respective pleadings before the Regional Trial Court. They participated in
all aspects of the trial without objection to its jurisdiction to decide the issue of
ownership. Consequently, the Regional Trial Court aptly decided the issued based on
the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of the Rules
of Court.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS; NATURE
DETERMINED BY INTENT OF THE PARTIES. — In determining the nature of a
contract, the Court looks at the intent of the parties and not the nomenclature used to
describe it. Pivotal to deciding this issue is the true aim and purpose of the contracting
parties as shown by the terminology used in the covenant, as well as "by their conduct,
words, actions and deeds prior to, during and immediately after executing the
SALES 7 (FINALS)
agreement." In this regard, parol evidence becomes admissible to prove the true intent
and agreement of the parties which the Court will enforce even if the title of the property
in question has already been registered and a new transfer certificate of title issued in
the name of the transferee. (Macapinlac vs. Gutierrez Repide)
8. ID.; ID.; EQUITABLE MORTGAGE, WHEN PRESUMED. — The law enumerates
when a contract may be presumed to be an equitable mortgage: "(1) When the price of
a sale with right to repurchase is unusually inadequate; (2) When the vendor remains
in possession as lessee or otherwise; (3) When upon or after the expiration of the right
to repurchase another instrument extending the period of redemption or granting a new
period is executed; (4) When the purchaser retains for himself a part of the purchase
price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any
other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other
obligation. . ." The foregoing presumption applies also to a "contract purporting to be
an absolute sale."
9. ID.; ID.; ID.; ID.; CASE AT BAR. — Applying the preceding principles to the factual
milieu of this case, we find the agreement between the private respondent and N.
Domingo Realty & Housing Corporation, as represented by petitioner, manifestly one
of equitable mortgage. First, possession of the property in the controversy remained
with Petitioner Manuel Lao who was the beneficial owner of the property, before, during
and after the alleged sale. It is settled that a "pacto de retro sale should be treated as
a mortgage where the (property) sold never left the possession of the
vendors." Second, the option given to Manuel Lao to purchase the property in
controversy had been extended twice through documents executed by Mr. Tan Bun Uy,
President and Chairman of the Board of Better Homes Realty & Housing Corporation.
The wording of the first extension is a refreshing revelation that indeed the parties really
intended to be bound by a loan with mortgage, not by a pacto de retro. It reads, "On
June 10, 1988, this option is extended for another sixty days to expired (sic) on Aug.
11, 1988. The purchase price is increased to P137,000.00. Since Mr. Lao borrow (sic)
P20,000.00 from me." These extensions clearly represent the extension of time to pay
the loan given to Manuel Lao upon his failure to pay said loan on its maturity. Mr. Lao
was even granted an additional loan of P20,000.00 as evidenced by the above-quoted
document. Third, unquestionably, Manuel Lao, and his brother were in such "dire need
of money" that they mortgaged their townhouse units registered under the name of N.
Domingo Realty Corporation, the family corporation put up by their parents, to Private
Respondent Better Homes Realty & Housing Corporation. In retrospect, it is easy to
blame Petitioner Manuel Lao for not demanding a reformation of the contract to reflect
the true intent of the parties. But this seeming inaction is sufficiently explained by the
Lao brothers' desperate need for money, compelling them to sign the document
purporting to be a sale after they were told that the same was just for "formality." Based
on the conduct of the petitioner and private respondent and even the terminology of the
second option to purchase, we rule that the intent and agreement between them was
undoubtedly one of equitable mortgage and not of sale.
10. ID.; ID.; IN CASE OF AMBIGUITY, A CONTRACT IS DEEMED TO BE ONE WHICH
INVOLVES A LESSER TRANSMISSION OF RIGHTS AND INTEREST. — Since the
borrower's urgent need for money places the latter at a disadvantage viz-a-viz the
lender who can thus dictate the terms of their contract, the Court, in case of an
ambiguity, deems the contract to be one which involves the lesser transmission of rights
and interest over the property in controversy.
11. ID.; ID.; ID.; A MERE MORTGAGE HAS NO RIGHT TO EJECT HIS MORTGAGOR;
CASE AT BAR. — An action for unlawful detainer is grounded on Section 1, Rule 70 of
the Rules of Court. Based on the previous discussion, there was no sale of the disputed
property. Hence, it still belongs to petitioner's family corporation. N. Domingo Realty &
Development Corporation. Private respondent, being a mere mortgagee, has no right
to eject petitioner. Private respondent, as a creditor and mortgagee, ". . . cannot
appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void."
12. ID.; ACTIONS; ESTOPPEL; PARTY CANNOT QUESTION STANDING OF PARTY
WHERE HE HIMSELF IMPLEADED DEFENDANT. — Private respondent in his
memorandum also contends that (1) petitioner is not the real party in interest and (2)
the petition should be dismissed for "raising/stating facts not so found by the Court of
Appeals." These deserve scant consideration. Petitioner was impleaded as party
defendant in the ejectment suit by private respondent itself. Thus, private respondent
cannot question his standing as a party. As such party, petitioner should be allowed to
raise defenses which negate private respondent's right to the property in question.
DECISION
PANGANIBAN, J p:
As a general rule, the main issue in an ejectment suit is possession de facto not
possession de jure. In the event the issue of ownership is raised in the pleadings, such
issue shall be taken up only for the limited purpose of determining who between the
contending parties has the better right to possession. However, where neither of the
parties objects to the allegation of the question of ownership — which may be initially
improvident or improper — in an ejectment suit and, instead, both present evidence
thereon, argue the question in their various submissions and participate in all aspects
of the trial without objecting to the Metropolitan (or Municipal) Trial Court's jurisdiction
to decide the question of ownership, the Regional Trial Court — in the exercise of its
original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court — may
rule on the issue and the corollary question of whether the subject deed is one of sale
or of equitable mortgage.
These postulates are discussed by the Court as it resolves this petition under Rule 45
seeking a reversal of the December 21, 1993 Decision 1 and April 28, 1994
Resolution 2 of the Court of Appeals in CA-G.R. SP No. 92-14293.
The Antecedent Facts
The facts of this case is narrated by Respondent Court of Appeals as follows: 3
SALES 7 (FINALS)
"On June 24, 1992, (herein Private Respondent Better Homes
Realty and Housing Corporation) filed with the Metropolitan Trial
Court of Quezon City, a complaint for unlawful detainer, on the
ground that (said private respondent) is the owner of the premises
situated at Unit I, No. 21 N. Domingo Street, Quezon City,
evidenced by Transfer Certificate of Title No. 22184 of the Registry
of Deeds of Quezon City; that (herein Petitioner Manuel Lao)
occupied the property without rent, but on (private respondent's)
pure liberality with the understanding that he would vacate the
property upon demand, but despite demand to vacate made by
letter received by (herein petitioner) on February 5, 1992, the
(herein petitioner) refused to vacate the premises.
In his answer to the complaint, (herein petitioner) claimed that he
is the true owner of the house and lot located at Unit 1, No. 21 N.
Domingo Street, Quezon City; that the (herein private respondent)
purchased the same from N. Domingo Realty and Development
Corporation but the agreement was actually a loan secured by
mortgage; and that plaintiff's cause of action is for accion
publiciana outside the jurisdiction of an inferior court.
On October 9, 1992, the Metropolitan Trial Court of Quezon City
rendered judgment ordering the (petitioner) to vacate the premises
located at Unit I, No. 21 N. Domingo Street, Quezon City; to pay
(private respondent) the sum of P300.00 a day starting on January
31, 1992, as reasonable rent for the use and occupation of the
premises; to pay plaintiff P5,000.00, as attorney's fees, and costs.
On appeal to the Regional Trial Court of Quezon City, 4 on March
30, 1993, the latter court rendered a decision reversing that of the
Metropolitan Trial Court, and ordering the dismissal of the (private
respondent's) complaint for lack of merit, with costs taxed against
(private respondent).
In its decision, the Regional Trial Court held that the subject
property was acquired by (private respondent) from N. Domingo
Realty and Development Corporation, by a deed of sale, and
(private respondent) is now the registered owner under Transfer
Certificate of Title No. 316634 of the Registry of Deeds of Quezon
City, but in truth the (petitioner) is the beneficial owner of the
property because the real transaction over the subject property
was not a sale but a loan secured by a mortgage thereon."
The dispositive portion of the Regional Trial Court's decision is quoted below: 5
"WHEREFORE, judgment is hereby rendered reversing the
appealed decision and ordering the dismissal of plaintiff's
complaint for lack of merit, with the costs taxed against it.
IT IS SO ORDERED."
On April 28, 1993, private respondent filed an appeal with the Court of Appeals which
reversed the decision of the Regional Trial Court.
The Respondent Court ruled:
"The Metropolitan Trial Court has no jurisdiction to resolve the
issue of ownership in an action for unlawful detainer (B.P. 129,
Sec. 33[2]; Cf Alvir vs. Vera, 130 SCRA 357). The jurisdiction of a
court is determined by the nature of the action alleged in the
complaint (Ching vs. Malaya, 153 SCRA 412). In its complaint in
the inferior court, the plaintiff alleged that it is the owner of the
premises located at Unit I, No. 21 N. Domingo Street, Quezon City,
and that defendant's occupation is rent free and based on plaintiff's
pure liberality coupled with defendant's undertaking to vacate the
premises upon demand, but despite demands, defendant has
refused to vacate. The foregoing allegations suffice to constitute a
cause of action for ejectment (Banco de Oro vs. Court of Appeals,
182 SCRA 464).
The Metropolitan Trial Court is not ousted of jurisdiction simply
because the defendant raised the question of ownership (Bolus
vs. Court of Appeals, 218 SCRA 798). The inferior court shall
resolve the issue of ownership only to determine who is entitled to
the possession of the premises (B.P. 129, Sec. 33[2]; Bolus
vs. Court of Appeals, supra).
Here, the Metropolitan Trial Court ruled that as owner, plaintiff
(herein private respondent Better Homes Realty and Housing
Corporation) is entitled to the possession of the premises because
the defendant's stay is by mere tolerance of the plaintiff (herein
private respondent).
On the other hand, the Regional Trial Court ruled that the subject
property is owned by the defendant, (herein petitioner Manuel Lao)
and, consequently, dismissed the complaint for unlawful detainer.
Thus, the Regional Trial Court resolve the issue of ownership, as
if the case were originally before it as an action for recovery of
possession, or accion publiciana, within its original jurisdiction. In
an appeal from a decision of the Municipal Trial Court, or
Metropolitan Trial Court, in an unlawful detainer case, the Regional
Trial Court is simply to determine whether the inferior court
correctly resolve the issue of possession; it shall not delve into the
issue of ownership (Manuel vs. Court of Appeals, 199 SCRA 603).
What the Regional Trial Court did was to rule that the real
agreement between the plaintiff and the previous owner of the
property was not a sale, but an equitable mortgage. Defendant
was only a director of the seller corporation, and his claim of
ownership could not be true. This question could not be
determined summarily. It was not properly in issue before the
inferior court because, as aforesaid, the only issue was
possession de facto (Manlapaz vs. Court of Appeals, 191 SCRA
SALES 7 (FINALS)
795), or who has a better right to physical possession (Dalida
vs. Court of Appeals, 117 SCRA 480). Consequently, the Regional
Trial Court erred in reversing the decision of the Metropolitan Trial
Court.
WHEREFORE, the Court hereby REVERSES the decision of the
Regional Trial Court. In lieu thereof, We affirm the decision of the
Metropolitan Trial Court of Quezon City sentencing the defendant
and all persons claiming right under him to vacate the premises
situated at Unit I, No. 21 N. Domingo Street, Quezon City, and to
surrender possession to the plaintiff; to pay plaintiff the sum of
P300.00, a day starting on January 31, 1992, until defendant shall
have vacated the premises; to pay plaintiff P5,000.00 as attorneys
fees and costs. cdtai
SO ORDERED." 6
Manuel Lao's motion for reconsideration dated January 24, 1994 was denied by the
Court of Appeals in its Resolution promulgated on April 28, 1994. Hence, this petition
for review before this Court. 7
The Issues
Petitioner Manuel Lao raises three issues:
"3.1 Whether or not the lower court can decide on the issue of
ownership in the present ejectment case.
3.2 Whether or not private respondent had acquired ownership
over the property in question.
3.3 Whether or not petitioner should be ejected from the premises
in question" 8
The Court's Ruling
The petition for review is meritorious.
First Issue: Jurisdiction to Decide the Issue of Ownership
The Court of Appeals held that as a general rule, the issue in an ejectment suit is
possession de facto, not possession de jure, and that in the event the issue of
ownership is raised as a defense, the issue is taken up for the limited purpose of
determining who between the contending parties has the better right to possession.
Beyond this, the MTC acts in excess of its jurisdiction. However, we hold that this is not
a hard and fast rule that can be applied automatically to all unlawful detainer cases.
Section 11, Rule 40 of Rules of Court provides that "[a] case tried by an inferior court
without jurisdiction over the subject matter shall be dismissed on appeal by the Court
of First Instance. But instead of dismissing the case, the Court of First Instance, in the
exercise of its original jurisdiction, may try the case on the merits if the parties therein
file their pleadings and go to the trial without any objection to such jurisdiction." After a
thorough review of the records of this case, the Court finds that the respondent
appellate court failed to apply this Rule and erroneously reversed the RTC Decision.
Respondent Court cites Alvir vs. Vera to support its Decision. On the contrary, we
believe such case buttresses instead the Regional Trial Court's decision. The cited
case involves an unlawful detainer suit where the issue of possession was inseparable
from the issue of transfer of ownership, and the latter was determinable only after an
examination of a contract of sale involving the property in question. The Court ruled
that where a "case was tried and heard by the lower court in the exercise of its original
jurisdiction by common assent of the parties by virtue of the issues raised . . . and the
proofs presented by them," any dismissal on the ground of lack of jurisdiction "would
only lead to needless delays and multiplicity of suits." The Court held:
"In actions of forcible entry and detainer, the main issue is
possession de facto, independently of any claim of ownership or
possession de jure that either party may set forth in his pleading. .
. . Defendant's claim of ownership of the property from which
plaintiff seeks to eject him is not sufficient to divest the inferior court
of its jurisdiction over the action of forcible entry and detainer.
However, if it appears during the trial that the principal issue relates
to the ownership of the property in dispute and any question of
possession which may be involved necessarily depends upon the
result of the inquiry into the title, previous rulings of this Court are
that the jurisdiction of the municipal or city court is lost and the
action should be dismissed.
We have at bar a case where, in effect, the question of physical
possession could not properly be determined without settling that
of lawful or de jure possession and of ownership and hence,
following early doctrine, the jurisdiction of the municipal court over
the ejectment case was lost and the action should have been
dismissed. As a consequence, respondent court would have no
jurisdiction over the case on appeal and it should have dismissed
the case on appeal from the municipal trial court. However, in line
with Section 11, Rule 40 of the Revised Rules of Court, which
reads —
'SEC. 11. Lack of Jurisdiction. — A case tried by an
inferior court without jurisdiction over the subject matter
shall be dismissed on appeal by the Court of First
Instance. But instead of dismissing the case, the Court of
First Instance in the exercise of its original jurisdiction,
may try the case on the merits if the parties therein file
their pleadings and go to trial without objection to such
jurisdiction.'
This Court held in Saliwan vs. Amores, 51 SCRA 329, 337, that
dismissal 'on the said ground of lack of appellate jurisdiction on the
part of the lower court flowing from the municipal court's loss of
jurisdiction would lead only to needless delay and multiplicity of
suits in the attainment of the same result and ignores, as above
SALES 7 (FINALS)
stated, that the case was tried and heard by the lower court in the
exercise of its original jurisdiction by common assent of the parties
by virtue of the issues raised by the parties and the proof presented
by them thereon.'" 9
This pronouncement was reiterated by this Court through Mr. Justice Teodoro R.
Padilla in Consignado vs. Court of Appeals 10 as follows:
"As the MTC of Laguna had no jurisdiction over the unlawful
detainer case in view of the raised question of title or ownership
over the property in dispute, the RTC of Laguna also had
no appellate jurisdiction to decide the case on the merits. It should
have dismissed the appeal. However, it had original jurisdiction to
pass upon the controversy. It is to be noted in this connection, that
in their respective memoranda filed with the RTC of Laguna, the
petitioners and private respondents did not object to the said court
exercising its original jurisdiction pursuant to the aforequoted
provisions of Section 11, Rule 40 of the Rules of Court.
xxx xxx xxx
Petitioner now contend, among others, that the Court of Appeals
erred in resolving the question of ownership as if actual title, not
mere possession of subject premises, is involve in the instant
case.
The petitioner's contention is untenable. Since the MTC and RTC
of Laguna decided the question of ownership over the property in
dispute, on appeal the Court of Appeals had to review and resolve
also the issue of ownership. . . ."
It is clear, therefore, that although an action for unlawful detainer
"is inadequate for the ventilation of issues involving title or
ownership of controverted real property, [i]t is more in keeping with
procedural due process that where issues of title or ownership are
raised in the summary proceedings for unlawful detainer, said
proceeding should be dismissed for lack of jurisdiction, unless, in
the case of an appeal from the inferior court to the Court of First
Instance, the parties agree to the latter Court hearing the case in
its original jurisdiction in accordance with Section 11, Rule 40 . . .
." 11
In the case at bar, a determination of the issue of ownership is indispensable to
resolving the rights of both parties over the property in controversy, and is inseparable
from a determination of who between them has the right to posses the same. Indeed,
the very complaint for unlawful detainer filed in Metropolitan Trial Court of Quezon City
is anchored on the alleged ownership of private respondent over the subject
premises. 12 The parties did not object to the incongruity of a question of ownership
being brought in an ejectment suit. Instead they both submitted evidence on such
question, and the Metropolitan Trial Court decided on the issue. These facts are evident
in the Metropolitan Trial Court's decision:
"From the records of the case, the evidence presented and the
various arguments advanced by the parties, the Court finds that
the property subject matter of this case is in the name of (herein
private respondent) Better Homes and Realty Housing
Corporation; that the deed of Absolute Sale which was the basis
for the issuance of said TCT No. 22184 is between N. Domingo
Realty and Development Corporation and Better Homes Realty
and Housing Corporation which was assigned by Artemio S. Lao
representing the seller N. Domingo and Realty Development
Corporation; that a Board Resolution of N. Domingo and Realty
and Development Corporation (Exhibit 'D' position paper) shows
that the Directors of the Board of the N. Domingo Realty and
Development Corporation passed a resolution selling apartment
units I and F located at No. 21 N. Domingo St., Quezon City and
designating the (herein petitioner) with his brother Artemio S. Lao
as signatories to the Deed of Sale. The claim therefore of the
(herein petitioner) that he owns the property is not true. . . ." 13
When the MTC decision was appealed to the Regional Trial Court, not one of the parties
questioned the Metropolitan Trial Court's jurisdiction to decide the issue of ownership.
In fact, the records show that both petitioner and private respondent discussed the
issue in their respective pleadings before the Regional Trial Court. 14 They participated
in all aspects of the trial without objection to its jurisdiction to decide the issue of
ownership. Consequently, the Regional Trial Court aptly decided the issue based on
the exercise of its original jurisdiction as authorized by Section 11, Rule 40 of the Rules
of Court.
This Court further notes that in both of the contending parties' pleadings
filed on appeal before the Court of Appeals, the issue of ownership was likewise
amply discussed. 15 The totality of evidence presented was sufficient to decide
categorically the issue of ownership.
These considerations, taken together with the fact that both the Metropolitan Trial Court
and the Regional Trial Court decided the issue of ownership, justify the review of the
lower courts' findings of fact and decision on the issue of ownership. This we now do,
as we dispose of the second issue and decide the case with finality to spare the parties
the time, trouble and expense of undergoing the rigors of another suit where they will
have to present the same evidence all over again and where, in all probability, the same
ultimate issue of ownership will be brought up on appeal.
Second Issue: Absolute Sale or Equitable Mortgage?
Private Respondent Better Homes Realty and Housing Corporation anchored its right
in the ejectment suit on a contract of sale in which petitioner (through their family
corporation) transferred the title of the property in question. Petitioner contends,
however, that their transaction was not an absolute sale, but an equitable mortgage.
In determining the nature of a contract, the Court looks at the intent of the parties and
not at the nomenclature used to describe it. Pivotal to deciding this issue is the true aim
and purpose of the contracting parties as shown by the terminology used in the
covenant, as well as "by their conduct, words, actions and deeds prior to, during and
immediately after executing the agreement." 16 In this regard, parol evidence becomes
SALES 7 (FINALS)
admissible to prove the true intent and agreement of the parties which the Court will
enforce even if the title of the property in question has already been registered and a
new transfer certificate of title issued in the name of the transferee. In Macapinlac
vs. Gutierrez Repide, which involved an identical question, the Court succinctly stated:
" . . . This conclusion is fully supported by the decision in Cuyugan
vs. Santos (34 Phil., 100), where this court held that a conveyance
in the form of a contract of sale with pacto de retro will be treated
as a mere mortgage, if really executed as security for a debt, and
that this fact can be shown by oral evidence apart from the
instrument of conveyance, a doctrine which has been followed in
the later cases of Villa vs. Santiago (38 Phil., 157), and Cuyugan
vs. Santos (39 Phil., 970).
xxx xxx xxx
In the first place, it must be borne in mind that the equitable
doctrine which has been so fully stated above, to the effect that
any conveyance intended as security for a debt will be held in
effect to be a mortgage, whether so actually expressed in the
instrument or not, operates regardless of the form of the
agreement chosen by the contracting parties as the repository of
their will. Equity looks through the form and considers the
substance; and no kind of engagement can be adopted which will
enable the parties to escape from the equitable doctrine to which
reference is made. In other words, a conveyance of land,
accompanied by registration in the name of the transferee and the
issuance of a new certificate, is no more secured from the
operation of this equitable doctrine than the most informal
conveyance that could be devised."17
The law enumerates when a contract may be presumed to be an equitable mortgage:
"(1) when the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting
a new period is executed;
(4) When the purchaser retains for himself a part of the purchase
price;
(5) when the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
xxx xxx xxx" 18
The foregoing presumption applies also to a 'contract purporting to
be an absolute sale." 19
Applying the preceding principles to the factual milieu of this case, we find the
agreement between the private respondent and N. Domingo Realty & Housing
Corporation, as represented by petitioner, manifestly one of equitable mortgage. First,
possession of the property in the controversy, remained with Petitioner Manuel Lao
who was the beneficial owner of the property, before, during and after the alleged
sale. 20 It is settled that a "pacto de retro sale should be treated as a mortgage where
the (property) sold never left the possession of the vendors." 21 Second, the option
given to Manuel Lao to purchase the property in controversy had been extended
twice 22 through documents executed by Mr. Tan Bun Uy, President and Chairman of
the Board of Better Homes Realty & Housing Corporation. The wording of the first
extension is a refreshing revelation that indeed the parties really intended to be bound
by a loan with mortgage, not by a pacto de retro. It reads, "On June 10, 88, this option
is extended for another sixty days to expired (sic) on Aug. 11, 1988. The purchase price
is increased to P137,000.00. Since Mr. Lao borrow (sic) P20,000.00 from
me." 23 These extensions clearly represent the extension of time to pay the loan given
to Manuel Lao upon his failure to pay said loan on its maturity. Mr. Lao was even
granted an additional loan of P20,000.00 as evidenced of the above quoted document.
Third, unquestionably, Manuel Lao and his brother were in such "dire need of money"
that they mortgaged their townhouse units registered under the name of N. Domingo
Realty Corporation, the family corporation put up by their parents, to Private
Respondent Better Homes Realty & Housing Corporation. In retrospect, it is easy to
blame Petitioner Manuel Lao for not demanding a reformation of the contract to reflect
the true intent of the parties. But this seeming inaction is sufficiently explained by the
Lao brother's desperate need for money, compelling them to sign the document
purporting to be a sale after they were told that the same was just for "formality." 24 In
fact, this Court, in various cases involving the same situation, had occasion to state:
". . . In Jayme, et al. v. Salvador, et al., this Court upheld a
judgment of the Court of First Instance of Iloilo which found the
transaction between the parties to be a loan instead of a sale of
real property notwithstanding the terminology used in the
document, after taking into account the surrounding circumstances
of the transaction. The Court through Justice Norberto Romualdez
stated that while it was true that plaintiffs were aware of the
contents of the contracts, the preponderance of the evidence
showed however that they signed knowing that said contracts did
not express their real intention, and if they did so notwithstanding
this, it was due to the urgent necessity of obtaining
funds. 'Necessitous men are not, truly speaking, free men; but to
answer a present emergency will submit to any terms that the
crafty may impose upon them.'" 25
SALES 7 (FINALS)
Moreover, since the borrower's urgent need for money places the latter at a
disadvantage vis-a-vis the lender who can thus dictate the terms of their contract, the
Court, in case of ambiguity, deems the contract to be one which involves the lesser
transmission of rights and interest over the property in controversy. 26
As aptly found and concluded by the regional trial court:
"The evidence of record indicates that while as of April 4, 1988 (the
date of execution of the Deed of Absolute Sale whereby the N.
Domingo and Realty & Development Corporation purportedly sold
the townhouse and lot subject of this suit to [herein private
respondent Better Homes Realty & Housing Corporation] for P
100,000.00) said N. Domingo Realty and Development
Corporation (NDRDC, for short) was the registered owner of the
subject property under Transfer Certificate of Title (TCT) No.
316634 of the Registry of Deeds for Quezon City, (herein petitioner
Manuel Lao) in fact was and has been since 1975 the beneficial
owner of the subject property and, thus, the same was assigned to
him by the NDRDC, the family corporation set up by his parents
and of which (herein petitioner) and his siblings are directors. That
the parties' real transaction or contract over the subject property
was not one of sale but, rather, one of loan secured by a mortgage
thereon is unavoidably inferable from the following facts of record,
to (herein petitioner's) possession of the subject property, which
started in 1975 yet, continued and remained even after the alleged
sale of April 4, 1988; (herein private respondent) executed an
option to purchase in favor (herein petitioner) as early as April 2,
1988 or two days before (herein private respondent) supposedly
acquired ownership of the property; the said option was renewed
several times and the price was increased with each renewal (thus,
the original period for the exercise of the option was up to June 11,
1988 and the price was P109,000.00; then on June 10, 1988, the
option was extended for 60 days or until August 11, 1988 and the
price was increased to P137,000.00; and then on August 11, 1988,
the option was again extended until November 11, 1988 and the
price was increased to P158,840.00); and, the Deed of Absolute
Sale of April 4, 1988 was registered and the property transferred
in the name of (private respondent) only on May 10, 1989, per TCT
No. 22184 of the Registry of Deeds for Quezon City (Arts. 1602,
nos. 2, 3, & 6, & 1604, Civil Code). Indeed, if it were true, as it
would have the Court believe, that (private respondent) was so
appreciative of (petitioner's) alleged facilitation of the subject
property's sale to it, it is quite strange why (private respondent)
some two days before such supposed sale would have been
minded and inclined to execute an option to purchase allowing
(petitioner) to acquire the property — the very same property it was
still hoping to acquire at the time. Certainly what is more likely and
thus credible is that, if (private respondent) was indeed thankful
that it was able to purchase the property, it would not given
(petitioner) any option to purchase at all . . ." 27
Based on the conduct of the petitioner and private respondent and even the terminology
of the second option to purchase, we rule that the intent and agreement between them
was undoubtedly one of equitable mortgage and not of sale.
Third Issue: Should Petitioner Be Ejected?
We answer in the negative. An action for unlawful detainer is grounded on Section 1,
Rule 70 of the Rules of Court which provides that:
". . . a landlord, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession by virtue
of any contract, express or implied, or the legal representatives or
assigns of any such landlord, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation
or withholding of possession, bring an action in the proper inferior
court against the person or persons unlawfully withholding or
depriving of possession, or any person or persons claiming under
them, for the restitution of such possession, together with
damages and costs. . . ." cdt
Based on the previous discussion, there was no sale of the disputed property. Hence,
it still belongs to petitioner's family corporation, N. Domingo Realty & Development
Corporation. Private respondent, being a mere mortgagee, has no right to eject
petitioner. Private respondent, as a creditor and mortgagee," . . . cannot appropriate
the things given by way of pledge or mortgage, or dispose of them. Any stipulation to
the contrary is null and void." 28
Other Matters
Private respondent in his memorandum also contends that (1) petitioner is not the real
party in interest and (2) the petition should be dismissed for "raising/stating facts not so
found by the Court of Appeals." These deserve scant consideration. Petitioner was
impleaded as party defendant in the ejectment suit by private respondent itself. Thus,
private respondent cannot question his standing as a party. As such party, petitioner
should be allowed to raise defenses which negate private respondent's right to the
property in question. The second point is really academic. This ponenciarelies on the
factual narration of the Court of Appeals and not on the "facts" supplied by
petitioner. aisadc
WHEREFORE, the petition is hereby GRANTED. The challenged Decision of the Court
of Appeals is REVERSED and SET ASIDE. The decision of the Regional Trial Court of
Quezon City ordering the dismissal of the complaint for ejectment is REINSTATED and
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
||| (Lao v. Court of Appeals, G.R. No. 115307, [July 8, 1997], 341 PHIL 230-250)
6. LANUZA VS. DE LEON, 20 SCRA 269
SALES 7 (FINALS)
7. CAPULONG VS. CA, 130 SCRA 245
[G.R. No. L-61337. June 29, 1984.]
AURORA P. CAPULONG, BENJAMIN P. CAPULONG, CESAR
P. CAPULONG, DOLORES P. CAPULONG, ESTER P.
CAPULONG, FERNANDO P. CAPULONG, FELICITAS P.
CAPULONG, IRMA P. CAPULONG, JAIME P. CAPULONG,
FRUTO P. CAPULONG, and LOURDES P. CAPULONG, as
substituted heirs of JOVITA PONCE VDA. DE
CAPULONG, petitioners, vs. THE COURT OF APPEALS,
DELFIN G. TOLENTINO, PILAR DE JOYA, and DOROTEO
TOLENTINO, AVELINO TOLENTINO, DELFIN TOLENTINO,
ANGELA TOLENTINO, SEVERINO TOLENTINO, FRANCISCO
TOLENTINO, EMILIO TOLENTINO, ZENAIDA BAUTISTA,
PILAR DE JOYA as substituted heirs of RICARDO G.
TOLENTINO, respondents.
Martin D. Ponraleon for petitioner.
Geronimo O. Veneracion Jr. for private-respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; SALE WITH RIGHT OF
REPURCHASE; PRESUMED TO BE EQUITABLE MORTGAGE UNDER
CIRCUMSTANCES DEFINED IN ARTICLE 1602, CIVIL CODE. — Where any of the
circumstances defined in Article 1602 of the Civil Code is present, a contract of sale
with right to repurchase is presumed to be an equitable mortgage. As stated by the
Code Commission which drafted the new Civil Code, in practically all of the so-called
contracts of sale with right of repurchase, the real intention of the parties is that the
pretended purchase price is money loaned and in order to secure the payment of the
loan, a contract purporting to be a sale with pacts de retro is drawn up. (Report of the
Code Commission, p. 63)
2. ID.; ID.; ID.; ID.; CASE AT BAR. — In the case at bar, the records show that over a
six month period, the mother of petitioners borrowed money on no less than ten
separate occasions from Delfin G. Tolentino. The evidence presented by Mrs. Jovita
Ponce Vda. de Capulong alleged that her total borrowing of P13,000.00 were added to
what she claims were serious interests amounting to P3,250.00, the kited total of
P16,250.00 was made to appear as P21,300.00 purchase price for the lot when actually
no money outside of the ten earlier loan transactions was exchanged between the
parties. The added fact that Jovita Capulong remained in actual possession of the land
and enjoyed the fruits thereof confirms the real intention of the parties to secure
payment of the loans with the land as security. The records show that the private
respondents waited for the period of redemption to expire before taking possession of
the land. Had the petitioner's mother really executed an absolute sale in favor of
respondent Delfin Tolentino the land which is the subject of the transaction should have
been delivered to Tolentino and he would assume immediate possession after the
execution of the questioned deed of sale. The deed of sale taken together with the
companion "right to redeem" contract is only an equitable mortgage.
3. ID.; ID.; ID.; ID.; VILLARICA (26 SCRA 189) DIFFERENTIATED FROM CASE AT
BAR. — There is one important factor that differentiates the Villarica case from the
instant petition. The document granting the vendors therein an option to buy back the
property was executed six (6) days after the execution of the deed of sale whereas in
the instant case the option to buy was embodied in a document executed at the same
time that the questioned deed of sale was executed. The option to buy in
the Villarica case was interpreted to be only an afterthought. On the other hand, the
intent of the parties to circumvent the provision discouraging pacto de retro sales is
very apparent in the instant case. The two contracts, the deed of sale and the document
embodying the option to repurchase were prepared, signed, and notarized on the same
day. The respondent court should have seen through a transparent effort to make it
appear that the two transactions were not intimately related but distinct and separate
as in the Villarica case. This should have put the court on guard considering the other
circumstances of the case from which no other conclusion could be derived except that
the deed of absolute sale and the document giving the right to repurchase were, in fact,
only one transaction of sale pacto de retro which must be construed as an equitable
mortgage. Another factor which the respondent court failed to note is the sale of the
property to the vendee a retro's brother, thus interposing a supposed innocent third
party between the parties to the contract. This second sale was squarely raised in the
amended complaint. The records show that this sale and the issuance of a new
Transfer Certificate of Title on the same date as the sale cannot be deemed to be bona
fide.
4. ID., ID.; ID.; ID.; FAILURE TO PROVE USURIOUS TRANSACTION NOT A BAR TO
HOLDING THAT SALE CONTRACT OF CASE AT BAR IS ACTUALLY CONTRACT
OF LOAN WITH MORTGAGE. — Apart from failing to appreciate the fact that the
vendee a retro used two separate documents of sale and option to repurchase to
formalize what was basically only one transaction of sale pacto de retro, thus simulating
a Villarica v. Court of Appealssituation, the respondent court also relied too much on
the trial court's failure to find usurious transactions. Actually, the determination of
whether or not there were usurious transactions in this case depends on whom to
believe — the borrowers or the lenders? We see no need to disturb the trial court's
findings on the credibility of the witnesses. Even if no usury was involved, and this is
by no means certain or established to our satisfaction there is enough evidence in the
records to prove that a contract of loan with mortgage was made to appear in paper as
an absolute sale with a companion option to buy.
DECISION
GUTIERREZ, JR., J p:
SALES 7 (FINALS)
This is a petition for review of the decision of the respondent Court of Appeals, now
Intermediate Appellate Court, affirming a judgment of the Court of First Instance of
Bulacan dismissing the complaint for annulment of usurious contracts, declaration of
the deed of sale as equitable mortgage, reconveyance, and damages filed by Jovita
Ponce Vda. de Capulong and ordering her to pay respondents the sum of P2,000.00
as attorney's fees and to pay the costs of the suit.
The background facts which led to the filing of this petition are summarized by the
respondent Court of Appeals as follows:
"Between November 19, 1964 and May 28, 1965, plaintiff-
appellant Jovita Ponce Vda. de Capulong obtained a series of
loans in varied amounts from defendant-appellee Dr. Delfin
Tolentino (Exhibits A to J), the aggregate of which amounted to
P16,250.00 (Exh J). The loans were secured by a continuing
mortgage on plaintiff's 950.3 square meter titled property in barrio
Concepcion, municipality of Baliuag, Bulacan province.
"Capulong failed to liquidate the mortgage upon maturity. Dr.
Tolentino accepted her proposal to sell to him the mortgaged
property. On February 18, 1967, the notarial document of absolute
sale (Exh K) now assailed as an equitable mortgage, was
executed by Capulong whereby title to the property in question
was transferred to Dr. Tolentino for P21,300.00, which amount was
P1,000.00 more than Capulong's mortgage indebtedness. In
another document (Exh. L) Capulong was given an option to
purchase the property on or before November 20, 1967, for the
same price of P21,300.00, Capulong failed to exercise the option
in due time. Her efforts to secure an extension of time proved futile.
On January 28, 1968, Dr. Tolentino sold (Exh O) the land in
question to defendants spouses Ricardo G. Tolentino and Pilar de
Joya in whose names it is now titled (Exh. 14)."
On February 1, 1968, Jovita Ponce Vda. de Capulong, predecessor-in-interest of the
petitioners, filed the complaint for annulment of usurious contracts, declaration of the
deed of sale as an equitable mortgage, reconveyance, and damages with the Court of
First Instance of Bulacan against respondent Delfin G. Tolentino. The case was
docketed as Civil Case No. 3617-M.
On February 6, 1968, Mrs. Capulong filed an amended complaint alleging inter alia that
the subject property was sold by Delfin Tolentino to the spouses Ricardo G. Tolentino
and Pilar de Joya under a fictitious deed of sale. She also impleaded said spouses as
additional defendants.
On September 9, 1968, the private respondents filed their answer alleging inter alia that
the transactions adverted to are not usurious and that the deed of absolute sale
between them and Jovita Capulong is a true and valid sale representing the real
intention of the parties.
On March 20, 1975, the trial court dismissed the complaint on the ground that Jovita
Capulong was not able to present concrete evidence to prove her claim of usury and
that the testimonies of the defendant Delfin Tolentino and his witness Fermin Samson
were more credible and weighty than those of the plaintiff and her witness. The
dispositive portion of the decision reads:
"WHEREFORE, premises considered, the complaint is hereby
dismissed for total lack of merit, and the plaintiff is hereby ordered
to pay the defendant the sum of P2,000.00 by way of attorney's
fees, and to pay the cost of this suit."
Jovita Ponce Vda. de Capulong appealed to the then Court of Appeals. On May 9, 1978
while the appeal was pending, the appellant died, and on motion of her counsel, she
was properly substituted by her children and heirs, the petitioners herein.
On January 27, 1981, the respondent court affirmed in toto the decision of the trial
court.
On March 10, 1981, the petitioners filed a motion for reconsideration of said decision
but this was denied in a resolution dated July 16, 1982.
For the grant of this petition, petitioners assign the following errors:
A. THE FORMULA USED BY THE COURT OF APPEALS IN
COMPUTING THE 25% INTEREST ON THE PRINCIPAL OF THE
VARIOUS LOANS IN QUESTION IS NOT SUPPORTED BY THE
EVIDENCE NOR ADMITTED BY THE PARTIES.
B. IN GIVING WEIGHT TO THE FINDING OF THE TRIAL COURT
ON THE CREDIBILITY OF THE WITNESSES FOR PRIVATE
RESPONDENTS, THE COURT OF APPEALS MISAPPLIED THE
RULE ON THE WEIGHT AND SUFFICIENCY OF EVIDENCE.
C. IN CONCLUDING THAT THE 'OPTION TO REPURCHASE ' IN
THIS CASE IS NOT A SOUND BASIS TO FIND THE DEED OF
SALE IN QUESTION AS AN EQUITABLE MORTGAGE, THE
COURT OF APPEALS ERRONEOUSLY APPLIED THE RULING
IN THE CASE OF VILLARICA V. COURT OF APPEALS.
The main point for consideration in this petition is whether or not the "Pagbibilihang
Tuluyan Ng Bakuran" should be treated as an equitable mortgage and not the absolute
sale it purports to be.
Petitioners submit that the questioned deed of sale is not what it appears to be but that
it is an equitable mortgage because the facts and evidence show it was merely resorted
to by the parties in circumvention of the usury law. Private respondents on the other
hand allege that Exhibits 11 and 12 do not embody a sale with repurchase agreement,
or "sale con pacto de retro." They state that Exhibit 11 is a deed of absolute sale while
Exhibit 12, in essence, simply grants the appellant an "option to buy."
We find the stand of the private respondents to be without merit, and accordingly
reverse the decision elevated to us for review. Articles 1602 and 1604 of the Civil Code
state:
SALES 7 (FINALS)
ART. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting
a new period is executed;
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to
be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws. (Emphasis
supplied)
xxx xxx xxx
ART. 1604. The provisions of article 1602 shall also apply to a
contract purporting to be an absolute sale.
Where any of the above circumstances defined in Article 1602 is present, a contract of
sale with right to repurchase is presumed to be an equitable mortgage. As stated by
the Code Commission which drafted the new Civil Code, in practically all of the so-
called contracts of sale with right of repurchase, the real intention of the parties is that
the pretended purchase price is money loaned and in order to secure the payment of
the loan, a contract purporting to be a sale with pacto de retro is drawn up. (Report of
the Code Commission, p. 63).
The respondent court allowed itself to be misled by our ruling in Villarica v. Court of
Appeals, (26 SCRA 189), that:
"The right of repurchase is not a right granted the vendor by the
vendee in a subsequent instrument, but is a right reserved by the
vendor in the same instrument of sale as one of the stipulations of
the contract. Once the instrument of absolute sale is executed, the
vendor can no longer reserve the right to repurchase, and any right
thereafter granted the vendor by the vendee in a separate
instrument cannot be a right of repurchase but some other right
like the option to buy in the instant case . . ."
In Villarica, the deed of absolute sale was executed on May 19, 1951. The
consideration was P35,000.00. It was registered on May 25, 1951. On that same
day, May 25, 1951, the vendees therein executed another public instrument where
they granted the vendors an option to buy the same property within a period of one
year for the price of P37,750.00. The ruling was based on a particular set of facts.
There is one important factor that differentiates the Villarica case from the instant
petition. The document granting the vendors therein in option to buy back the property
was executed six (6) days after the execution of the deed of sale whereas in the instant
case the option to buy was embodied in a document executed at the same time that
the questioned deed of sale was executed. The option to buy in the Villarica case was
interpreted to be only an afterthought. On the other hand, the intent of the parties to
circumvent the provision discouraging pacto de retro sales is very apparent in the
instant case. The two contracts, the deed of sale and the document embodying the
option to repurchase were prepared, signed, and notarized on the same day. The
respondent court should have seen through a transparent effort to make it appear that
the two transactions were not intimately related but distinct and separate as in
the Villarica case. This should have put the court on guard considering the other
circumstances of the case from which no other conclusion could be derived except that
the deed of absolute sale and the document giving the right to repurchase were, in fact,
only one transaction of sale pacto de retro which must be construed as an equitable
mortgage. Another factor which the respondent court failed to note is the sale of the
property to the vendee a retro's brother, thus interposing a supposed innocent third
party between the parties to the contract. This second sale was squarely raised in the
amended complaint. The records show that this sale and the issuance of a new
Transfer Certificate of Title on the same date as the sale cannot be deemed to be bona
fide.
Looking into the reason for the inclusion of Article 1602 in the New Civil Code, this
Court held in Santos v. Duata (14 SCRA 1041) that:
"Article 1602 is a new provision in the Civil Code designed
primarily to curtail the evils brought about by contracts of sale with
right of repurchase, such as the circumvention of the usury law
and pactum commissorium. It particularly envisions contracts of
sale with right to repurchase where the real intention of the parties
is that the pretended purchase price is money loaned, and in order
to secure the payment of the loan a contract purporting to be a sale
with pacto de retro is drawn up. (See report of the Code
Commission, pp. 61-63.)
The records show that over a six month period, the mother of the petitioners borrowed
money on no less than ten separate occasions from Delfin G. Tolentino. The evidence
presented by Mrs. Jovita Ponce Vda. de Capulong alleges that when her total
borrowings of P13,000.00 were added to what she claims were usurious interests
amounting to P3,250.00, the kited total of P16,250.00 was made to appear as, the
P21,300.00 purchase price for the lot when actually no money outside of the ten earlier
loan transactions was exchanged between the parties.
The added fact that Jovita Capulong remained in actual physical possession of the land
and enjoyed the fruits thereof confirms the real intention of the parties to secure the
SALES 7 (FINALS)
payment of the loans with the land as security. The records show that the private
respondents waited for the period of redemption to expire before taking possession of
the land. Had the petitioners' mother really executed an absolute sale in favor of
respondent Delfin Tolentino, the land which is the object of the transaction should have
been delivered to Tolentino and he would have assumed immediate possession after
the execution of the questioned deed of sale.
The deed of sale taken together with the companion "right to redeem" contract is only
an equitable mortgage. Therefore, private respondent Delfin G. Tolentino could not
validly sell the land to his brother Ricardo Tolentino and the latter's wife, Pilar de Joya.
Apart from failing to appreciate the fact that the vendee a retro used two separate
documents of sale and option to repurchase to formalize what was basically only one
transaction of sale pacto de retro, thus simulating a Villarica v. Court of
Appeals situation, the respondent court also relied too much on the trial court's failure
to find usurious transactions.
The petitioners' mother summarized the loan transactions as
follows:
Date Obtained Actual Loan 25% Interest Amounts per Documents
Nov. 20, 1964 P5,000.00 P1,250.00 P 6,250.00 (Exh. "A")
Dec. 5, 1964 600.00 150.00 750.00 (Exh. "B")
Dec. 21, 1964 1,000.00 250.00 1,250.00 (Exh. "C")
Jan. 6, 1965 1,500.00 375.00 1,875.00 (Exh. "D")
Jan. 19, 1965 1,500.00 375.00 1,875.00 (Exh. "E")
Feb. 18, 1965 1,000.00 250.00 1,250.00 (Exh. "F")
April 17, 1965 600.00 150.00 750.00 (Exh. "G")
April 19, 1965 800.00 200.00 1,000.00 (Exh. "H")
May 21, 1965 500.00 125.00 625.00 (Exh. "I")
May 28, 1965 500.00 125.00 625.00 (Exh. "J")
———— ———— ————
Total: P13,000.00 P3,250.00 P16,250.00
According to Mrs. Capulong, she actually borrowed only P13,000.00 but the contracts
evidencing the transaction make the total appear as P16,250.00. When the last
contract, the one now sought to be set aside, was executed, the loans and interests
were allegedly made to appear as a P21,300.00 purchase price, including a P1,000.00
amount given to her on February 18, 1967, when actually no additional money was
given when the deed of sale was granted.
The respondent court sustained the trial court's conclusions and reasoned out:
"There is no merit in this appeal. Appellant's theory, that the
purchase of her land in the amount of P21,300.00 is the sum total
of her principal loan allegedly amounting to only P13,000.00 and
the usurious interest thereon at 25% per annum, minus the sum of
P1,500.00 which she paid to Dr. Tolentino on November 20, 1965,
in concept of interest (Vide p. 10, appellant's brief), does not find
support from a mathematical computation based on said theory.
Thus from November 20, 1964 until February 18, 1967, when the
controverted sale was consummated, a period of 2 years and 3
months, the interest due on P13,000.00 amounted to P7,412.49.
This added to the principal of P13,000.00 would give a result of
P20,412.49. The balance after deducting therefrom the sum of
P1,500.00 would be P18,912.49 only, or P2,387.51 less the sum
of P21,300.00."
The petitioners now allege that the Court of Appeals adopted a computation formula in
consonance with the respondents' theory which is not supported by the evidence in the
records but which is only a theory. The petitioners offer their own theory, thus:
"Upon the other hand, in adopting the formula now being
questioned, the respondent Court of Appeals disregarded a basic
rule followed in the computation of interest charges. It also
disregarded what petitioners offered was a formula of computation
used by the parties in accounting for the consideration of the sale
of P21,300.00. In the formula adopted by the respondent Court,
the 12% per annum was computed on the principal loan on a
straight basis without taking into account the fact that the said
amount of loan was obtained on different dates.
"Anent petitioners' suggested formula which was disregarded by
respondent Court of Appeals, the same consisted in the following:
The actual loan received by Jovita Ponce Vda. de Capulong from
Delfin Tolentino of P13,000.00 would command an interest of
P6,500.00 computed at the rate of 25% per annum for 2 years
disregarding the 3 months from November 20, 1965 to February
18, 1967. The loan of P16,250.00 which is the total of the face
value of the various loan contracts would command an interest of
P3,250.00 computed at the stipulated rate of 12% per annum for 2
years and 3 months. The said amounts of interest totalling
P9,750.00 added to the actual amount of loan received of
P13,000.00 less the payment of P1,500.00 on November 20, 1965
in the concept of interest, yields a total of P21,250.00 or P50.00
less than the consideration of P21,300.00 stated in the deed of
absolute sale. The result using this formula compared to that in the
formula adopted by respondent Court of Appeals suggests that it
was error to have disregarded this formula in favor of the other."
Actually, the determination of whether or not there were usurious transactions in this
case depends on whom to believe — the borrowers or the lenders? We see no need to
disturb the trial court's findings on the credibility of the witnesses. Even if no usury was
involved, and this is by no means certain or established to our satisfaction, there is
enough evidence in the records to prove that a contract of loan with mortgage was
made to appear in paper as an absolute sale with a companion option to buy.
WHEREFORE, the judgment of the respondent court is hereby REVERSED and SET
ASIDE. The deed of sale executed by Jovita Ponce de Capulong in favor of Dr. Delfin
G. Tolentino is declared as an equitable mortgage. The petitioners are ordered to pay
their mortgage indebtedness in the amount of P21,300.00 to the private respondents
SALES 7 (FINALS)
with legal rate of interest from the time of the expiration of the redemption period on
November 20, 1967 until it is fully paid. The deed of sale executed by Delfin Tolentino
in favor of Ricardo Tolentino and Pilar de Joya, being null and void, is also
CANCELLED.
SO ORDERED.
||| (Capulong v. Court of Appeals, G.R. No. L-61337, [June 29, 1984], 215 PHIL 213-
224)
8. SOLID HOMES, INC, VS. CA, G.R. NO 117501, JULY 8, 1997
[G.R. No. 117501. July 8, 1997.]
SOLID HOMES, INC., petitioner, vs. HON. COURT OF
APPEALS, STATE FINANCING CENTER, INC., and REGISTER
OF DEEDS FOR RIZAL, respondents.
Rene A. Diokno for petitioner.
Padilla Law Office for private respondent.
SYNOPSIS
In this petition for review on certiorari assailing the Court of Appeals decision affirming
the decision of the Regional Trial Court of Pasig sustaining the validity of the
subject dacion en pago declaring the same "as true sale with the right of repurchase,"
Petitioner raises the following questions: 1) Is the failure to annotate the vendor a retro's
right of repurchase in the certificates of title of the real estate properties subject
of dacion en pagoconclusive evidence of vendee a retro's malice and bad faith, entitling
the former to damages?; 2) In a sale with pacto de retro, is the repurchase price limited
by Article 1616 of the Civil Code?
The Supreme Court ruled and petitioner was not prejudice by the non-annotation of the
right of repurchase in the certificates of title issued in the name of State Financing
because it is not the sole function of respondent corporation to cause said annotation,
it is equally the responsibility of petitioner to protect its own rights by making sure that
its right of repurchase was indeed annotated in the consolidated titles of private
respondent. Regarding the second issue, the Court ruled that Article 1616 of the Civil
Code is not restrictive or exclusive, barring additional amounts that the parties may
agree upon. Said provision should be construed together with Article 1601 of the same
code requiring the vendor to comply with the provisions of Article 1616 and other
stipulations agreed upon by the parties.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; ONLY QUESTIONS OF LAW
MAY BE BROUGHT BY THE PARTIES AND PASSED UPON BY THE COURT;
EXCEPTIONS THERETO. — It is elementary that in petitions for review on certiorari,
only questions of law may be brought by the parties and passed upon by this Court.
Findings of fact of lower courts are deemed conclusive and binding upon the Supreme
Court except when the findings are grounded on speculation, surmises or conjectures;
when the inference made is manifestly mistaken, absurd or impossible; when there is
grave abuse of discretion in the appreciation of facts; when the factual findings of the
trial and appellate courts are conflicting; when the Court of Appeals, in making its
findings, has gone beyond the issues of the case and such findings are contrary to the
admissions of both appellant and appellee; when the judgment of the appellate court is
premised on a misapprehension of facts or when it has failed to notice certain relevant
facts which, if properly considered, will justify a different conclusion; when the findings
of fact are conclusions without citation of specific evidence upon which they are based;
and when findings of fact of the Court of Appeals are premised on the absence of
evidence but are contradicted by the evidence on record.
2. ID.; ID.; ID.; ONLY ERRORS SPECIFICALLY ASSIGNED AND PROPERLY
ARGUED IN THE BRIEF WILL BE CONSIDERED, WITH THE EXCEPTION OF
THOSE AFFECTING JURISDICTION OVER THE SUBJECT MATTER AS WELL AS
PLAIN AND CLERICAL ERRORS. — Another fundamental principle of procedural law
precludes higher courts from entertaining matters neither alleged in the pleadings nor
raised during the proceedings below, but ventilated for the first time only in a motion for
reconsideration or on appeal. On appeal, only errors specifically assigned and properly
argued in the brief will be considered, with the exception of those affecting jurisdiction
over the subject matter as well as plain and clerical errors.
3. CIVIL LAW; SALES; IN A CONTRACT OF SALE WITH PACTO DE RETRO, THE
VENDEE HAS A RIGHT TO THE IMMEDIATE POSSESSION OF THE PROPERTY
SOLD, UNLESS OTHERWISE AGREED UPON. — In a contract of sale with pacto de
retro, the vendee has a right to the immediate possession of the property sold, unless
otherwise agreed upon. It is basic that in pacto de retro sale, the title and ownership of
the property sold are immediately vested in the vendee a retro, subject only to the
resolutory condition of repurchase by the vendor a retro within the stipulated period.
4. ID.; ID.; REDEMPTION PRICE, INCLUSION OF THE 30% INTEREST AND
PENALTY IN THE TOTAL REDEMPTION PRICE, NOT IN CONTRAVENTION WITH
ARTICLE 1616 OF THE CIVIL CODE. — Petitioner argues that the inclusion of 30%
interest and penalty in the total redemption price is in contravention of Art. 1616 of the
Civil Code. We do not, however, find said legal provision to be restrictive or exclusive,
barring additional amounts that the parties may agree upon. Said provision should be
construed together with Art. 1601 of the same Code. . . It is clear, therefore, that the
provisions of Art. 1601 require petitioner to comply with . . . the other stipulations of the
Memorandum of Agreement/Dacion en Pago it freely entered into with private
respondent.
5. ID.; ID.; ID.; INCLUDES ONLY THOSE EXPENSES RELATING TO THE
REGISTRATION OF DACION EN PAGO, BUT NOT THE REGISTRATION AND
OTHER EXPENSES INCURRED IN THE ISSUANCE OF NEW CERTIFICATES OF
TITLE. — Petitioner is right in its observation that the Court of Appeals' inclusion of
registration fees, real estate and documentary stamp taxes and other incidental
SALES 7 (FINALS)
expenses incurred by State Financing in the transfer and registration of its ownership
(of the subject properties) via dacion en pago was vague, if not erroneous, considering
that such transfer and issuance of the new titles were null and void. Thus, the
redemption price shall include only those expenses relating to the registration of
the dacion en pago, but not the registration and other expenses incurred in the issuance
of new certificates of title in the name of State Financing.
6. ID.; DAMAGES; FAILURE OR RESPONDENT TO OBSERVE THE PROPER
PROCEDURE IN EFFECTING THE CONSOLIDATION OF TITLES DOES NOT
AUTOMATICALLY ENTITLE PETITIONER TO DAMAGES ABSENT CONVINCING
PROOF OF MALICE AND BAD FAITH. — The only legal transgression of State
Financing was its failure to observe the proper procedure in effecting the consolidation
of the titles in its name. But this does not automatically entitle the petitioner to damages
absent convincing proof of malice and bad faith on the part of private respondent and
actual damages suffered by petitioner as a direct and probable consequence thereof.
In fact, the evidence proffered by petitioner consist of mere conjectures and
speculations with no factual moorings. Furthermore, such transgression was addressed
by the lower courts when they nullified the consolidation of ownership over the subject
properties in the name of respondent corporation, because it had been effected in
contravention of the provisions of Article 1607 of the Civil Code. Such rulings are
consistent with law and jurisprudence.
7. ID.; ID.; A CORPORATION, BEING AN ARTIFICIAL PERSON, IS NOT ENTITLED
TO MORAL DAMAGES. — Time and again, we have held that a corporation — being
an artificial person which has no feelings, emotions or senses, and which cannot
experience physical suffering or metal anguish — is not entitled to moral damages.
8. ID.; ID.; WHEN NO RIGHT WAS VIOLATED OR INVADED BY RESPONDENT,
NOMINAL DAMAGES CANNOT BE AWARDED. — Nominal damages are adjudicated
in order that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him. As elaborated above and in the decisions of the two lower
courts, no right of petitioner was violated or invaded by respondent corporation.
DECISION
PANGANIBAN, J p:
Is the failure to annotate the vendor a retro's right of repurchase in the certificates of
title of the real estate properties subject of dacion en pagoconclusive evidence of the
vendee a retro's malice and bad faith, entitling the former to damages? In a sale
with pacto de retro, is the repurchase price limited by Article 1616 of the Civil Code?
These are the basic questions raised in this petition for review on certiorari under Rule
45 of the Rules of Court assailing the Court of Appeals 1Decision 2 promulgated on
April 25, 1994 and Resolution 3 of September 26, 1994 in CA-G.R. CV No. 39154,
affirming the decision 4 of the Regional Trial Court of Pasig, Branch 157 in Civil
Case No. 51214. The said RTC decision sustained the validity of the subject dacion en
pago agreement and declared the same as "a true sale with right of repurchase."
The Facts
The facts of the case as narrated by the trial court and reproduced in the assailed
Decision of the Court of Appeals are undisputed by the parties. These are the relevant
portions:
"It appears that on June 4, 1979, Solid Homes executed in favor
of State Financing (Center, Inc.) a Real Estate Mortgage (Exhibit
'3') on its properties embraced in Transfer Certificate of Title No.
9633 (Exhibit '9') and Transfer Certificate of Title No. (492194)-
11938 (Exhibit '8') of the Registry of Deeds in Pasig, Metro Manila,
in order to secure the payment of a loan of P10,000,000.00 which
the former obtained from the latter. A year after, Solid Homes
applied for and was granted an additional loan of P1,511,270.03
by State Financing, and to secure its payment, Solid Homes
executed the Amendment to Real Estate Mortgage dated June 4,
1980 (Exhibit '4') whereby the credits secured by the first mortgage
on the abovementioned properties were increased from
P10,000,000.00 to P11,511,270.03. Sometime thereafter, Solid
Homes obtained additional credits financing facilities from Estate
Financing in the sum of P1,499,811.97, and to secure its payment,
Solid Homes executed in favor of State Financing the Amendment
to Real Estate Mortgage dated March 5, 1982 (Exhibit '5') whereby
the mortgage executed on its properties on June 4, 1979 was
again amended so that the loans or credits secured thereby were
further increased from P11,511,270.03 to P13,011,082.00.
"When the loan obligations abovementioned became due and
payable, State Financing made repeated demands upon Solid
Homes for payment thereof, but the latter failed to do so. So, on
December 16, 1982, State Financing filed a petition for
extrajudicial foreclosure of the mortgages abovementioned with
the Provincial Sheriff of Rizal, who, in pursuance of the petition,
issued a Notice of Sheriff's Sale dated February 4, 1983 (Exhibit
'6') whereby the mortgaged properties of Solid Homes and the
improvements existing thereon, including the V.V. Soliven Towers
II Building, were set for public auction sale on March 7, 1983 in
order to satisfy the full amount of Solid Homes' mortgage
indebtedness, the interest thereon, and the fees and expenses
incidental to the foreclosure proceedings.
"Before the scheduled public auction sale . . ., the mortgagor Solid
Homes made representations and induced State Financing to
forego with the foreclosure of the real estate mortgages referred to
above. By reason thereof, State Financing agreed to suspend the
foreclosure of the mortgaged properties, subject to the terms and
SALES 7 (FINALS)
conditions they agreed upon, and in pursuance of their said
agreement, they executed a document entitled MEMORANDUM
OF AGREEMENT/DACION EN PAGO ('Memorandum') dated
February 28, 1983 (Exhibits 'C' and '7') . . .. Among the terms and
conditions that said parties agreed upon were . . . :
'1. (Solid Homes) acknowledges that it has an outstanding
obligation due and payable to (State Financing) and binds
and obligates to pay (State Financing) the totality of its
outstanding obligations in the amount of P14,225,178.40,
within one hundred eighty (180) days from date of signing
of this instrument. However, it is understood and agreed
that the principal obligation of P14,225,178.40 shall earn
interest at the rate of 14% per annum and penalty of 16%
per annum counted from March 01, 1983 until fully paid.
'2. The parties agreed that should (Solid Homes) be able to pay
(State Financing) an amount equivalent to sixty per
centum (60%) of the principal obligation, or the amount of
P8,535,107.04, within the first one hundred eighty (180)
days, (State Financing) shall allow the remaining
obligation of (Solid Homes) to be mutually agreed
between the parties.
'3. It is hereby understood and agreed that in the event (Solid
Homes) fails to comply with the provisions of the
preceding paragraphs, within the said period of one
hundred eighty (180) days, this document shall
automatically operate to be an instrument of dacion en
pago without the need of executing any document to such
an effect and (Solid Homes) hereby obligates and binds
itself to transfer, convey and assign to (State Financing),
by way of dacion en pago, its heirs, successors and
assigns, and (State Financing) does hereby accept the
conveyance and transfer of the above-described real
properties, including all the improvements thereon, free
from all liens and encumbrances, in full payment of the
outstanding indebtedness of (Solid Homes) to (State
Financing) . . .
xxx xxx xxx
'6. (State Financing) hereby grants (Solid Homes) the right to
repurchase the aforesaid real properties, including the
condominium units and other improvements thereon,
within ten (10) months counted from and after the one
hundred eighty (180) days from date of signing hereof at
an agreed price of P14,225,178.40, or as reduced
pursuant to par. 5 (d), plus all cost of money equivalent
to 30% per annum, registration fees, real estate and
documentary stamp taxes and other incidental expenses
incurred by (State Financing) in the transfer and
registration of its ownership via dacion en pago . . .'
xxx xxx xxx
"Subsequently, Solid Homes failed to pay State Financing an
amount equivalent to 60% (or P8,535,107.04) of the principal
obligation of P14,225,178.40 within 180 days from the signing of
the (Memorandum) on February 28, 1983, as provided under
paragraph 2 of the said document. Hence, and in pursuance of
paragraph 3 thereof which provided that 'this document shall
automatically operate to be an instrument of dacion en pago
without the need of executing any document to such an effect . . .
(,)' State Financing registered the said (Memorandum) with the
Register of Deeds in Pasig, Metro Manila on September 15, 1983.
Consequently, the said Register of Deeds cancelled TCT No. 9633
and TCT No. (492194) 11938 in the name of Solid Homes which
were the subject matter of the (Memorandum) above mentioned,
and in lieu thereof, the said office issued Transfer Certificate of
Title No. 40533 (Exhibits 'J' and '11') and Transfer Certificate of
Title No. 40534 (Exhibits 'K' and '12') in the name of State
Financing. . . .
"In a letter dated October 11, 1983 (Exhibit '16'), State Financing
informed Solid Homes of the transfer in its name of the titles to all
the properties subject matter of the (Memorandum) and demanded
among other things, that Solid Homes turn over to State Financing
the possession of the V.V. Soliven Towers II Building erected on
two of the said properties. Solid Homes replied with a letter dated
October 14, 1983, (Exhibit '20') asking for a period of ten (10) days
within which to categorize its position on the matter; and in a
subsequent letter dated October 24, 1983, Solid Homes made
known to State Financing its position that the (Memorandum) is
null and void because the essence thereof is that State Financing,
as mortgagee creditor, would be able to appropriate unto itself the
properties mortgaged by Solid Homes which is in contravention of
Article 2088 of the Civil Code. State Financing then sent to Solid
Homes another letter dated November 3, 1983 (Exhibit '17'),
whereby it pointed out that Art. 2088 of the Civil Code is not
applicable to the (Memorandum) they have executed, and also
reiterated its previous demand that Solid Homes turn over to it the
possession of the V.V. Soliven Towers II Building within five (5)
days, but Solid Homes did not comply with the said demand.
". . . and within that period of repurchase, Solid Homes wrote to
State Financing a letter dated April 30, 1984 containing its
proposal for repayment schemes under terms and conditions
indicated therein for the repurchase of the properties referred to.
In reply to said letter, State Financing sent a letter dated May 17,
1984 (Exhibit '18') advising Solid Homes that State Financing's
management was not amenable to its proposal, and that by way of
SALES 7 (FINALS)
granting it some concessions, said management made a counter-
proposal requiring Solid Homes to make an initial payment of P10
million until 22 May 1984 and the balance payable within the
remaining period to repurchase the properties as provided for
under the (Memorandum) . . . Thereafter, a number of conferences
were held among the corporate officers of both companies wherein
they discussed the payment arrangement of Solid Home's
outstanding obligation. . . . In a letter dated June 7, 1984 (Exhibit
'19'), State Financing reiterated the counter-proposal in its
previous letter dated May 17, 1984 to Solid Homes as a way of
making good its account, and at the same time reminded Solid
Homes that it has until 27 June 1984 to exercise its right to
repurchase the properties pursuant to the terms and conditions of
the (Memorandum), otherwise, it will have to vacate and turn over
the possession of said properties to State Financing. In return,
Solid Homes sent to State Financing a letter dated June 18, 1984
(Exhibits 'N' and '22') containing a copy of the written offer made
by C.L. Alma Jose & Sons, Inc. (Exhibits 'M' and '22-A') to avail of
Solid Homes' right to repurchase the V.V. Soliven Towers II
pursuant to the terms of the Dacion En Pago. The letter also
contained a request that the repurchase period under said Dacion
En Pago which will expire on June 27, 1984 be extended by sixty
(60) days to enable Solid Homes to comply with the conditions in
the offer of Alma Jose & Sons, Inc. referred to, and thereafter, to
avail of the one year period to pay the balance based on the verbal
commitment of State Financing's President. . . .
"However. on June 26, 1984, a day before the expiry date of its
right to repurchase the properties involved in the (Memorandum)
on June 27, 1984, Solid Homes filed the present action against
defendants State Financing and the Register of Deeds for Metro
Manila District II (Pasig), seeking the annulment of said
(Memorandum) and the consequent reinstatement of the
mortgages over the same properties; . . ." 5
As earlier stated, the trial court held that the Memorandum of Agreement/Dacion En
Pago executed by the parties was valid and binding, and that the registration of said
instrument in the Register of Deeds was in accordance with law and the agreement of
the parties. It disposed of the case thus:
"WHEREFORE, this Court hereby renders judgment, as follows:
"1. Declaring that the Memorandum of Agreement/Dacion En Pago
entered into by and between plaintiff Solid Homes and defendant
State Financing on February 28, 1983 is a valid and binding
document which does not violate the prohibition against pactum
commisorium under Art. 2088 of the Civil Code;
"2. Declaring that the said Memorandum of Agreement/Dacion En
Pago is a true sale with right of repurchase, and not an equitable
mortgage;
"3. Declaring that the registration of the said Memorandum of
Agreement/Dacion En Pago with the defendant Register of Deeds
in Pasig, Metro Manila by defendant State Financing on
September 15, 1983 is in accordance with law and the agreement
of the parties in the said document; but the annotation of the said
document by the said Register of Deeds on the certificates of title
over the properties subject of the Memorandum of
Agreement/Dacion En Pago without any mention of the right of
repurchase and the period thereof, is improper, and said Register
of Deeds' cancellation of the certificates of title in the name of Solid
homes over the properties referred to and issuance of new titles in
lieu thereof in the name of State Financing — during the period of
repurchase and without any judicial order — is in violation of Art.
1607 of the Civil Code, which renders said titles null and void;
"4. Ordering the defendant State Financing to surrender to the
defendant Register of Deeds in Pasig, Metro Manila for the
cancellation thereof, all the certificates of title issued in its name
over the properties subject of the Memorandum of
Agreement/Dacion En Pago, including those titles covering the
fully paid condominium units and the substitute collateral
submitted in exchange for said condominium units;
"5. Ordering the said defendant Register of Deeds to cancel all the
titles in the name of State Financing referred to and to reinstate
the former titles over the same properties in the name of Solid
Homes, with the proper annotation thereon of the Memorandum of
Agreement/Dacion En Pago together with the right of repurchase
and the period thereof — as provided in said document — and to
return the said reinstated former titles (owner's copies) in the name
of Solid Homes to State Financing;
"6. Ordering the defendant State Financing to release to plaintiff
Solid Homes all the certificates of title over the fully paid
condominium units in the name of Solid Homes, free from all liens
and encumbrances by releasing the mortgage thereon;
"7. Granting the plaintiff Solid Homes the opportunity to exercise
its right to repurchase the properties subject of the Memorandum
of Agreement/Dacion En Pago within thirty (30) days from the
finality of this Decision, by paying to defendant State Financing the
agreed price of P14,225,178.40 plus all cost of money equivalent
to 30 % (interest of 14% and penalty of 16% from March 1, 1983)
per annum, registration fees, real estate and documentary stamp
taxes and other incidental expenses incurred by State Financing
in the transfer and registration of its ownership via the Dacion En
Pago, as provided in the said document and in pursuance of
Articles 1606 and 1616 of the Civil Code; and
SALES 7 (FINALS)
"8. Ordering the defendant Register of Deeds in Pasig, Metro
Manila — should plaintiff Solid Homes fail to exercise the above-
mentioned right to repurchase within 30 days from the finality of
this judgment — to record the consolidation of ownership in State
Financing over the properties subject of the Memorandum of
Agreement/Dacion En Pago in the Registry of Property, in
pursuance of this Order, but excluding therefrom the fully paid
condominium units and their corresponding titles to be released by
State Financing.
"For lack of merit, the respective claims of both parties for
damages, attorney's fees, expenses of litigation and costs of suit
are hereby denied." 6
Both parties appealed from the trial court's decision. Solid Homes raised a lone
question contesting the denial of its claim for damages. Such damages allegedly
resulted from the bad faith and malice of State Financing in deliberately failing to
annotate Solid Homes' right to repurchase the subject properties in the former's
consolidated titles thereto. As a result of the non-annotation, Solid Homes claimed to
have been prevented from generating funds from prospective buyers to enable it to
comply with the Agreement and to redeem the subject properties. LexLib
State Financing, on the other hand, assigned three errors against the RTC decision:
(1) granting Solid Homes a period of thirty (30) days from finality of the judgment within
which to exercise its right of repurchase; (2) ordering Solid Homes to pay only 30% per
annum as interest and penalty on the principal obligation, rather than reasonable rental
value from the time of the properties was illegally withheld from State Financing; and
(3) failing to order the immediate turnover of the possession of the properties to State
Financing as the purchaser a retro from whom no repurchase has been made.
As to the lone issue raised by Solid Homes, the court of Appeals agreed with the trial
court that the failure to annotate the right of repurchase of the vendor a retro is not by
itself an indication of bad faith or malice. State Financing was not legally bound to cause
its annotation, and Solid Homes could have taken steps to protect its own interests.
The evidence shows that after such registration and transfer of titles, State Financing
willingly negotiated with Solid Homes to enable the latter to exercise its right to
repurchase the subject properties, 7 an act that negates bad faith.
Anent the first error assigned by State financing, Respondent Court likewise upheld the
trial court in applying Article 1606, paragraph 3 8 of the Civil Code. Solid Homes was
not in bad faith in filling the complaint for the declaration of nullity of the Memorandum
of Agreement/Dacion En Pago. There is statutory basis for petitioner's claim that an
equitable mortgage existed since it believed that (1) the price of P14 million was grossly
inadequate, considering that the building alone was allegedly built at a cost of P60
million in 1979 and the lot was valued at P5,000.00 per square meter and (2) it remained
in possession of the subject properties. 9 Furthermore, Article 1607 10 of the Civil Code
abolished automatic consolidation of ownership in the vendee a retro upon expiration
of the redemption by requiring the vendee to insure an action for consolidation where
the vendor a retro may be duly heard. If the vendee succeeds in proving that the
transaction was indeed a pacto de retro, the vendor is still given a period of thirty days
from the finality of the judgment within which to repurchase the property. 11
Respondent Court also affirmed the trial court's imposition of the 30% interest per
annum on top of the redemption price in accordance with paragraph 6 of the parties'
Memorandum of Agreement. 12
However, Respondent Court of Appeals ruled favorably on State Financing's last
assigned error by ordering Solid Homes to deliver possession of the subject properties
to the private respondent, citing jurisprudence that in a sale with pacto de retro, the
vendee shall immediately acquire title over and possession of the real property sold,
subject only to the vendor's right of redemption. 13 The full text of the dispositive portion
of the assailed Decision is as follows:
"WHEREFORE, the judgment appealed from is affirmed with the
modification that plaintiff Solid Homes is further ordered to deliver
the possession of the subject property to State Financing." 14
The two opposing parties filed their respective motions for reconsideration of the
assailed Decision. Both were denied by said Court for lack of merit. Both parties
thereafter filed separate petitions for review before this Court. In a minute
Resolution 15 dated December 5, 1994, this Court (Third Division) denied State
Financing Center's petition because of its failure to show that a reversible error was
committed by the appellate court. Its motion for reconsideration of said resolution was
likewise denied for lack of merit. This case disposes only of the petition filed by Solid
Homes, Inc.
Issues
In its petition, Solid Homes repeats its arguments before the Court of Appeals. It claims
damages allegedly arising from the non-annotation of its right of repurchase in the
consolidated titles issued to private respondent. Petitioner reiterates its attack against
the inclusion of 30% interest per annum as part of the redemption price. It asserts
that Article 1616 of the Civil Code authorizes only the return of the (1) price of the sale,
(2) expenses of the contract and any other legitimate payments by reason of the sale
and (3) necessary and useful expenses made on the thing sold. Considering that the
transfer of titles was null and void, it was thus erroneous to charge petitioner the
registration fees, documentary stamp taxes and other incidental expenses incurred by
State Financing in the transfer and registration of the subject properties via the dacion
en pago. Lastly, petitioner argues that there is no need for the immediate turnover of
the properties to State Financing since the same was not stipulated under their
Agreement, and the latter's rights were amply protected by the issuance of new
certificates of title in its name.
The Court's Ruling
First Issue: Damages
To resolved the issue of damages, an examination of factual circumstances would be
necessary, a task that is clearly beyond this Court's dominion. It is elementary that in
petitions for review on certiorari, only questions of law may be brought by the parties
and passed upon by this Court. Findings of fact of lower courts are deemed conclusive
and binding upon the Supreme Court except when the findings are grounded on
speculation, surmises or conjectures; when the inference made is manifestly mistaken,
absurd or impossible; when there is a grave abuse of discretion in the appreciation of
facts; when the factual findings of the trial and appellate courts are conflicting; when
SALES 7 (FINALS)
the Court of Appeals, in making its findings, has gone beyond the issues of the case
and such findings are contrary to the admissions of both appellant and
appellee; 16 when the judgment of the appellate court is premised on a
misapprehension of facts or when it has failed to notice certain relevant facts which, if
properly considered, will justify a different conclusions; when the findings of fact are
conclusions without citation of specific evidence upon which they are based; and when
findings of fact of the Court of Appeals are premised on the absence of evidence but
are contradicted by the evidence on records. 17
The petitioner has not shown any — and indeed the Court finds none — of the above-
mentioned exceptions to warrant a departure from the general rule.
In fact, petitioner has not even bothered to support with evidence its claim for "actual,
moral and punitive/nominal damages" as well as "exemplary damages and attorney's
fees." It is basic that the claim for these damages must each be independently identified
and justified; such claims cannot be dealt with in the aggregate, since they are neither
kindred or analogous nor governed by a coincident set of rules. 18
The trial court found, and the Court of Appeals affirmed, that petitioner's actual claim
for actual damages was baseless. Solid Homes utterly failed to prove that respondent
corporation had maliciously and in bad faith caused the non-annotation of petitioner's
right of repurchase so as to prevent the latter from exercising such right. On the
contrary, it is admitted by both parties that State Financing informed petitioner of the
registration with the Register of Deeds of Pasig of their Memorandum of
Agreement/Dacion en Pago and the issuance of new certificate of title in the name of
the respondent corporation. Petitioner exchanged communications and held
conferences with private respondent in order to draw a mutually acceptable payment
arrangement for the former's repurchase of the subject properties. A written offer from
another corporation alleging willingness to avail itself of petitioner's right of repurchase
was even attached to one of these communications. Clearly, petitioner was not
prejudiced by the non-annotation of such right in the certificates of titles issued in the
name of State Financing. Besides, as the Court of Appeals noted, it was not the function
of respondent corporation to cause said annotation. It was equally the responsibility of
petitioner to protect its own rights by making sure that its right of repurchase was indeed
annotated in the consolidated titles of private respondent.
The only legal transgression of State Financing was its failure to observe the proper
procedure in affecting the consolidation of the titles in its name. But this does not
automatically entitle the petitioner to damages absent convincing proof of malice and
bad faith 19 on the part of private respondent and actual damages suffered by petitioner
as a direct and probable consequence thereof. In fact, the evidence proffered by
petitioner consist of mere conjectures and speculations with no factual moorings.
Furthermore, such transgression was addressed by the lower courts when they nullified
the consolidation of ownership over the subject properties in the name of respondent
corporations, because it had been effected in contravention of the provisions of Article
1607 20 of the Civil Code. Such rulings are consistent with law and jurisprudence.
Neither can moral damages be awarded to petitioner. Time and again, we have held
that a corporation — being an artificial person which has nofeelings, emotions or
senses, and which cannot experience physical suffering or mental anguish — is not
entitled to moral damages. 21
While the amount of exemplary damages need not be proved, petitioner must show
that he is entitled to moral or actual damages; 22 but the converse obtains in the instant
case. Award of attorney's fees is likewise not warranted when moral damages are
eliminated and entitlement thereto is not demonstrated by the claimant. 23
Lastly, "(n)ominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him." 24 As
elaborated above and in the decisions of the two lower courts, no right of petitioner was
violated or invaded by respondent corporation.
Second Issue: Redemption Price
Another fundamental principle of procedural law precludes higher courts from
entertaining matters neither alleged in the pleadings nor raised during the proceedings
below, but ventilated for the first time only in a motion for reconsideration or on
appeal. 25 On appeal, only errors specially assigned and properly argued in the brief
will be considered, with the exception of those affecting jurisdiction over the subject
matter as well as plain and clerical errors. 26
As stated earlier, the single issue raised by petitioner in its appeal of the RTC decision
to the Court of Appeals concerned only the denial of its claim for damages. Petitioner
succinctly stated such issue in its brief as follows:
"I. LONE ASSIGNMENT OF ERROR
"The trial court erred in that after having found that the registration
of the Memorandum of Agreement/Dacion en Pago on September
15, 1983 [and the consequent cancellation of the titles of plaintiff-
appellant Solid Homes, Inc. and issuance in lieu thereof of titles to
defendant-appellant State Financing Center, Inc. (SFCI) was null
and void because of failure to duly annotate the right to repurchase
granted to plaintiff-appellant Solid Homes, Inc. under par. 6 thereof
still then subsisting up to June 28, 1984 and the failure to comply
with the provisions of Art. 1607, Civil Code . . .
"I[t] nonetheless did not rule that such irregular registration unduly
deprived plaintiff-appellant Solid Homes, Inc. of its right of
repurchase and that it further erred in not having declared that
defendant-appellant SFCI liable in favor of said plaintiff-appellant
for damages." 27
Petitioner is thus barred from raising a new issue in its appeal before this Court.
Nevertheless, in the interest of substantial justice, we now resolve the additional
question posed with respect to the composition of the redemption price prescribed by
the trial court and affirmed by the Court of Appeals, as follows:
"7. Granting the plaintiff Solid Homes the opportunity to exercise
its right to repurchase the properties . . . by paying to defendant
State Financing the agreed price of P14,225,178.40 plus all cost
SALES 7 (FINALS)
of money equivalent to 30% (interest of 14% and penalty of 16%
from March 1, 1983) per annum, registration fees, real estate and
documentary stamp taxes and other incidental expenses incurred
by State Financing in the transfer and registration of its ownership
via the Dacion En Pago, as provided in the said document and in
pursuance of Article 1606 and 1616 of the Civil Code." 28
Petitioner argues that such total redemption price is in contravention of Art. 1616 of the
Civil Code. We do not, however, find said legal provision to be restrictive or exclusive,
barring additional amount that the parties may agree upon. Said provision should be
construed together with Art. 1601 of the same Code which provides as follows:
"Art. 1601. Conventional redemption shall take place when the
vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of article 1616 and other
stipulations may have been agreed upon." (emphasis supplied)
It is clear, therefore, that the provisions of Art. 1601 require petitioner to "comply with .
. . the other stipulations" of the Memorandum of Agreement/Dacion en Pago it freely
entered into with private respondent. The said Memorandum's provision on redemption
states:
"6. The FIRST PARTY (State Financing) hereby grants the
SECOND PARTY (Solid Homes) the right to repurchase the
aforesaid real properties, including the condominium units and
other improvements thereon, within ten (10) months counted from
and after the one hundred eighty (180) days from date of signing
hereof at an agreed price of P14, 225,178.40, or as reduced
pursuant to par. 5 (d), plus all cost of money equivalent to 30% per
annum, registration fees, real estate and documentary stamp
taxes and other incidental expenses incurred by the FIRST PARTY
(State Financing) in the transfer and registration of its ownership
via dacion en pago . . ." 29 (emphasis supplied)
Contracts have the force of law between the contracting parties who may establish such
stipulations, clauses, terms and conditions as they may want, subject only to the
limitation that their agreements are not contrary to law, morals, customs, public policy
or public order 30 — and the above-quoted provision of the Memorandum does not
appear to be so.
Petitioner, however, is right in its observation that the Court of Appeal's inclusion of
"registration fees, real estate and documentary stamp taxes and other incidental
expenses incurred by State Financing in the transfer and registration of its ownership (
of the subject properties) via dacion en pago" was vague, if not erroneous, considering
that such transfer and issuance of the new titles were null and void. Thus, the
redemption price shall include only those expenses relating to the registration of
the dacion en pago, but not the registration and other expenses incurred in the issuance
of new certificates of title in the name of State Financing.
Possession of the Subject Properties
During the Redemption Period
The Court of Appeals Decision modified that of the trial court only insofar as it ordered
petitioner to deliver possession of the subject properties to State Financing, the
vendee a retro. We find no legal error in this holding. In a contract of sale with pacto de
retro, the vendee has a right to the immediate possession of the property sold, unless
otherwise agreed upon. It is basic that in a pacto de retro sale, the title and ownership
of the property sold are immediately vested in the vendee a retro, subject only to the
resolutory condition of repurchase by the vendor a retro within the stipulated period. 31
WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED
with the MODIFICATION that the redemption price shall not include the registration and
other expenses incurred by State Financing Center, Inc. in the issuance of new
certificates of title in its name, as this was done without the proper judicial order required
under Article 1607 of the Civil Code.
SO ORDERED.
||| (Solid Homes, Inc. v. Court of Appeals, G.R. No. 117501, [July 8, 1997], 341 PHIL
261-281)
9. PRIMARY SRUCTURES CORP. VS. VALENCIA, GR NO. 150060, AUGUST
19, 2003
[G.R. No. 150060. August 19, 2003.]
PRIMARY STRUCTURES CORP. represented herein by its
President ENGR. WILLIAM C. LIU, petitioner, vs. SPS.
ANTHONY S. VALENCIA and SUSAN T.
VALENCIA, respondents.
Jose M Perez for petitioner.
Petronio V. Elesterio for private respondents.
SYNOPSIS
Petitioner is the registered owner of Lot 4523. Adjacent thereto are parcels of land
identified as Lots no. 4527, 4528 and 4529, which were sold by owner Mendoza to
respondent spouses in December 1994. When petitioner learned of the sale in January
1996, it signified its intention to redeem the lots, invoking the right afforded under
Articles 1621 and 1623 of the Civil Code. Respondent spouses, however, refused to
sell.
The Court upheld the right of petitioner and gave it 30 days from finality of the Court's
decision to exercise its right of legal redemption. The trial court found the adjacent lots
involved to be rural lands. There was no evidence to show that respondents are not
themselves owners of rural lands for the exclusionary clause under Art. 1621 of the
Civil Code to apply. As to the requirement that the right of redemption shall not be
SALES 7 (FINALS)
exercised except within 30 days from notice in writing by the prospective vendor, the
Court ruled that there was no sufficient evidence for the compliance of the obligatory
written notice. prescribed by the New Civil Code.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALES; EXTINGUISHMENT OF SALE;
LEGAL REDEMPTION; BY OWNERS OF ADJOINING LOTS; REQUIREMENTS;
THAT ADJACENT LOTS ARE BOTH RURAL LANDS. — Whenever a piece of rural
land not exceeding one hectare is alienated, the law grants to the adjoining owners a
right of redemption except when the grantee or buyer does not own any other rural
land. In order that the right may arise, the land sought to be redeemed and the adjacent
property belonging to the person exercising the right of redemption must both be rural
lands. If one or both are urban lands, the right cannot be invoked. Here, the one or both
are urban lands, the right cannot be invoked. Here, the trial court found the lots involved
to be rural lands and respondents did not dispute it before the Court of Appeals.
2. ID.; ID.; ID.; ID.; ID.; ID.; EXCEPTION; WHEN BUYER DOES NOT OWN ANY
OTHER RURAL LAND. — Article 1621 of the Civil Code expresses that the right of
redemption it grants to an adjoining owner of the property conveyed may be defeated
if it can be shown that the buyer or grantee does not own any other rural land. The
appellate court, sustaining the trial court, has said that there has been no evidence
proffered to show that respondents are not themselves owners of rural lands for the
exclusionary clause of the law to apply.
3. ID.; ID.; ID.; ID.; ID.; ID.; MUST BE EXERCISED WITHIN 30 DAYS FROM NOTICE
IN WRITING BY VENDOR; AFFIDAVIT OF VENDOR TO THAT EFFECT BEFORE
SALE RECORDED IN THE REGISTRY OF PROPERTY, NOT SUFFICIENT. — Article
1623 of the Civil Code provides that the right of legal pre-emption or redemption shall
not be exercised except within thirty days from notice in writing by the prospective
vendor, or by the vendor, as the case may be. In stressing the mandatory character of
the requirement, the law states that the deed of sale shall not be recorded in the
Registry of Property unless the same is accompanied by an affidavit of the vendor that
he has given notice thereof to all possible redemptioners. The Court of Appeals has
equated the statement in the deed of sale to the effect that the vendors have complied
with the provisions of Article 1623 of the Civil Code, as being the written affirmation
under oath, as well as the evidence, that the required written notice to petitioner under
Article 1623 has been met. Respondents, like the appellate court, overlook the fact that
petitioner is not a party to the deed of sale between respondents and Mendoza and has
had no hand in the preparation and execution of the deed of sale. It could not thus be
considered a binding equivalent of the obligatory written notice prescribed by the Code.
DECISION
VITUG, J p:
On appeal is the decision of the Court of Appeals in CA-G.R. CV No. 59960,
promulgated on 13 February 2001, which has affirmed in toto the decision of the
Regional Trial Court of Cebu City dismissing the complaint of petitioners for legal
redemption over certain rural lots sold to respondents.
Petitioner is a private corporation based in Cebu City and the registered owner of Lot
4523 situated in Liloan, Cebu, with an area of 22,214 square meters. Adjacent to the
lot of petitioner are parcels of land, identified to be Lot 4527, Lot 4528, and Lot 4529
with a total combined area of 3,751 square meters. The three lots, aforenumbered,
have been sold by Hermogenes Mendoza to respondent spouses sometime in
December 1994. Petitioner learned of the sale of the lots only in January, 1996, when
Hermogenes Mendoza sold to petitioner Lot No. 4820, a parcel also adjacent to Lot
4523 belonging to the latter. Forthwith, it sent a letter to respondents, on 30 January
1996, signifying its intention to redeem the three lots. On 30 May 1996, petitioner sent
another letter to respondents tendering payment of the price paid to Mendoza by
respondents for the lots. Respondents, in response, informed petitioner that they had
no intention of selling the parcels. Thereupon, invoking the provisions of Articles 1621
and 1623, petitioner filed an action against respondents to compel the latter to allow
the legal redemption. Petitioner claimed that neither Mendoza, the previous owner, nor
respondents gave formal or even just a verbal notice of the sale of the lots as so
required by Article 1623 of the Civil Code.
After trial, the Regional Trial Court of Cebu dismissed petitioner's complaint and
respondents' counterclaim; both parties appealed the decision of the trial court to the
Court of Appeals. The appellate court affirmed the assailed decision.
Basically, the issues posed for resolution by the Court in the instant petition focus on
the application of Article 1621 and Article 1623 of the Civil Code, which read:
"ART. 1621. The owners of adjoining lands shall also have the right
of redemption when a piece of rural land, the area of which does
not exceed one hectare, is alienated unless the grantee does not
own any rural land.
"This right is not applicable to adjacent lands which are separated
by brooks, drains, ravines, roads and other apparent servitudes for
the benefit of other estates.
"If two or more adjoining owners desire to exercise the right of
redemption at the same time, the owner of the adjoining land of
smaller area shall be preferred; and should both lands have the
same area, the one who first requested the redemption."
"ART. 1623. The right of legal pre-emption or redemption shall not
be exercised except within thirty days from the notice in writing by
the prospective vendor, or by the vendor, as the case may be. The
deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
SALES 7 (FINALS)
"The right of redemption of co-owners excludes that of adjoining
owners."
Whenever a piece of rural land not exceeding one hectare is alienated, the law grants
to the adjoining owners a right of redemption except when the grantee or buyer does
not own any other rural land. 1 In order that the right may arise, the land sought to be
redeemed and the adjacent property belonging to the person exercising the right of
redemption must both be rural lands. If one or both are urban lands, the right cannot
be invoked. 2
The trial court found the lots involved to be rural lands. Unlike the case of Fabia vs.
Intermediate Appellate Court 3 (which ruled, on the issue of whether a piece of land
was rural or not, that the use of the property for agricultural purpose would be essential
in order that the land might be characterized as rural land for purposes of legal
redemption), respondents in the instant case, however, did not dispute before the Court
of Appeals the holding of the trial court that the lots in question are rural lands. In failing
to assail this factual finding on appeal, respondents would be hardput to now belatedly
question such finding and to ask the Court to still entertain that issue.
Article 1621 of the Civil Code expresses that the right of redemption it grants to an
adjoining owner of the property conveyed may be defeated if it can be shown that the
buyer or grantee does not own any other rural land. The appellate court, sustaining the
trial court, has said that there has been no evidence proffered to show that respondents
are not themselves owners of rural lands for the exclusionary clause of the law to apply.
With respect to the second issue, Article 1623 of the Civil Code provides that the right
of legal pre-emption or redemption shall not be exercised except within thirty days from
notice in writing by the prospective vendor, or by the vendor, as the case may be. In
stressing the mandatory character of the requirement, the law states that the deed of
sale shall not be recorded in the Registry of Property unless the same is accompanied
by an affidavit of the vendor that he has given notice thereof to all possible
redemptioners.
The Court of Appeals has equated the statement in the deed of sale to the effect that
the vendors have complied with the provisions of Article 1623 of the Civil Code, as
being the written affirmation under oath, as well as the evidence, that the required
written notice to petitioner under Article 1623 has been met. Respondents, like the
appellate court, overlook the fact that petitioner is not a party to the deed of sale
between respondents and Mendoza and has had no hand in the preparation and
execution of the deed of sale. It could not thus be considered a binding equivalent of
the obligatory written notice prescribed by the Code.
In Verdad vs. Court of Appeals 4 this court ruled:
"We hold that the right of redemption was timely exercised by
private respondents. Concededly, no written notice of the sale was
given by the Burdeos heirs (vendors) to the co-owners required
under Article 1623 of the Civil Code —
"xxx xxx xxx
Hence, the thirty-day period of redemption had yet to commence
when private respondent Rosales sought to exercise the right of
redemption on 31 March 1987, a day after she discovered the sale
from the Office of the City Treasurer of Butuan City, or when the
case was initiated, on 16 October 1987, before the trial court.
"The written notice of sale is mandatory. This Court has long
established the rule that notwithstanding actual knowledge of a co-
owner, the latter is still entitled to a written notice from the selling
co-owner in order to remove all uncertainties about the sale, its
terms and conditions, as well as its efficacy and status.
"Even in Alonzo vs. Intermediate Appellate Court (150 SCRA 259),
relied upon by petitioner in contending that actual knowledge
should be an equivalent to a written notice of sale, the Court made
it clear that it was not reversing the prevailing jurisprudence; said
the Court:
"'We realize that in arriving at our conclusion today, we
are deviating from the strict letter of the law, which the
respondent court understandably applied pursuant to
existing jurisprudence. The said court acted properly as it
had no competence to reverse the doctrines laid down by
this Court in the above-cited cases. In fact, and this
should be clearly stressed, we ourselves are not
abandoning the De Conejero and Buttle doctrines. What
we are doing simply is adopting an exception to the
general rule, in view of the peculiar circumstances of this
case.'
"In Alonzo, the right of legal redemption was invoked several
years, not just days or months, after the consummation of the
contracts of sale. The complaint for legal redemption itself was
there filed more than thirteen years after the sales were
conducted." 5
WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court
of Appeals is REVERSED and SET ASIDE. Petitioner is hereby given a period of thirty
days from finality of this decision within which to exercise its right of legal redemption.
No costs.
SO ORDERED.
||| (Primary Structures Corp. v. Spouses Valencia, G.R. No. 150060, [August 19, 2003],
456 PHIL 649-654)
SALES 7 (FINALS)
10. ETCUBAN VS. CA, 148 SCRA 507
[G.R. No. L-45164. March 16, 1987.]
DOMINICO ETCUBAN, petitioner, vs. THE HONORABLE COURT OF
APPEALS, JESUS C. SONGALIA & GUADALUPE S.
SONGALIA,respondents.
Basilio E. Duaban for petitioner.
DECISION
PARAS, J p:
Before Us is a petition to review the judgment of the respondent Court of Appeals 1 in
CA-G.R. No. 53258-R reversing the decision of the court a quoin Civil Case No. BN-
109, entitled Dominico Etcuban vs. Jesus G. Songalia, et al., by ruling that plaintiff-
appellee (petitioner herein) failed to avail himself of the right of legal redemption within
the period provided for by law. llcd
Plaintiff inherited a piece of land with an area of approximately 14.0400 hectares
together with his co-heirs from their deceased father. Said piece of land was declared
in their names as heirs of Eleuterio Etcuban under Tax Declaration No. 06837 and was
the subject matter in dispute in SP No. 1192-R, of the Court of First Instance of Cebu,
a case for the settlement of the estate of the late Eleuterio Etcuban. In said case,
petitioner Dominico Etcuban, the spouse of the deceased, Demetria Initan, and Pedro,
Vicente, Felicitas, Anastacio, Froilan, Alfonso, Advincula, Anunciacion, Jesus,
Aguinaldo, all surnamed Etcuban were declared as co-owners of the property in
question. Thereafter the 11 co-heirs executed in favor of defendants (private
respondents herein) 11 deeds of sale of their respective shares in the co-ownership for
the total sum of P26,340.00. It is not disputed that the earliest of the 11 deeds of sale
was made on December 9, 1963 and the last one in December 1967. (Annexes "1-11").
In his complaint before the trial court, plaintiff alleged that his co-owners leased and/or
sold their respective shares without giving due notice to him as a co-owner
notwithstanding his intimations to them that he was willing to buy all their respective
shares. He further maintained that even upon inquiry from his co-heirs/co-owners, and
also from the alleged buyers (defendants) he elicited nothing from them. Plaintiff
discovered for the first time the existence of these 11 deeds of sale during the hearing
on January 31, 1972 of Civil Case No. BN-87, entitled Jesus C. Songalia vs. Dominico
Etcuban in the Court of First Instance of Cebu, Branch XI. When he verified the
supposed sales with his co-owners only 3 of them admitted their respective sales.
Hence, the filing of Civil Case No. BN-109 by petitioner for legal redemption.
Defendants (private respondents herein) in denying the material allegations of the
complaint, argued by way of affirmative and special defenses that plaintiff has no cause
of action against them; that the action is barred by prescription or laches; that the
complaint is barred by the pendency of Civil Case No. BN-87 involving the same
parties, same subject matter and same cause of action; that the provisions of the law
pertaining to legal redemption have been fully complied with in respect to the sale of
the disputed land to them; that plaintiff came to know of the sale of the land in question
to them in August, 1968 or sometime prior thereto; that acting on this knowledge,
plaintiff thru his lawyers wrote defendants on August 15, 1968 about the matter; that
Jesus Songalia personally went to the office of Atty. Vicente Faelner or counsel for
plaintiff to inform him of the sale of the disputed land to them; that again another
demand letter was received on May 30, 1969 by defendants from the lawyers of plaintiff
but on both occasions, no action was taken by plaintiff despite the information plaintiff
received from defendants thru his counsel and that consequently plaintiff lost his right
to redeem under Art. 1623 of the new Civil Code because the right of redemption may
be exercised only within 30 days from notice of sale and plaintiff was definitely notified
of the sale years ago as shown by the records.
During the pre-trial conference, the parties failed to agree on any stipulation of facts.
Judgment was rendered after due trial with the following dispositive portion:
"WHEREFORE, JUDGMENT is hereby rendered in favor of the
plaintiff and against the defendants as follows.
1. Allowing the plaintiff to exercise his right of redemption over the
land in question;
2. Ordering the defendants to accept the redemption price of
P26,340.00 which plaintiff should deposited with this Court within
30 days from and after this decision becomes final and executory
and thereafter to execute a deed of reconveyance in favor of the
plaintiff and to surrender the possession and ownership of the
property in question to the plaintiff; and
3. The defendants are ordered to pay the costs."
Defendants appealed to the Court of Appeals assigning several errors but the appellate
court centered its dissertation on the first assignment of error as the issue to be most
decisive and, therefore confined its discussion to it.
Defendants in their first assignment of error assailed the lower court in not holding that
the failure of the plaintiff-appellee to tender to the defendants-appellants the
redemption price or to consign the same in court or to make a specific offer to redeem
the property before filing the complaint for legal redemption has barred the appellee's
right to redeem the property pursuant to the doctrine of the Supreme court in Conejero
vs. Court of Appeals (16 SCRA 775).
The appellate court in tackling this issue declared that plaintiff failed to make a valid
tender of the sale price of the land paid by the defendants within the period fixed by Art.
1623 of the Civil Code which provides as follows:
SALES 7 (FINALS)

ART. 1623. The right of legal pre-emption or redemption shall not ||| (Etcuban v. Court of Appeals, G.R. No. L-45164, [March 16, 1987], 232 PHIL 471-
be exercised except within thirty (30) days from the notice in writing 476)
by the prospective vendor, or by the vendor, as the case may be.
The deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of adjoining

owners. (1524a)"

The respondent court found that written notice was given to plaintiff-appellee in the form
of an answer with counterclaim to the complaint in Civil Case No. BN-109 which
appears on the records to have been filed on March 18, 1972. Said court ruled that "this
notice is sufficient to inform the plaintiff about the sale and the reckoning date for the
30-day period commenced upon receipt thereof. No other notice is needed under the
premises because it is the substance conveyed rather than the form embodying it, that
counts."
The records reveal that on May 27, 1974, plaintiff-appellee deposited with the lower
court the amount of P26,340.00 the redemption price. Since the answer with
counterclaim was filed on March 18, 1972, the deposit made on May 27, 1974 was
clearly outside the 30-day period of legal redemption. The period within which the right
of legal redemption or pre-emption may be exercised is non-extendible. prLL

Petitioner contends that vendors (his co-heirs) should be the ones to give him written
notice and not the vendees (defendants or private respondent herein) citing the case
of Butte vs. Manuel Uy & Sons, Inc., 4 SCRA 526. Such contention is of no moment.
While it is true that written notice is required by the law (Art. 1623), it is equally true that
the same "Art. 1623 does not prescribe any particular form of notice, nor any distinctive
method for notifying the redemptioner." So long, therefore, as the latter is informed in
writing of the sale and the particulars thereof, the 30 days for redemption start running,
and the redemptioner has no real cause to complain. (De Conejero et al v. Court of
Appeals, et al., 16 SCRA 775). In the Conejero case, We ruled that the furnishing of a
copy of the disputed deed of sale to the redemptioner, was equivalent to the giving of
written notice required by law in "a more authentic manner than any other writing could
have done," and that We cannot adopt a stand of having to sacrifice substance to
technicality. More so in the case at bar, where the vendors or co-owners of petitioner
stated under oath in the deeds of sale. (Annexes "1 to 11") that notice of sale had been
given to prospective redemptioners in accordance with Art. 1623 of the Civil Code. "A
sworn statement or clause in a deed of sale to the effect that a written notice of sale
was given to possible redemptioners or co-owners might be used to determine whether
an offer to redeem was made on or out of time, or whether there was substantial
compliance with the requirement of said Art. 1623. 2 "

In resume, We find that petitioner failed to substantially comply with the requirements
of Art. 1623 on legal redemption and We see no reason to reverse the assailed decision
of the respondent court. LLpr
WHEREFORE, premises considered, the petition is hereby DISMISSED and the
appealed decision is hereby AFFIRMED.

SO ORDERED.