Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 171250 July 4, 2007

SPS. CARLOS AND EULALIA RAYMUNDO and SPS. ANGELITO AND JOCELYN BUENAOBRA, Petitioners,
vs.
SPS. DOMINADOR and ROSALIA BANDONG, Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners Spouses Carlos
and Eulalia Raymundo and Spouses Angelito and Jocelyn Buenaobra seeking the reversal and setting aside of the
Decision1 of the Court of Appeals dated 26 September 2005 and its Resolution2 dated 24 January 2006 in CA-G.R. CV
No. 59557. The Court of Appeals, in its assailed Decision and Resolution, reversed the Decision 3 of the Regional Trial
Court (RTC) dated 28 January 1998, in Civil Case No. C-14980, declaring the Deed of Sale executed by respondent
Dominador Bandong (Dominador) in favor of petitioner Eulalia Raymundo (Eulalia) as valid and binding. The dispositive
portion of the asailed Court of Appeals Decision reads:

WHEREFORE, premises considered, we hereby GRANT the appeal. The January 28, 1998 decision of the RTC, Branch
126, Caloocan City is hereby REVERSED and SET ASIDE and a new one entered:

1. ANNULLING the Deed of Absolute Sale dated February 3, 1989 as a deed of sale, and considering it instead
as a real estate mortgage of the disputed property to secure the payment of the ₱70,000.00 the plaintiffs-
appellants spouses Bandong owe the defendants-appellees spouses Raymundo. The spouses Bandong are
given one (1) year from the finality of this Decision within which to pay the ₱70,000.00 owed to the spouses
Raymundo, at 12% interest per annum computed from July 17, 1991 until its full payment.

2. ANNULLING the Deed of Absolute Sale dated September 25, 1990, between the spouses Raymundo as
vendors and the spouses Buenaobra as vendees.

3. ORDERING the Register of Deeds of Caloocan City to issue a new Transfer Certificate of Title covering Lot 18,
Block 2 of the subdivision plan PSD 16599, a portion of Lot 1073 of the Cadastral Survey of Caloocan, in the
names of the spouses Dominador and Rosalia Bandong, after the cancellation pursuant to this Decision of TCT
No. 222871 currently in the names of the spouses Angelito and Jocelyn Buenaobra; and FURTHER ORDERING
the said Register of Deeds to annotate in the new Transfer Certificate of Title in the names of the spouses
Bandong a real estate mortgage in favor of the spouses Carlos and Eulalia Raymundo reflecting the terms of this
Decision.

4. AWARDING – moral damages in the amount of ₱50,000.00; exemplary damages of ₱20,000.00; and attorney’s
fees and expenses of litigation of ₱20,000.00, plus ₱500.00 per proven appearance of the plaintiffs-appellants’
counsel in court – all solidarily payable by the spouses Carlos and Eulalia Raymundo and the spouses Angelito
and Jocelyn Buenaobra, to the spouses Dominador and Rosalia Bandong.

5. ORDERING the payment of the costs of the suit, payable by the spouses Carlos and Eulalia Raymundo and
the spouses Angelito and Jocelyn Buenaobra.4

The factual and procedural backdrop of this case are as follows:

Eulalia was engaged in the business of buying and selling large cattle from different provinces within the Philippines. For
this purpose, she employed "biyaheros" whose primary task involved the procuring of large cattle with the financial capital
provided by Eulalia and delivering the procured cattle to her for further disposal. In order to secure the financial capital she
advanced for the "biyaheros," Eulalia required them to surrender the Transfer Certificates of Title (TCTs) of their
properties and to execute the corresponding Deeds of Sale in her favor.
Dominador had been working for Eulalia as one of her biyaheros for three decades. Considering his long years of service
without any previous derogatory record, Eulalia no longer required Dominador to post any security in the performance of
his duties.5

However, in 1989, Eulalia found that Dominador incurred shortage in his cattle procurement operation in the amount of
₱70,000.00. Dominador and his wife Rosalia Bandong (Rosalia) then executed a Deed of Sale 6 in favor of Eulalia on 3
February 1989, covering a parcel of land with an area of 96 square meters, more or less, located at Caloocan City and
registered under TCT No. 1421 (subject property), in the name of the Spouses Bandong. On the strength of the aforesaid
deed, the subject property was registered in the names of Eulalia and her husband Carlos Raymundo (Carlos). The
subject property was thereafter sold by the Spouses Raymundo to Eulalia’s grandniece and herein co-petitioner, Jocelyn
Buenaobra (Jocelyn). Thus, the subject property came to be registered in the name of Jocelyn and her husband Angelito
Buenaobra (Angelito).

After the TCT of the subject property was transferred to their names, the Spouses Buenaobra instituted before the
Metropolitan Trial Court (MeTC) of Caloocan City, an action for ejectment against the Spouses Bandong, docketed
as Civil Case No. 20053, seeking the eviction of the latter from the subject property, which the Spouses Bandong
opposed on the ground that they are the rightful owners and possessors thereof. The MeTC ruled in favor of the Spouses
Buenaobra which, on appeal, was affirmed in toto by the RTC7 and subsequently, by the Court of Appeals.8 Finally, when
the case was raised on appeal before us in G.R. No. 109422, we issued a Resolution9dated 12 July 1993, finding that no
substantial arguments were raised therein to warrant the reversal of the appealed decision.

To assert their right to the subject property, the Spouses Bandong instituted an action for annulment of sale before the
RTC against Eulalia and Jocelyn on the ground that their consent to the sale of the subject property was vitiated by
Eulalia after they were served by Jocelyn’s counsel with the demand to vacate. This was docketed as Civil Case No. C-
14980. The Spouses Bandong alleged that there was no sale intended but only equitable mortgage for the purpose of
securing the shortage incurred by Dominador in the amount of ₱70,000 while employed as "biyahero" by Eulalia.

Eulalia countered that Dominador received from her a significant sum of money, either as cash advances for the purpose
of procuring large cattle or as personal loan, and when he could no longer pay his obligations, the Spouses Bandong
voluntarily ceded the subject property to her by executing the corresponding deed of sale in her favor. Indeed, the
Spouses Bandong personally appeared before the Notary Public and manifested that the deed was their own voluntary
act and deed.

For her part, Jocelyn maintained that she was a buyer in good faith and for value for she personally inquired from the
Register of Deeds of the presence of any liens and encumbrances on the TCT of the subject property and found that the
same was completely free therefrom. While she admitted that she had previous notice that Dominador and a certain
Lourdes Santos (Lourdes) were in possession of the subject property, Jocelyn claimed that the said possessors already
acknowledged her ownership thereof and even asked for time to vacate. In the end, though, they refused to leave the
premises.

On 28 June 1998, the RTC rendered a Decision10 in Civil Case No. C-14980 in favor of Eulalia and Jocelyn by declaring
that the Deed of Sale between Dominador and Eulalia was valid and binding and, consequently, the subsequent sale
between Eulalia and Jocelyn was also lawful absent any showing that Jocelyn was a buyer in bad faith. The dispositive
portion of the said decision reads:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint filed by the [Spouses Bandong] and ordering
said [Spouses Bandong] to pay [herein petitioners] spouses Raymundo and Buenaobra the amount of ₱50,000 and
₱30,000, respectively, as attorney’s fees and costs of the suit.

On appeal in CA-G.R. SP No. 59557, the Court of Appeals reversed the RTC Decision and found that the transaction
entered into by Dominador and Eulalia was not one of sale but an equitable mortgage considering that the purchase price
was grossly inadequate and the Spouses Bandong remained as possessors of the subject property after Eulalia’s alleged
purchase thereof. The appellate court likewise charged Jocelyn with knowledge that the Spouses Raymundo were not the
absolute owners of the subject property negating the presumption that she was an innocent purchaser for value.

The Court of Appeals found the Motion for Reconsideration filed by petitioners unmeritorious and denied the same in its
Resolution11 dated 24 January 2006.
Hence, this instant Petition for Review on Certiorari filed by the petitioners assailing the Decision dated 26 September
2005 and the Resolution dated 24 January 2006 rendered by the Court of Appeals. For the resolution of this Court are the
following issues:

I.

WHETHER OR NOT THE DEED OF SALE BETWEEN DOMINADOR AND EULALIA IS VALID AND BINDING.

II.

WHETHER OR NOT JOCELYN IS A BUYER IN GOOD FAITH.

In arguing that the sale between Dominador and Eulalia is valid, petitioners posit that gross inadequacy of the price is not
sufficient to invalidate the sale, and granting arguendo that insufficient consideration may void a sale, it has not been
proven that the consideration of sale between Dominador and Eulalia was grossly inadequate.

Elaborating, petitioners maintain that the amount of ₱110,000.00 (which they claimed they have given to Dominador), or
even the sum of ₱70,000.00 (which respondents admitted receiving), was a substantial consideration, sufficient to support
a sale contract. Mere inadequacy of the price is not sufficient to invalidate a sale; the price must be grossly inadequate or
utterly shocking to the conscience in order to avoid a contract of sale.

Petitioners further aver that the alleged market value of the subject property as submitted by the appraiser, one of
respondents’ witnesses, would not serve as an objective basis in determining the actual value of the subject property,
much less the supposed amount of its purchase price, in the absence of any logical and valid basis for its determination.

Finally, petitioners contend that so long as the contract was voluntarily entered into by the parties and in the absence of a
clear showing that their consent thereto was vitiated by fraud, mistake, violence or undue influence, such as in the case at
bar, the said contract should be upheld.

We do not agree.

An equitable mortgage is one that - although lacking in some formality, forms and words, or other requisites demanded by
a statute - nevertheless reveals the intention of the parties to charge a real property as security for a debt and contains
nothing impossible or contrary to law.12

The instances when a contract - regardless of its nomenclature - may be presumed to be an equitable mortgage are
enumerated in the Civil Code as follows:

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.

Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.

For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a contract denominated as
a contract of sale; and two, their intention was to secure an existing debt by way of an equitable mortgage. 13
There is no question that Dominador and Eulalia entered into a contract of sale as evidenced by the document
denominated as Deed of Sale14 signed by them. As to whether the parties intended to transfer ownership of the subject
property or merely to constitute a security for an existing debt is an issue that needs to be addressed by this Court.

In resolving this kind of controversy, the doctrine in Reyes v. Court of Appeals15 directs us to give utmost consideration to
the intention of the parties in light of the relative situation of each and the circumstances surrounding the execution of the
contract, thus:

In determining whether a deed absolute in form is a mortgage, the court is not limited to the written memorials of the
transaction. The decisive factor in evaluating such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the
relative situation of the parties at that time, the attitude acts, conduct, declarations of the parties, the negotiations
between them leading to the deed, and generally, all pertinent facts having a tendency to fix and determine the real nature
of their design and understanding. x x x16 (Emphasis supplied.)

By applying the aforestated principle to the case at bar, we are constrained to rule that in executing the said Deed of Sale,
Dominador and Eulalia never intended the transfer of ownership of the subject property but to burden the same with an
encumbrance to secure the indebtedness incurred by Dominador on the occasion of his employment with Eulalia.

By Eulalia’s own admission,17 it was her customary business practice to require her biyaheros to deliver to her the titles to
their real properties and to execute in her favor the corresponding deeds of sale over the said properties as security for
the money she provided for their cattle procurement task, and since Dominador worked for Eulalia’s business for years,
he was allowed to advance the money without any security. Significantly, it was only after he incurred a shortage that the
sale contract was executed.

We are not inclined to believe the contention of the petitioners that Dominador ceded his property to Eulalia as payment
for his obligation for it is contrary to human experience that a person would easily part with his property after sustaining a
debt. Rather, he would first look for means to settle his obligation, and the selling of a property on which the house that
shelters him and his family stands, would be his last resort. The only reasonable conclusion that may be derived from
Dominador’s act of executing a Deed of Sale in favor of Eulalia is that the latter required him to do so in order to ensure
that he will subsequently pay his obligation to her.

This conclusion is in accord with the doctrine we enunciated in Aguirre v. Court of Appeals,18 that:

The explicit provision of Article 1602 that any of those circumstances would suffice to construe a contract of sale
to be one of equitable mortgage is in consonance with the rule that the law favors the least transmission of
property rights. To stress, the existence of any one of the conditions under Article 1602, not a concurrence, or an
overwhelming number of such circumstances, suffices to give rise to the presumption that the contract is an equitable
mortgage.

While we agree in the petitioners’ insistence that inadequacy of the price is not sufficient to nullify the contract of sale,
their persistence is, however, misplaced. It is worthy to note that the factual circumstances attendant in the case at bar
call not for the application of the legal and jurisprudential principles on annulment of contract per se, but more aptly, of the
provisions of Articles 1602 and 1604 of the Civil Code on the construction of the contract of sale as an equitable
mortgage.

Consequently, the agreement between Dominador and Eulalia was not avoided in its entirety so as to prevent it from
producing any legal effect at all. Instead, we construe that said transaction is an equitable mortgage, thereby merely
altering the relationship of the parties from seller and buyer, to mortgagor and mortgagee, while the subject property is not
transferred but subjected to a lien in favor of the latter.

Moreover, granting that the purchase price is adequate, the fact that respondents remain in possession of the subject
property after its supposed sale is sufficient to support our finding that the contract is one of equitable mortgage and not of
sale. To reiterate, the existence of any one of the conditions under Article 1602, not a concurrence, or an
overwhelming number of such circumstances, suffices to give rise to the presumption that the contract is an
equitable mortgage.19

Having threshed the issue that there was no sale in favor of Eulalia but an equitable mortgage leads us to an
inevitable conclusion that she has no right to subsequently transfer ownership of the subject property, in
consonance with the principle that nobody can dispose of what he does not have. 20 One of the exceptions21 to
this rule, however, can be found in Article 1506 of the Civil Code, wherein the seller has voidable title to a
property but his title has not yet been nullified at the time of the sale, and the subsequent buyer of the property
was in good faith.

An innocent purchaser for value is one who buys the property of another, without notice that some other person has a
right or interest in the property, for which a full and fair price is paid by the buyer at the time of the purchase or before
receipt of any notice of claims or interest of some other person in the property. 22

Petitioners are harping on the contention that Jocelyn was an innocent purchaser for value. Invoking the indefeasibility of
a Torrens title, they assert that there is nothing in the subject property’s TCT that should arouse Jocelyn’s suspicion as to
put her on guard that there is a defect in Eulalia’s title.

Again, we are not persuaded. The burden of proving the purchaser’s good faith lies in the one who asserts the same. In
discharging the burden, it is not enough to invoke the ordinary presumption of good faith.23 In Arrofo v. Quiño,24 we have
elucidated that:

[A] person dealing with registered land, [is not required] to inquire further that what the Torrens title on its face indicates.
This rule, however, is not absolute but admits of exceptions.

Thus, while it is true x x x that a person dealing with registered lands need not go beyond the certificate of title, it
is likewise a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a
reasonable man on his guard, and then claim that he acted in good faith under the belief that there was no defect
in the title of the vendor or mortgagor. His mere refusal to face up to the fact that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in the vendor’s or mortgagor’s title, will not make him an
innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such
notice of the defect as would have led to its discovery had he acted with the measure of precaution which may be required
of a prudent man in a like situation.

In the present case, we are not convinced by the petitioners’ incessant assertion that Jocelyn is an innocent purchaser for
value. To begin with, she is a grandniece of Eulalia and resides in the same locality where the latter lives and conducts
her principal business. It is therefore impossible for her not to acquire knowledge of her grand aunt’s business practice of
requiring her biyaheros to surrender the titles to their properties and to sign the corresponding deeds of sale over said
properties in her favor, as security. This alone should have put Jocelyn on guard for any possible abuses that Eulalia may
commit with the titles and the deeds of sale in her possession.

The glaring lack of good faith of Jocelyn is more apparent in her own admission that she was aware that Dominador and a
certain Lourdes were in possession of the subject property. A buyer of real property that is in the possession of a person
other than the seller must be wary. A buyer who does not investigate the rights of the one in possession can hardly be
regarded as a buyer in good faith.25 Jocelyn’s self-serving statement that she personally talked to Dominador and Lourdes
about her acquisition of the subject property and intention to take possession of the same, and that Dominador and
Lourdes even pleaded for time to vacate the subject property cannot be given credence in light of the prompt filing by the
Spouses Bandong of an action for the annulment of the sale contract between Dominador and Eulalia after they received
the demand to vacate from Jocelyn’s lawyer.

In the last analysis, good faith, or the lack of it, is a question of intention.1awphi1 But in ascertaining the intention that
impels one on a given occasion, the courts are necessarily controlled by the evidence as to the conduct and other
outward acts by which the motive may be safely determined.26

Petitioners question further the belated filing by the Spouses Bandong of an action for the annulment of sale, since the
Spouses Bandong filed the same only after they received the notice to vacate, and not immediately after the execution of
the assailed Deed of Sale. We have repeatedly held that the one who is in actual possession of a piece of land claiming to
be the owner thereof may await to vindicate his right. His undisturbed possession gives him a continuing right to seek the
aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own
title, which right can be claimed only by one who is in possession. 27

Finally, we agree with the Court of Appeals that the ejectment case which had been litigated to finality by the Spouses
Buenaobra and the respondents need not alter our conclusion in the present case. Well entrenched is the doctrine that in
ejectment cases, the sole question for resolution is the physical or material possession of the property in question, so that
neither the claim of juridical possession nor an averment of ownership can outrightly prevent the court from taking
cognizance of the case.28 In ejectment cases, all the court may do is to resolve who is entitled to its possession although,
in doing so, it may make a determination of who is the owner of the property in order to resolve the issue of possession.
But such determination of ownership is not clothed with finality. Neither will it affect ownership of the property or constitute
a binding and conclusive adjudication on the merits with respect to the issue of ownership. 29

WHEREFORE, IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Decision dated 26 September 2005,
and the Resolution dated 24 January 2006, rendered by the Court of Appeals in CA-G.R. SP No. 59957, are
hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 149756 February 11, 2005

MYRNA RAMOS, petitioner,

vs.
SUSANA S. SARAO and JONAS RAMOS, respondents.

DECISION

PANGANIBAN, J.:

Although the parties in the instant case denominated their contract as a "DEED OF SALE UNDER PACTO DE RETRO,"
the "sellers" have continued to possess and to reside at the subject house and lot up to the present. This evident factual
circumstance was plainly overlooked by the trial and the appellate courts, thereby justifying a review of this case. This
overlooked fact clearly shows that the petitioner intended merely to secure a loan, not to sell the property. Thus, the
contract should be deemed an equitable mortgage.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the August 31, 2001 Decision 2 of the
Court of Appeals (CA) in CA-GR CV No. 50095, which disposed as follows:

"WHEREFORE, the instant appeal is DISMISSED for lack of merit. The decision dated January 19, 1995 of the Regional
Trial Court, Branch 145, Makati City is AFFIRMEDin toto."3

The Facts

On February 21, 1991, Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal house and lot in
favor of Susana S. Sarao for and in consideration of ₱1,310,430.4 Entitled "DEED OF SALE UNDER PACTO DE
RETRO," the contract, inter alia, granted the Ramos spouses the option to repurchase the property within six months from
February 21, 1991, for ₱1,310,430 plus an interest of 4.5 percent a month.5 It was further agreed that should the spouses
fail to pay the monthly interest or to exercise the right to repurchase within the stipulated period, the conveyance would be
deemed an absolute sale.6

On July 30, 1991, Myrna Ramos tendered to Sarao the amount of ₱1,633,034.20 in the form of two manager’s checks,
which the latter refused to accept for being allegedly insufficient. 7 On August 8, 1991, Myrna filed a Complaint for the
redemption of the property and moral damages plus attorney’s fees. 8 The suit was docketed as Civil Case No. 91-2188
and raffled to Branch 145 of the Regional Trial Court (RTC) of Makati City. On August 13, 1991, she deposited with the
RTC two checks that Sarao refused to accept.9

On December 21, 1991, Sarao filed against the Ramos spouses a Petition "for consolidation of ownership in pacto de
retro sale" docketed as Civil Case No. 91-3434 and raffled to Branch 61 of the RTC of Makati City.10 Civil Case Nos. 91-
2188 and 91-3434 were later consolidated and jointly tried before Branch 145 of the said Makati RTC. 11

The two lower courts narrated the trial in this manner:

"x x x Myrna [Ramos] testified as follows: On February 21, 1991, she and her husband borrowed from Sarao the amount
of ₱1,234,000.00, payable within six (6) months, with an interest thereon at 4.5% compounded monthly from said date
until August 21, 1991, in order for them to pay [the] mortgage on their house. For and in consideration of the said amount,
they executed a deed of sale under a [pacto de retro] in favor of Sarao over their conjugal house and lot registered under
TCT No. 151784 of the Registry of Deeds of Makati (Exhibit A). She further claimed that Sarao will keep the torrens title
until the lapse of the 6-month period, in which case she will redeem [the] subject property and the torrens title covering it.
When asked why it was the amount of ₱1,310,430 instead of the aforestated amount which appeared in the deed, she
explained that upon signing of the deed in question, the sum of ₱20,000.00 representing attorney’s fees was added, and
its total amount was multiplied with 4.5% interest rate, so that they could pay in advance the compounded interest. She
also stated that although the market value of the subject property as of February 1991 [was] calculated to [be] more or
less ₱10 million, it was offered [for] only ₱1,310,430.00 for the reason that they intended nothing but to redeem the same.
In May 1991, she wrote a letter to Atty. Mario Aguinaldo requesting him to give a computation of the loan obligation, and
[expressed] her intention to redeem the subject property, but she received no reply to her letter. Instead, she, through her
husband, secured directly from Sarao a handwritten computation of their loan obligation, the total of which amount[ed] to
₱1,562,712.14. Later, she sent several letters to Sarao, [furnishing] Atty. Aguinaldo with copies, asking them for the
updated computation of their loan obligation as of July 1991, but [no reply was again received]. During the hearing of
February 17, 1992, she admitted receiving a letter dated July 23, 1991 from Atty. Aguinaldo which show[ed] the
computation of their loan obligation [totaling] to ₱2,911,579.22 (Exhs. 6, 6-A). On July 30, 1991, she claimed that she
offered the redemption price in the form of two (2) manager’s checks amounting to ₱1,633,034.20 (Exhs. H-1 & H-2) to
Atty. Aguinaldo, but the latter refused to accept them because they [were] not enough to pay the loan obligation. Having
refused acceptance of the said checks covering the redemption price, on August 13, 1991 she came to Court to consign
the checks (Exhs. L-4 and L-5). Subsequently, she proceeded to the Register of Deeds to cause the annotation of lis
pendens on TCT No. 151784 (Exh. B-1-A). Hence, she filed the x x x civil case against Sarao.

"On the other hand, Sarao testified as follows: On February 21, 1991, spouses Ramos together with a certain Linda
Tolentino and her husband, Nestor Tolentino approached her and offered transaction involv[ing a] sale of property[. S]he
consulted her lawyer, Atty. Aguinaldo, and on the same date a corresponding deed of sale under pacto de retrowas
executed and signed (Exh. 1 ). Later on, she sent, through her lawyer, a demand letter dated June 10, 1991 (Exh. 6) in
view of Myrna’s failure to pay the monthly interest of 4.5% as agreed upon under the deed[. O]n June 14, 1991 Jonas
replied to said demand letter (Exh. 8); in the reply Jonas admitted that he no longer ha[d] the capacity to redeem the
property and to pay the interest. In view of the said reply of Jonas, [Sarao] filed the corresponding consolidation
proceedings. She [further claimed] that before filing said action she incurred expenses including payment of real estate
taxes in arrears, x x x transfer tax and capital [gains] tax, and [expenses] for [the] consolidated proceedings, for which
these expenses were accordingly receipted (Exhs. 6, 6-1 to 6-0). She also presented a modified computation of the
expenses she had incurred in connection with the execution of the subject deed (Exh. 9). She also testified that Myrna did
not tender payment of the correct and sufficient price for said real property within the 6-month period as stipulated in the
contract, despite her having been shown the computation of the loan obligation, inclusive of capital gains tax, real estate
tax, transfer tax and other expenses. She admitted though that Myrna has tendered payment amounting to ₱1,633,034.20
in the form of two manager’s checks, but these were refused acceptance for being insufficient. She also claimed that
several letters (Exhs. 2, 4 and 5) were sent to Myrna and her lawyer, informing them of the computation of the loan
obligation inclusive of said expenses. Finally, she denied the allegations made in the complaint that she allied herself with
Jonas, and claimed that she ha[d] no knowledge about said allegation." 12

After trial, the RTC dismissed the Complaint and granted the prayer of Sarao to consolidate the title of the property in her
favor.13 Aggrieved, Myrna elevated the case to the CA.

Ruling of the Court of Appeals

The appellate court sustained the RTC’s finding that the disputed contract was a bonafide pacto de retro sale, not a
mortgage to secure a loan.14 It ruled that Myrna Ramos had failed to exercise the right of repurchase, as the consignation
of the two manager’s checks was deemed invalid. She allegedly failed (1) to deposit the correct repurchase price and (2)
to comply with the required notice of consignation.15

Hence, this Petition.16

The Issues

Petitioner raises the following issues for our consideration:

"1. Whether or not the honorable appellate court erred in ruling the subject Deed of Sale under Pacto de Retro was, and is
in reality and under the law an equitable mortgage;

"2. Whether or not the honorable appellate court erred in affirming the ruling of the court a quo that there was no valid
tender of payment of the redemption price neither [sic] a valid consignation in the instant case; and

"3. Whether or not [the] honorable appellate court erred in affirming the ruling of the court a quo denying the claim of
petitioner for damages and attorney’s fees."17

The Court’s Ruling

The Petition is meritorious in regard to Issues 1 and 2.

First Issue:

A Pacto de Retro Sale

or an Equitable Mortgage?

Respondent Sarao avers that the herein Petition should have been dismissed outright, because petitioner (1) failed to
show proof that she had served a copy of it to the Court of Appeals and (2) raised questions of fact that were not proper
issues in a petition under Rule 45 of the Rules of Court.18 This Court, however, disregarded the first ground; otherwise,
substantial injustice would have been inflicted on petitioner. Since the Court of Appeals is not a party here, failure to serve
it a copy of the Petition would not violate any right of respondent. Service to the CA is indeed mentioned in the Rules, but
only to inform it of the pendency of the appeal before this Court.
As regards Item 2, there are exceptions to the general rule barring a review of questions of fact. 19 The Court reviewed the
factual findings in the present case, because the CA had manifestly overlooked certain relevant and undisputed facts
which, after being considered, justified a different conclusion.20

Pacto de Retro Sale Distinguished

from Equitable Mortgage

The pivotal issue in the instant case is whether the parties intended the contract to be a bona fide pacto de retrosale or an
equitable mortgage.

In a pacto de retro, ownership of the property sold is immediately transferred to the vendee a retro, subject only to the
repurchase by the vendor a retro within the stipulated period.21 The vendor a retro’s failure to exercise the right of
repurchase within the agreed time vests upon the vendee a retro, by operation of law, absolute title to the property.22 Such
title is not impaired even if the vendee a retro fails to consolidate title under Article 1607 of the Civil Code.23

On the other hand, an equitable mortgage is a contract that -- although lacking the formality, the form or words, or other
requisites demanded by a statute -- nevertheless reveals the intention of the parties to burden a piece or pieces of real
property as security for a debt.24 The essential requisites of such a contract are as follows: (1) the parties enter into what
appears to be a contract of sale, but (2) their intention is to secure an existing debt by way of a mortgage. 25 The
nonpayment of the debt when due gives the mortgagee the right to foreclose the mortgage, sell the property, and apply
the proceeds of the sale to the satisfaction of the loan obligation. 26

This Court has consistently decreed that the nomenclature used by the contracting parties to describe a contract does not
determine its nature.27 The decisive factor is their intention -- as shown by their conduct, words, actions and deeds -- prior
to, during, and after executing the agreement.28 This juristic principle is supported by the following provision of law:

Article 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall
be principally considered.29

Even if a contract is denominated as a pacto de retro, the owner of the property may still disprove it by means of parol
evidence,30 provided that the nature of the agreement is placed in issue by the pleadings filed with the trial court. 31

There is no single conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation
secured by a mortgage.32 However, the law enumerates several instances that show when a contract is presumed to be
an equitable mortgage, as follows:

Article 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. 33

Furthermore, a contract purporting to be a pacto de retro is construed as an equitable mortgage when the terms of the
document and the surrounding circumstances so require.34 The law discourages the use of a pacto de retro,because this
scheme is frequently used to circumvent a contract known as a pactum commissorium. The Court has frequently noted
that a pacto de retro is used to conceal a contract of loan secured by a mortgage. 35 Such construction is consistent with
the doctrine that the law favors the least transmission of rights. 36

Equitable Mortgage Presumed

to be Favored by Law

Jurisprudence has consistently declared that the presence of even just one of the circumstances set forth in the forgoing
Civil Code provision suffices to convert a contract to an equitable mortgage. 37 Article 1602 specifically states that the
equitable presumption applies to any of the cases therein enumerated.

In the present factual milieu, the vendor retained possession of the property allegedly sold.38 Petitioner and her children
continued to use it as their residence, even after Jonas Ramos had abandoned them. 39 In fact, it remained as her address
for the service of court orders and copies of Respondent Sarao’s pleadings. 40

The presumption of equitable mortgage imposes a burden on Sarao to present clear evidence to rebut it. Corollary to this
principle, the favored party need not introduce proof to establish such presumption; the party challenging it must
overthrow it, lest it persist.41 To overturn that prima facie fact that operated against her, Sarao needed to adduce
substantial and credible evidence to prove that the contract was a bona fide pacto de retro. This evidentiary burden she
miserably failed to discharge.

Contrary to Sarao’s bare assertions, a meticulous review of the evidence reveals that the alleged contract was executed
merely as security for a loan.

The July 23, 1991 letter of Respondent Sarao’s lawyer had required petitioner to pay a computed amount -- under the
heading "House and Lot Loan"42 -- to enable the latter to repurchase the property. In effect, respondent would resell the
property to petitioner, once the latter’s loan obligation would have been paid. This explicit requirement was a clear
indication that the property was to be used as security for a loan.

The loan obligation was clear from Sarao’s evidence as found by the trial court, which we quote:

"x x x [Sarao] also testified that Myrna did not tender payment of the correct and sufficient price for said real property
within the 6-month period as stipulated in the contract, despite her having been shown the computation of the loan
obligation, inclusive of capital gains tax, real estate tax, transfer tax and other expenses. She admitted though that Myrna
has tendered payment amounting to ₱1,633,034.20 in the form of two manager’s checks, but these were refused
acceptance for being insufficient. She also claimed that several letters (Exhs. 2, 4 and 5) were sent to Myrna and her
lawyer, informing them of the computation of the loan obligation inclusive of said expenses. x x x."43

Respondent herself stressed that the pacto de retro had been entered into on the very same day that the property was to
be foreclosed by a commercial bank.44 Such circumstance proves that the spouses direly needed funds to avert a
foreclosure sale. Had they intended to sell the property just to realize some profit, as Sarao suggests, 45 they would not
have retained possession of the house and continued to live there. Clearly, the spouses had entered into the
alleged pacto de retro sale to secure a loan obligation, not to transfer ownership of the property.

Sarao contends that Jonas Ramos admitted in his June 14, 1991 letter to her lawyer that the contract was a pacto de
retro.46 That letter, however, cannot override the finding that the pacto de retro was executed merely as security for a loan
obligation. Moreover, on May 17, 1991, prior to the transmittal of the letter, petitioner had already sent a letter to Sarao’s
lawyer expressing the former’s desire to settle the mortgage on the property. 47 Considering that she had already
denominated the transaction with Sarao as a mortgage, petitioner cannot be prejudiced by her husband’s alleged
admission, especially at a time when they were already estranged.48

Inasmuch as the contract between the parties was an equitable mortgage, Respondent Sarao’s remedy was to recover
the loan amount from petitioner by filing an action for the amount due or by foreclosing the property. 49

Second Issue:

Propriety of Tender of
Payment and Consignation

Tender of payment is the manifestation by debtors of their desire to comply with or to pay their obligation. 50 If the creditor
refuses the tender of payment without just cause, the debtors are discharged from the obligation by the consignation of
the sum due.51 Consignation is made by depositing the proper amount to the judicial authority, before whom the tender of
payment and the announcement of the consignation shall be proved. 52 All interested parties are to be notified of the
consignation.53 Compliance with these requisites is mandatory.54

The trial and the appellate courts held that there was no valid consignation, because petitioner had failed to offer the
correct amount and to provide ample consignation notice to Sarao. 55 This conclusion is incorrect.

Note that the principal loan was ₱1,310,430 plus 4.5 per cent monthly interest compounded for six months. Expressing
her desire to pay in the fifth month, petitioner averred that the total amount due was ₱1,633,034.19, based on the
computation of Sarao herself.56 The amount of ₱2,911,579.22 that the latter demanded from her to settle the loan
obligation was plainly exorbitant, since this sum included other items not covered by the agreement. The property had
been used solely as secure ty for the ₱1,310,430 loan; it was therefore improper to include in that amount payments for
gasoline and miscellaneous expenses, taxes, attorney’s fees, and other alleged loans. When Sarao unjustly refused the
tender of payment in the amount of ₱1,633,034.20, petitioner correctly filed suit and consigned the amount in order to be
released from the latter’s obligation.

The two lower courts cited Article 1257 of the Civil Code to justify their ruling that petitioner had failed to notify
Respondent Sarao of the consignation. This provision of law states that the obligor may be released, provided the
consignation is first announced to the parties interested in the fulfillment of the obligation.

The facts show that the notice requirement was complied with. In her August 1, 1991 letter, petitioner said that should the
respondent fail to accept payment, the former would consign the amount. 57 This statement was an unequivocal
announcement of consignation. Concededly, sending to the creditor a tender of payment and notice of consignation --
which was precisely what petitioner did -- may be done in the same act.58

Because petitioners’ consignation of the amount of ₱1,633,034.20 was valid, it produced the effect of payment. 59 "The
consignation, however, has a retroactive effect, and the payment is deemed to have been made at the time of the deposit
of the thing in court or when it was placed at the disposal of the judicial authority." 60 "The rationale for consignation is to
avoid making the performance of an obligation more onerous to the debtor by reason of causes not imputable to him." 61

Third Issue:

Moral Damages and Attorney’s Fees

Petitioner seeks moral damages in the amount of ₱500,000 for alleged sleepless nights and anxiety over being
homeless.62 Her bare assertions are insufficient to prove the legal basis for granting any award under Article 2219 of the
Civil Code.63 Verily, an award of moral damages is uncalled for, considering that it was Respondent Sarao’s
accommodation that settled the earlier obligation of the spouses with the commercial bank and allowed them to retain
ownership of the property.

Neither have attorney’s fees been shown to be proper.64 As a general rule, in the absence of a contractual or statutory
liability therefor, sound public policy frowns on penalizing the right to litigate. 65 This policy applies especially to the present
case, because there is a need to determine whether the disputed contract was a pacto de retro sale or an equitable
mortgage.

Other Matters

In a belated Manifestation filed on October 19, 2004, Sarao declared that she was the "owner of the one-half share of
Jonas Ramos in the conjugal property," because of his alleged failure to file a timely appeal with the CA. 66 Such
declaration of ownership has no basis in law, considering that the present suit being pursued by petitioner pertains to a
mortgage covering the whole property.

Besides, it is basic that defenses and issues not raised below cannot be considered on appeal. 67
The Court, however, observes that Respondent Sarao paid real property taxes amounting to ₱67,567.10 to halt the
auction sale scheduled for October 8, 2004, by the City of Muntinlupa. 68 Her payment was made in good faith and
benefited petitioner. Accordingly, Sarao should be reimbursed; otherwise, petitioner would be unjustly enriched, 69 under
Article 2175 of the Civil Code which provides:

Art. 2175. Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter.

WHEREFORE, the Petition is partly GRANTED and the assailed Decision SET ASIDE. Judgment is hereby rendered:

(1) DECLARING (a) the disputed contract as an equitable mortgage, (b) petitioner’s loan to Respondent Sarao to be in
the amount of ₱1,633,034.19 as of July 30, 1991; and (c) the mortgage on the property -- covered by TCT No. 151784 in
the name of the Ramos spouses and issued by the Register of Deeds of Makati City --as discharged

(2) ORDERING the RTC to release to Sarao the consigned amount of ₱1,633,034.19

(3) COMMANDING Respondent Sarao to return to petitioner the owner’s copy of TCT No. 151784 in the name of the
Ramos spouses and issued by the Register of Deeds of Makati City

(4) DIRECTING the Register of Deeds of Makati City to cancel Entry No. 24057, the annotation appearing on TCT No.
151784

(5) ORDERING petitioner to pay Sarao in the amount of ₱67,567.10 as reimbursement for real property taxes

No pronouncement as to costs.

SO ORDERED.

SANTIAGO ORTEGA, Plaintiff-Appellant, v. ANDRES ORCINE and DOROTEO ESPLANA, Defendants-Appellees.

German G. Vilgera, for Plaintiff-Appellant.

Reyes & Dy-Liacco for Defendants-Appellees.

SYLLABUS

1. CIVIL LAW; CIVIL CODE; SPECIAL CONTRACTS; SALE; EXTINGUISHMENT; LEGAL REDEMPTION; ADJOINING
URBAN LAND. — This Court has already emphasized inprevious cases, that an owner of urban land may not redeem an
adjoining urban property where he does not allege in his complaint, much less prove at the trial, that the latter is so small
and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having
been bought merely for speculation It is evident that the purpose of the new Civil Code in allowing redemption of adjoining
urban land is to discourage speculation in real estate and the consequent aggravation of the housing problems in centers
of population.

2. ID.; ID.; ID.; ID.; ID.; ID.; ART. 1622 NOT APPLICABLE IN CASE AT BAR — Considering that the land which appellant
seeks to redeem is 4,452 square meters in area, which is far from being "so small and so situated that a major portion
thereof cannot be used for any practical purpose" for quite the contrary, it has been made a subdivision, and also that it
cannot be said that appellee Esplana bought the same "merely for speculation", since in less than eight months, from
March 27, 1965 when he bought it, to December 7, 1965 when the present complaint was filed, he had developed the
same into a subdivision for re-sale, which shows that he must have had that definite purpose in mind in buying the same,
it is Our holding that appellant cannot invoke Article 1622 of the Civil Code, We cannot hold that such purpose is
speculative.

3. STATUTORY CONSTRUCTION; "URBAN" LAND DEFINED CASE AT BAR. — It is clear to Us that the term urban in
Art 1622 does not necessarily refer to the nature of the land itself sought to be redeemed nor to the purpose to which it is
somehow devoted, but to the character of the community or vicinity in which it is found. In this sense, even if the land is
somehow dedicated to agriculture, it is still urban, in contemplation of this law, if it is located within the center of
population or the more or less populated portion of a city or town. In the case at bar, in view of the facts that: (1) the land
of appellant is a school site and (2) the one in question has been filled with earth, developed and subdivided into small
lots for residential purposes, it is quite safe to conclude that both lands are in the population section of the town and are
accordingly urban.

DECISION

BARREDO, J.:

Appeal from the decision of the Court of First Instance of Camarines Sur dismissing its civil Case No. 6043 — an action
filed therein by herein appellant Santiago Ortega, owner of a parcel of land in Iriga, Camarines Sur occupied and used as
school site by the Saint Anthony Academy, against herein appellees Andres Orcine and Doroteo Esplana, for the purpose
of enforcing an alleged right of legal redemption under Article 1622 of the Civil Code over an adjoining 4,452-square-
meter parcel of land.

The appealed decision is one practically on the pleadings as may be gleaned from the following pertinent portions
thereof:jgc:chanrobles.com.ph

"This case was instituted by plaintiff to enable him to redeem the property sold by defendant Andres Orcine to his
codefendant Doroteo Esplana.

"Originally plaintiff’s complaint was based on Art. 1621, New Civil Code. Motion to dismiss was timely presented by the
defendants, opposed by the plaintiff, and this Court resolving said motion to dismiss, issued an order dated March 3,
1966, which, among others, stated as follows:chanrob1es virtual 1aw library

x x x

‘From the aforesaid decision it is indeed clear that the right of legal redemption can be availed of only by adjoining owner
if the two adjacent lands are both rural. The absence, however, of an allegation to that effect in the complaint will only
amount to a vagueness or uncertainty of the complaint which will entitle the defendant to ask for a bill of particulars but not
to an outright dismissal of the case.

‘. . . The best that the plaintiff can do is to file a complaint against the defendant vendor to compel the latter to notify him in
writing of the sale of his land.’

"It was because of that order that on March 8, 1966, defendants filed their motion for Bill of Particulars or Motion for
Clarification (p. 20, Records), and this Court in its order dated April 21, 1966, ordered the plaintiff.

‘To be specific in his pleading as to whether or his land which adjoins that upon which he wishes to exercise the legal right
of redemption is also rural, within 10 days from receipt of this order.’ (p. 27, Records)

"Plaintiff obviously in obedience to the above order of Court, presented on April 28, 1966, an Amended Complaint (pp. 28-
32, Records) — the most notable change in it is that plaintiff seeks now to exercise his alleged right of legal redemption
under Article 1622, (Objection to Motion to Dismiss Amended Complaint, pp. 39-40, Records) instead of Article 1621, New
Civil Code, as was his intention in the original complaint.

"Defendant presented again a motion to dismiss the amended complaint on exactly the same grounds as the former
motion to dismiss, which likewise, was denied by this Court in its order dated June 21, 1966 (pp. 45-46, Records). Motion
for reconsideration was equally denied by order of this Court dated July 25, 1966 (p. 52, Records).

"All the above proceedings were had under then presiding Judge Jose Surtida of this Court, and all the resolutions above
adverted to were made by him.

"A pre-trial was had in the case. This time under a different Judge — Judge de la Cruz. In the order of this Court dated
December 8, 1966, Judge de la Cruz gave the defendants ten days to file a motion to dismiss — which the defendants did
on December 15, 1966, and was just a reiteration of the reasons and arguments urged on this Court in the previous
motions to dismiss, and was also denied by this Court per order dated January 4, 1967 (p. 1, records).

"Such was the situation of this case when the undersigned presiding Judge of this Court took over.

"This Court believes that based on the pleadings submitted in this case by both parties, the case can be decided on the
merits. The parties and their respective counsels felt the same, that is why they agreed to have the case set for Oral
arguments before this Court and after such argument, the same shall be submitted for decision, and no other proceedings
shall be taken on the case. (order dated July 13, 1967, pp. 83-84, Records)

"There is no dispute that the land sold to the defendant Esplana on March 27, 1965, for P10,000.00 by his co-defendant
Orcine was a ricefield, an agricultural land (rural); that after the same was sold, defendant Esplana had it filled with earth
and then had it subdivided into small lots for residential purposes. The land has then ceased to be rural, and is now urban
land. Likewise, the land owned by the plaintiff is adjacent to the land in question, not separated by a creek, drain, ravines,
road and apparent servitude for the benefit of other estates, was formerly an agricultural land (rural) but at the time of the
sale made by Orcine to Esplana on March 27, 1965, the same was already urban, and in fact, was and is being used and
occupied as school site of St. Anthony Academy, a private school."cralaw virtua1aw library

Reversal of the dismissal is now sought by appellant upon the claim that:jgc:chanrobles.com.ph

"I. THE LOWER COURT ERRED IN HOLDING THAT DESPITE THE CONVERSION BY APPELLEE DOROTEO
ESPLANA OF THE LAND IN QUESTION FROM RURAL TO URBAN LAND APPELLANT IS NOT ENTITLED TO THE
RIGHT OF REDEMPTION OR PRE-EMPTION UNDER ARTICLE 1622 OF THE CIVIL CODE.

"II. THE LOWER COURT ERRED IN HOLDING THAT APPELLEE DOROTEO ESPLANA DID NOT PURCHASE THE
LAND IN QUESTION FOR SPECULATIVE PURPOSE.

"III. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT IS NOT ENTITLED TO WRITTEN NOTICE AS
PROVIDED FOR UNDER ARTICLE 1623 OF THE NEW CIVIL CODE."cralaw virtua1aw library

The provisions of law involved by appellant read as follows:jgc:chanrobles.com.ph

"ART. 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be
used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-
sold, the owner of any adjoining land has a right of pre-emption at a reasonable price.

"If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable
price.

"When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the owner whose
intended use of the land in question appears best justified shall be preferred."cralaw virtua1aw library

Appellant contends under his first assignment of error that under Article 1622, above-quoted, he has the right of legal
redemption over the land in question, since, it is not disputed that he is the owner of the urban property adjoining said land
on the North and the latter had already been converted into urban land by appellee Esplana at the time he (appellant)
exercised his light, hence the lower court erred in holding that he is not entitled to such right on the ground, stated by His
Honor, that the time of the sale of the said land by Orcine to Esplana on March 27, 1965, the land sought to be redeemed
and his land were not of the same kind — that of appellant being urban land while that of appellees rural. In essence, the
position of appellant is that what governs for purposes of the redemption provided for in the law is the nature or character
of the adjoining land at the time redemption is actually sought and not at the time of its sale to the person from whom
redemption is asked.

We believe it is idle to rule in this case on appellant’s contention. The legal issue he raises involves many aspects which
do not appear to have been dealt with by the parties whether in their pleadings here or in the court below and without
which it is not possible to resolve properly the point in question. Indeed, even the question alone of what is rural and what
is urban land is itself one that is not easy to resolve. Even under Article 1523 of the Spanish Civil Code which, incidentally,
referred to rural land only, the Spanish authorities preferred to make the needed classification only on a case to case
basis. 1 This, notwithstanding that it was clear to them that the reason underlying the provision is to encourage better
development and utilization of agricultural lands. According to Manresa:jgc:chanrobles.com.ph

"Limitado dicho derecho a las fincas rústicas, cuya cabida no exceda de una hect rea, es visto que el espiritu del Código
no es otro que favorecer el desarrollo de la propiedad territorial y de los intereses de la agricultura. Una finca, cuya
cabida no excede de una hect rea, no produce, por regla general, lo suficiente para mantener a una familia: su cultivo
teniendo que transportar por entre heredades ajenas los instrumentos de labranza, no se hace en condiciones
economicas; lo mismo puede decirse de la saca y transporte de los frutos. Todas estas dificultades desaparecen, si al
venderse la finca, la compra un propietario que tenga tierras colindantes: se favorece de este modo el inters público,
porque la producción aumenta, se atiende al inters privado del retrayente y no es de apreciar ningún ostensible perjuicio
para el vendedor ni para el comprador." (10 Manresa, Codigo Civil Español, 328.)

which reasoning was echoed by Justice Romualdez in Cortes v. Flores, 2 thus:jgc:chanrobles.com.ph

"Hallamos acertado este criterio. La intención de la ley al conceder este retracto es proteger la agricultura, haciendo que
los terrenos agricolas pequeños se unan a sus colindantes bajo un solo dueño para su mejor expletación. Si el terreno
colindante con el que se trata de retraer no es agricola, entonces es vano el retracto, no responde al propósito de la lev.

"‘Est ajustada a este precepto’ dice el Tribunal Supremo de España en su fallo de 12 de marzo de 1902, ‘la sentencia que
desestima la demanda de retracto. cuando las dos o una sola de las fincas, son urbanas.’"

On the assumption then that the land in question is rural or that in legal contemplation it continued to be such even after it
was developed, for purposes of determining appellant’s right of redemption, it is obvious that since appellant’s land is
admittedly urban, the redemption sought cannot be allowed because it would not be in line with the above-discussed
purposes of redemption of rural land contemplated in Article 1621 of the present Civil Code. Incidentally, this provision
which is substantially Article 1523 of the Spanish Civil Code above-mentioned, was the one firstly invoked by appellant in
the trial court. Hence, the above ruling in Cortes v. Flores is applicable to this case.

On the other hand, even on the assumption that the land in controversy is urban, still Article 1622 of the present Civil
Code which is not invoked by appellant does not support his case. This Court has already emphasized in previous cases,
3 that an owner of urban land may not redeem an adjoining urban property where he does not allege in his complaint,
much less prove at the trial, that the latter is so small and so situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought merely for speculation. In Soriente v. Court of Appeals, 4
We held:jgc:chanrobles.com.ph

"Said Article 1622 reads:chanrob1es virtual 1aw library

‘Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner
of any adjoining land has a right of pre-emption at a reasonable price. (Emphasis supplied.)

"This provision is not in point. It has been neither proved nor alleged, either that the land purchased by appellant from
Lamberto Reyes ‘is so small and so situated that a major portion thereof cannot be used for any practical purpose,’ or that
it has ‘been bought merely for speculation,’ or, even, that it ‘is about to be resold.’ Besides, it is alleged in appellant’s
answer ‘that the land sought to be redeemed by plaintiff is . . . sufficiently big in area and so situated that the major portion
or the whole thereof can serve comfortably as workshop and storage of machineries and equipments which defendant is
putting up in the exercise and furtherance of his profession as professional mechanical engineer and associate electrical
engineer;’ that ‘in fact a portion of said lot is actually used for residential purposes . . .;’ and ‘that defendant has no
intention now or in the future to dispose of or sell the property subject matter of the present action to any person . . ..’
What is more, appellee does not context appellant’s evidence on these allegations. Hence, the first two assignments of
error are well taken."cralaw virtua1aw library

It may be mentioned here that the right of redemption of adjoining urban land did not exist in the Spanish Civil Code,
which confined itself to the redemption of rural lands. It was introduced here only by the new Civil Code. Whereas, as
already observed, the objective of the right of redemption of adjoining rural land under the old code, as adopted in the new
Civil Code, is to encourage the maximum development and utilization of agricultural lands, it is evident that the purpose of
the new Civil Code in allowing redemption of adjoining urban land is to discourage speculation in real estate and the
consequent aggravation of the housing problems in centers of population. As a matter of fact, having in view this
legislative purpose, We are of the opinion that whatever difficulty may exist in determining if a land is rural for the proper
application of Article 1621, as previously noted to be the view of Spanish authorities, no such problem arises in regard to
the urban lands contemplated in Article 1622 of the Code. It is clear to Us that the term urban in this provision does not
necessarily refer to the nature of the land itself sought to be redeemed nor to the purpose to which it is somehow devoted,
but to the character of the community or vicinity in which it is found. In this sense, even if the land is somehow dedicated
to agriculture, it is still urban, in contemplation of this law, if it is located within the center of population or the more or less
populated portion of a city or town. 5

In the case at bar, appellant himself submits that the land in question should be considered as urban. Actually, the facts
on record do not sufficiently show where it is situated. In view, however, of the facts that: (1) the land of appellant is a
school site and (2) the one in question has been filled with earth, developed and subdivided into small lots for residential
purposes, it is quite safe to conclude that both lands are in the populated section of the town and are accordingly urban.

Now, considering that the land which appellant seeks to redeem is 4,452 square meters in area, which is far from being
"so small and so situated that a major portion thereof cannot be used for any practical purpose" for quite the contrary, it
has been made a subdivision, and also that it cannot be said that appellee Esplana bought the same "merely for
speculations" since in less than eight months, from March 27, 1965 when he bought it, to December 7, 1965 when the
present complaint was filed, he had developed the same into a subdivision for re-sale, which shows that he must have
had definite purpose in mind in buying the same, it is Our holding that appellant cannot invoke Article 1622 of the Civil
Code. We cannot hold that such purpose is speculative. As appellees aptly point out, according to Webster’s International
Dictionary to speculate means:jgc:chanrobles.com.ph

"To enter into a business transaction or venture from which the profits or return are conjectural because the undertaking is
outside of the ordinary course of business to purchase or sell with the expectation of profiting by anticipated, but
conjectural, fluctuations in price; often in a somewhat depreciative sense, to engage in harardous business transaction for
the chance of an unusually large profit; as to speculate in coffee, in sugar or in bank stock." (2nd Edition p. 2417,
Webster’s International Dictionary.)

Consequently, all of appellants’ assignments of error must be as they are hereby overruled.

WHEREFORE, the decision appealed from is affirmed, with costs against Appellant.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Villamor and Makasiar, JJ.,
concur.
G.R. No. 159755 June 18, 2009

GRACE GOSIENGFIAO GUILLEN, deceased EMMA GOSIENGFIAO GALAOS, represented by her daughter
EMELYN GALAOS-MELARION, deceased FRANCISCO GOSIENGFIAO, JR., represented by his widow EDELWISA
GOSIENGFIAO, JACINTO GOSIENGFIAO, and absentees ESTER GOSIENGFIAO BITONIO, NORMA
GOSIENGFIAO, and PINKY BUENO PEDROSO, represented by their attorney-in-fact JACINTO
GOSIENGFIAO, Petitioners,
vs.
THE COURT OF APPEALS, HON. JIMMY HENRY F. LUCZON, JR., in his capacity as Presiding Judge of the
Regional Trial Court, Branch I, Tuguegarao, Cagayan, LEONARDO MARIANO, AVELINA TIGUE, LAZARO
MARIANO, MERCEDES SAN PEDRO, DIONISIA M. AQUINO, and JOSE N.T. AQUINO, Respondents.

DECISION

BRION, J.:

At issue in this petition is the timeliness of the exercise of the right of legal redemption that this Court has recognized in a
final and executory decision.

The petitioners, heirs of Francisco Gosiengfiao (petitioner-heirs), assail in this Rule 45 petition for review on certiorari the
January 17, 2003 decision and September 9, 2003 resolution of the Court of Appeals (CA) in CA-G.R. CV No.
63093.1 The assailed CA decision ruled that the thirty-day period for the exercise of the right of legal redemption should
be counted, not from the notice of sale by the vendor but, from the finality of the judgment of this Court.

BACKGROUND FACTS

I. G.R. No. 101522 - Mariano v. Court of Appeals

The previous case where we recognized the petitioner-heirs’ right of legal redemption is Mariano v. CA.2 To quote, by way
of background, the factual antecedents that Mariano recognized:

It appears on record that the decedent Francisco Gosiengfiao is the registered owner of a residential lot located at Ugac
Sur, Tuguegarao, Cagayan, particularly described as follows, to wit:

The eastern portion of Lot 1351, Tuguegarao Cadastre, and after its segregation now designated as Lot 1351-A, Plan
PSD-67391, with an area of 1,346 square meters.
and covered by Transfer Certificate of Title (TCT) No. T-2416 recorded in the Register of Deeds of Cagayan.

The lot in question was mortgaged by the decedent to the Rural Bank of Tuguegarao (designated as mortgagee bank, for
brevity) on several occasions before the last, being on March 9, 1956 and January 29, 1958.

On August 15, 1958, Francisco Gosiengfiao died intestate survived by his heirs, namely: Third-Party Defendants: wife
Antonia and Children Amparo, Carlos, Severino and herein plaintiffs-appellants Grace, Emma, Ester, Francisco, Jr.,
Norma, Lina (represented by daughter Pinky Rose), and Jacinto.

The loan being unpaid, the lot in dispute was foreclosed by the mortgagee bank, and in the foreclosure sale held on
December 27, 1963, the same was awarded to the mortgagee bank as the highest bidder.

On February 7, 1964, third-party defendant Amparo Gosiengfiao-Ibarra redeemed the property by paying the amount of
₱1,347.89 and the balance of ₱423.35 was paid on December 28, 1964 to the mortgagee bank.

On September 10, 1965, Antonia Gosiengfiao on her behalf and that of her minor children Emma, Lina, Norma, together
with Carlos and Severino, executed a "Deed of Assignment of the Right of Redemption" in favor of Amparo G. Ibarra
appearing in the notarial register of Pedro (Laggui) as Doc. No. 257, Page No. 6, Book No. 8, Series of 1965.

On August 15, 1966, Amparo Gosiengfiao sold the entire property to defendant Leonardo Mariano who subsequently
established residence on the lot subject of this controversy. It appears in the Deed of Sale dated August 15, 1966 that
Amparo, Antonia, Carlos and Severino were signatories thereto.

Sometime in 1982, plaintiff-appellant Grace Gosiengfiao learned of the sale of said property by the third-party defendants.
She went to the Barangay Captain and asked for a confrontation with defendants Leonardo and Avelina Mariano to
present her claim to the said property.

On November 27, 1982, no settlement having been reached by the parties, the Barangay Captain issued a certificate to
file action.

On December 8, 1982, defendant Leonardo Mariano sold the same property to his children Lazaro F. Mariano and
Dionicia M. Aquino as evidenced by a Deed of Sale notarized by Hilarion L. Aquino as Doc. No. 143, Page No. 19, Book
No. V, Series of 1982.

On December 21, 1982, plaintiffs Grace Gosiengfiao, et al. [herein petitioner-heirs] filed a complaint for "recovery of
possession and legal redemption with damages" against defendants Leonardo and Avelina Mariano [herein respondent-
buyers]. Plaintiffs alleged in their complaint that as co-heirs and co-owners of the lot in question, they have the right to
recover their respective shares in the said property as they did not sell the same, and the right of redemption with regard
to the shares of other co-owners sold to the defendants.

Defendants in their answer alleged that the plaintiffs has [sic] no cause of action against them as the money used to
redeem the lot in question was solely from the personal funds of third-party defendant Amparo Gosiengfiao-Ibarra, who
consequently became the sole owner of the said property and thus validly sold the entire property to the defendants, and
the fact that defendants had already sold the said property to their children, Lazaro Mariano and Dionicia M. Aquino.
Defendants further contend that even granting that the plaintiffs are co-owners with the third-party defendants, their right
of redemption had already been barred by the Statute of Limitations under Article 1144 of the Civil Code, if not by laches.

On September 16, 1986, the trial court dismissed the complaint before it, as "only Amparo redeemed the property from
the bank" using her money and solely in her behalf so that the petitioner-heirs had lost all their rights to the property.3 The
trial court explained that what Gosiengfiao’s heirs inherited from him was only the right to redeem the property, as it was
then already owned by the bank. By redeeming the property herself, Amparo became the sole owner of the property, and
the lot ceased to be a part of Gosiengfiao’s estate.

On May 13, 1991, the CA reversed the trial court’s decision, declaring the petitioner-heirs "co-owners of the property who
may redeem the portions sold" to the respondent-buyers. The CA denied the respondent-buyers’ motion for
reconsideration;4 thus, they came to this Court to question the CA’s rulings.

Our Decision, promulgated on May 28, 1993, affirmed the appellate court decision. 5 It stated in its penultimate paragraph
and in its dispositive portion that:
Premises considered, respondents have not lost their right to redeem, for in the absence of a written notification of the
sale by the vendors, the 30-day period has not begun to run.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioners.

Aside from this express declaration, the Court explained that, as the property was mortgaged by the decedent, co-
ownership existed among his heirs during the period given by law to redeem the foreclosed property. Redemption of the
whole property by co-owner Amparo did not vest in her the sole ownership over the property, as the redemption inured to
the benefit of all co-owners; redemption will not put an end to co-ownership, as it is not a mode of terminating a co-
ownership. The Court also distinguished 6 between Articles 10887 and 16208 of the Civil Code and ruled as inapplicable
the doctrine that "the giving of a copy of the deed of sale to the co-heirs as equivalent to a notice."9 On July 12, 1993, this
Court denied the respondent-buyers’ motion for reconsideration. The entry of judgment was made on August 2, 1993.

II. Execution of the Mariano Decision

(G.R. No. 101522) By the Lower Court

a. The Incidents

On April 26, 1994, the petitioner-heirs, as winning parties, filed a motion for the execution of our Decision in G.R. No.
101522, which motion the trial court granted on May 11, 1994.10 The next day, the clerk of court issued a writ of execution
and a notice to vacate.11 The respondent-buyers moved for a reconsideration of the May 11, 1994 order and prayed for
the nullification of the notice to vacate, arguing that the dispositive portion of the decision to be executed merely declared
and recognized the petitioner-heirs as co-owners of the lot and did not authorize the sheriff to remove their houses from
the land. They argued they can remain in possession of the property as co-owners because the judgment did not divest
them of possession.12 The sheriff later informed the trial court that copies of the notice to vacate and the writ of execution
were served on, but were not signed by, the respondent-buyers. After the expiration of the 45-day period to vacate, the
sheriff went back to check if the respondent-buyers had complied. They had not.

On March 31, 1995, the petitioner-heirs filed a notice of redemption with the court of origin, duly served on the
respondent-buyers, for the shares of Amparo, Antonia, Carlos, and Severino, and tendered the redemption price of
₱53,760.13 On April 18, 1995, the sheriff issued a certificate of redemption after the first and second buyers refused to
sign the notice and accept the tender, and after the aggrieved heirs deposited the redemption money with the court.14 On
the same date, the sheriff issued a return of service informing the court that on March 31, 1995, the redemption money
was tendered to, but was not accepted by, Engr. Jose Aquino who received, but did not sign, the notice of redemption. 15

From 1994 to 1995, the respondent-buyers filed four motions: a motion for reconsideration of the May 11, 1994 order
granting the motion for the issuance of a writ of execution;16 a motion to ascertain the redemptive shares of third-party
defendants;17 a motion to declare the petitioner-heirs to have lost their right of legal redemption;18 and a motion to
expunge from the records the petitioner-heirs’ notice of redemption.19

b. The Judge Beltran Rulings

On December 4, 1995, the trial court, through Judge Orlando Beltran, 20 issued an order (1) recalling the writ of execution
for "incorrectly" quoting the dispositive portion of the CA decision and nullifying the notice to vacate; (2) denying the
motion to ascertain third-party defendants’ shares, as Amparo’s redemption inured to the benefit of her co-heirs, thus,
each of the 10 heirs has 1/10 equal share of the lot; (3) denying the third motion as no written notice of the sale has been
served on the petitioner-heirs by the vendor or by the vendee; and (4) denying the last motion for lack of legal and factual
basis.21 The trial court thereafter denied the respondent-buyers’ motion for reconsideration that followed.22

On May 30, 1996, the court denied their motion to nullify the certificate of redemption and cancellation of the certificate at
the back of TCT No. T-2416; the respondent-buyers moved to reconsider this denial on July 9, 1996. 23

On June 11, 1996, the respondent-buyers filed an omnibus motion for reconsideration, arguing that the December 4, 1995
order is contrary to law, jurisprudence, and the decisions of the CA and this Court on this case.24

On July 15, 1996, the respondent-buyers again filed a motion for reconsideration of the May 30, 1996 order denying their
motion to nullify the certificate of redemption and to order its cancellation at the back of TCT No. T-2416, which move the
petitioner-heirs opposed. They argued that the decision of this Court was not self-executing, and the sheriff had no power
to do anything without a court sanction. They also argued that it was untrue that the basis of the April 18, 1995 certificate
of redemption was the May 31, 1991 decision of the CA, as affirmed by this Court, because the certificate was "inexistent"
when those decisions were promulgated.

c. The Judge Luczon Rulings

On September 26, 1997, the trial court, through Judge Jimmy Henry F. Luczon, Jr., 25 issued an order granting the
respondent-buyers’ omnibus motion for reconsideration of the December 4, 1995 order, declaring the petitioner-heirs to
have lost their right of redemption, and nullifying the notice and the certificate of redemption. 26 Noting the absence of a
written notice of sale or manifestation received by the petitioner-heirs, the trial court deemed as notice of sale this Court’s
decision which became final and executory on August 2, 1993. The trial court considered September 1, 1993 as the last
day of the redemption period, and, consequently, declared that the notice and the certificate of redemption were filed late.

The trial court denied the petitioner-heirs’ motion for reconsideration of the September 26, 1997 order, ruling that the
introduction of the deed of sale as the parties’ evidence in the trial and higher courts was sufficient to give the petitioner-
heirs written notice of the sale; and that the Civil Code does not require any particular form of written notice or distinctive
method for written notification of redemption.

III. The Assailed Court of Appeals Decision

The petitioner-heirs thereupon went to the CA on a petition for certiorari to question the lower court’s orders. (They had
earlier filed an Appeal Ad Cautelam which the CA consolidated with the petition for certiorari.)27 As grounds, they cited the
lower court’s lack of jurisdiction since the motions ruled upon were really initiatory pleadings based on causes of action
independent of, although related to, Civil Case No. 3129, and that no certificate of non-forum shopping was attached, nor
any docket fees paid. They also claimed that the respondent-buyers’ motion was a prohibited second motion for
reconsideration that the lower court could not rule upon, and one that was filed beyond the 15-day period of
appeal.28 Finally, they faulted the lower court for ignoring the law of the case, as established in Mariano.

The respondent-buyers questioned the petition on technicalities, but focused on the issue of whether the final and
executory decision of this Court in Mariano was effectively a written notice of sale to the heirs; they continued to maintain
that the redemption period should run from the finality of our Decision, and, thus, had already lapsed.

The CA followed the respondent-buyers’ lead and likewise focused on the effect of our Decision on the petitioner-heirs’
redemption of the disputed co-owned property. To quote the appellate court:

The pivot of inquiry here is: whether or not the final and executory Decision of the Supreme Court constitutes written
notice to plaintiffs-appellants [herein petitioner-heirs].

xxx

It is undisputed that the Highest Magistrate’s Decision in G.R. 101522 had become final and executory on 02 August 1993
and that it was only on 26 April 1994 or after the lapse of more than eight (8) months from the finality of the said Decision
that plaintiffs-appellants filed a Motion for Execution.

The Entry of Judgment of G.R. 101522 states as follows, thus:

This is to certify that on May 26, 1993 a decision rendered in the above-entitled case was filed in this Office, the
dispositive portion of which reads as follows:

Premises considered, respondents have not lost their right to redeem, for in the absence of a written certification of the
sale by the vendors, the 30-day period has not even begun to run.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioners.

SO ORDERED.

and that the same has, on August 2, 1993 become final and executory and is hereby recorded in the book of Entries of
Judgment.
As it is an established procedure in court that when an entry of judgment was issued, it means that the contending parties
were already properly notified of the same either through the parties themselves or through their respective counsels.

Thus, the very existence of the Supreme Court’s Entry of Judgment negates plaintiffs-appellants’ claim that no notice of
what [sic] nature was received by them insofar as G.R. 101522 was concerned.

Concomitantly, the Court concurs with the argument of respondents-appellees [herein respondent-buyers] that the thirty
(30) days grace period within which to redeem the contested property should be counted from 02 August 1993.

As they failed to redeem the same in accordance with the instruction of the High Court, plaintiffs-appellants lost all the
rights and privileges granted to them by the Supreme Court in G.R. 101522.

From the foregoing facts, it is clear that plaintiffs-appellants had slept from their rights and their failure to exercise the
same within the period allowed by the High Court is deemed a waiver on their part.

All told, the Court holds and so rules that the court a quo erred not in reversing itself.

To summarize, the appellate court ruled that (1) because an entry of judgment had been made, the Mariano Decision is
deemed to have been served on the petitioner-heirs; (2) based on this premise, the appellate court held that the 30-day
redemption period should run from August 2, 1993 (the date of the entry of judgment); and (3) for the petitioner-heirs’
failure to redeem within that period, they "lost all the rights and privileges granted to them by the Supreme Court in G.R.
No. 101522."

THE PETITION

Faced with the CA’s ruling and the denial of their motion for reconsideration, the petitioner-heirs filed the present petition
with this Court. They argue in this petition and in their memorandum that the January 17, 2003 decision of the CA is
erroneous for the reasons outlined below.

First. They clarify that their theory that the Decision of this Court is not the written notice required by law was not anchored
on lack of notice of that decision, but on Article 1623 of the Civil Code: the written notice should be given by the vendor,
not by this Court by virtue of a final decision. The CA erred and abused its discretion in concluding that they lost their right
of redemption under this Court’s Decision because the start of the redemption period is not reckoned from the date of the
finality of that decision; the Decision is not the source of their right to redeem.

Second. They posit a redemption period is not a prescriptive period, and the lower courts erred in considering the 30-day
period as an extinctive prescriptive period because legal redemption under Article 1623 does not prescribe. The period
has not even begun to run. Their use of the services of the sheriff to exercise their right of redemption through a motion
for execution was approved by this Court as a method of redemption.

In their Comment, the respondent-buyers stress that the main issue in this petition is whether the petitioner-heirs’ right of
legal redemption, as recognized in G.R. No. 101522, had been lost. The "non-reviewable" findings of facts of the trial and
appellate courts that plaintiffs exercised their right of redemption late, and that the decision in G.R. No. 101522 had
already become final, bind this Court.

In their Reply to Comment, the petitioner-heirs argue that the 30-day redemption period under Article 1623 cannot be
reckoned from the date of finality of this Court’s Decision in G.R. No. 101522 because it is not and cannot be a "notice" in
writing by the vendor; this Court is not the vendor and a written notice by the vendor is mandatory for the 30-day
redemption period to run. The Decision negates the notion that it serves as a "notice," because it clearly states that the
period of redemption had not begun to run. Having previously exercised the right of redemption, the execution was
nothing more than the implementation of what had been the final ruling of this Court.lavvphil.net

In their memorandum, the respondent-buyers maintain that the petitioner-heirs’ "time-barred" right to redeem the property
was not cured by the notice of redemption and by their "late" tender of the redemption money; since the petitioner-heirs
were exercising their right of legal redemption by virtue of the Decisions of this Court and the CA, it was incumbent upon
them to effectuate the steps of redemption seasonably. The "belated" notice of redemption and tender of payment of
redemption price were not bona fide, as they were not made within the required period.

THE COURT’S RULING

The parties’ positions all focus, and rightly so, on the main issue: when did the 30-day period to redeem the subject
property start? This is a question of law, not of fact, as the respondent-buyers erroneously claim; thus, the lower courts’
findings cannot bind this Court.

The appellate court unfortunately failed to appreciate the breadth and significance of this issue, simply ruling on the case
based on the implications of an entry of judgment. Because of this myopic view, it completely missed the thrust and
substance of the Mariano Decision.

We grant the petition and hold – pursuant to the Mariano Decision and based on the subsequent pleaded developments –
that the petitioner-heirs have effectively exercised their right of redemption and are now the owners of the redeemed
property pursuant to the Sheriff’s Certificate of Redemption.

A significant aspect of Mariano that the CA failed to appreciate is our confirmation of the ruling that a written notice must
be served by the vendor.29 We ruled as follows:

The requirement of a written notice has long been settled as early as in the case of Castillo v. Samonte (106 Phil. 1023
[1960]) where this Court quoted the ruling in Hernaez v. Hernaez (32 Phil. 214), thus:

Both the letter and spirit of the New Civil Code argue against any attempt to widen the scope of the notice specified in
Article 1088 by including therein any other kind of notice, such as verbal or by registration. If the intention of the law had
been to include verbal notice or any other means of information as sufficient to give the effect of this notice, then there
would have been no necessity or reasons to specify in Article 1088 of the New Civil Code that the said notice be made in
writing for, under the old law, a verbal notice or information was sufficient.

xxx

The ruling in Castillo v. Samonte, supra, was reiterated in the case of Garcia v. Calaliman (G.R. No. 26855, April 17,
1989, 172 SCRA 201) where We also discussed the reason for the requirement of the written notice. We said:

Consistent with aforesaid ruling, in the interpretation of a related provision (Article 1623 of the New Civil Code) this Court
had stressed that written notice is indispensable, actual knowledge of the sale acquired in some other manners by the
redemptioner, notwithstanding. He or she is still entitled to written notice, as exacted by the code to remove all uncertainty
as to the sale, its terms and its validity, and to quiet any doubt that the alienation is not definitive. The law not having
provided for any alternative, the method of notifications remains exclusive, though the Code does not prescribe any
particular form of written notice nor any distinctive method for written notification of redemption (Conejero et al. v. Court of
Appeals et al., 16 SCRA 775 [1966]; Etcuban v. Court of Appeals, 148 SCRA 507 [1987]; Cabrera v. Villanueva, G.R. No.
75069, April 15, 1988).

We also made the factual finding that:

The records of the present petition, however, show no written notice of the sale being given whatsoever to private
respondents [petitioner-heirs]. Although, petitioners allege that sometime on October 31, 1982 private respondent, Grace
Gosiengfiao was given a copy of the questioned deed of sale and shown a copy of the document at the Office of the
Barangay Captain sometime November 18, 1982, this was not supported by the evidence presented. x x x

From these premises, we ruled that "[P]etitioner-heirs have not lost their right to redeem, for in the absence of a written
notification of the sale by the vendors, the 30-day period has not even begun to run." These premises and conclusion
leave no doubt about the thrust of Mariano: The right of the petitioner-heirs to exercise their right of legal redemption
exists, and the running of the period for its exercise has not even been triggered because they have not been notified in
writing of the fact of sale. This is what our Decision held, as the penultimate paragraph and the dispositive portion clearly
state. This is the law of the case that should guide all other proceedings on the case, particularly its execution.30 For the
Luczon ruling and the CA to miss or misinterpret the clear ruling in Mariano – the Decision subject of the execution – is a
gross and patent legal error that cannot but lead to the reversal of their decisions.

In light of this conclusion, we see no need to discuss the other presented issues. We hold that the computation of the 30-
day period to exercise the legal right of redemption did not start to run from the finality of the Mariano Decision, and that
the petitioner-heirs seasonably filed, via a writ of execution, their notice of redemption, although they applied for the
issuance of the writ some eight (8) months after the finality of the Decision. In seeking the execution of a final and
executory decision of this Court, what controls is Section 11, Rule 51, 31 in relation to Section 2, Rule 56,32 of the Rules of
Court. Before the trial court executing the decision, Section 6, Rule 39, 33 on the question of timeliness of the execution,
governs. Eight (8) months after the finality of the judgment to be executed is still a seasonable time for execution by
motion pursuant to this provision. The writ, notice of redemption, and the tender of payment were all duly served, so that it
was legally in order for the Sheriff to issue a Certificate of Redemption when the respondent-buyers failed to comply with
the writ and to accept the notice and the tender of payment.

WHEREFORE, in light of the foregoing, we hereby GRANT the petition and, accordingly, REVERSE and SET ASIDE the
January 17, 2003 decision and September 9, 2003 resolution of the Court of Appeals in CA-G.R. CV No. 63093. The
petitioner-heirs’ exercise of their right of redemption of co-heirs Amparo G. Ibarra, Antonio C. Gosiengfiao, Carlos
Gosiengfiao, and Severino Gosiengfiao’s shares over Lot 1351-A, Plan Psd-67391, covered by Transfer Certificate of Title
No. T-2416, and located in Ugac Sur, Tuguegarao, Cagayan, in view of their March 31, 1995 Notice of Redemption and
the April 18, 1995 Certificate of Redemption issued by the Sheriff of the Regional Trial Court, Branch IV, Tuguegarao,
Cagayan, is hereby declared VALID and LEGAL.

Costs against the respondents.

SO ORDERED.
G.R. No. 141613 December 16, 2005

SENEN B. AGUILAR, Petitioner,

vs.
VIRGILIO B. AGUILAR and ANGEL B. AGUILAR, Respondents,

x-----------------------------------------------x

ALEJANDRO C. SANGALANG,

Intervenor-Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Assailed in this petition for review on certiorari are the Decision1 and Resolution2 of the Court of Appeals, dated June 11,
1999 and January 11, 2000, respectively, in CA-G.R. CV No. 55750.

The parties in this case are brothers, except Alejandro Sangalang, herein intervenor-respondent. As will be subsequently
discussed, this is the second time that the brothers Aguilar seek the intervention of this Court regarding the same facts
and the same subject matter. The first was in Aguilar v. Court of Appeals, G.R. No. 76351decided on October 29, 1993
against Senen B. Aguilar.3 It is time to writ finis to this family wrangling.

On October 28, 1993, Senen and Virgilio purchased a house and lot located in Parañaque City, Metro Manila for the
benefit of their father, Maximiano Aguilar (now deceased). The brothers wanted their father to enjoy his retirement in a
quiet neighborhood. On February 23, 1970, they executed a written agreement stipulating that their shares in the house
and lot would be equal; and that Senen would live with their father on condition that he would pay the Social Security
System (SSS) the remaining loan obligation of the former owners.

In 1974, their father died. Virgilio then demanded that Senen vacate the house and that the property be sold, the proceeds
to be divided between them. Senen refused to comply with Virgilio’s demand.

On January 12, 1979, Virgilio filed a complaint with the Court of First Instance (now Regional Trial Court) of Rizal at Pasay
City for specific performance. Virgilio prayed that Senen be compelled to sell the property so that the proceeds could be
divided between them.

However, during the pre-trial, neither Senen nor his counsel appeared. Thus, Senen was declared as in default by the trial
court and Virgilio was allowed to present his evidence ex-parte.

On July 26, 1979, the trial court rendered its Decision, declaring the brothers co-owners of the house and lot and are
entitled to equal shares; and ordering that the property be sold, the proceeds to be divided equally between them. The
trial court also ordered Senen to vacate the property and to pay Virgilio rentals with interests corresponding to the period
from January 1975 until he leaves the premises.

On appeal, docketed as CA-G.R. CV No. 03933, the Court of Appeals reversed the trial court’s Decision.

Virgilio then filed with this Court a petition for review on certiorari, docketed as G.R. No. 76351.

On October 29, 1993, this Court rendered its Decision, the dispositive portion of which reads:

"WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated 16 October 1986 is
REVERSED and SET ASIDE. The decision of the trial court in Civil Case No. 6912-P dated 26 July 1971 is
REINSTATED, with the modification that respondent Senen B. Aguilar is ordered to vacate the premises in question within
ninety (90) days from receipt of this decision, and to pay petitioner Virgilio B. Aguilar, a monthly rental of ₱1,200.00 with
interest at the legal rate from the time he received the decision of the trial court directing him to vacate until he effectively
leaves the premises.

The trial court is further directed to take immediate steps to implement this decision, conformably with Art. 498 of the Civil
Code and the Rules of Court. This decision is final and executory.

SO ORDERED."

On March 27, 1995, Senen filed with the Regional Trial Court, Branch 260, Parañaque City, an action for legal redemption
against Virgilio and another brother, Angel, docketed as Civil Case No. 95-039. In his complaint, Senen alleged that while
he knows that Virgilio sold his ½ share of the property to Angel in January 1989, however, he (Senen) was not furnished
any written notice of the sale. Consequently, as a co-owner, he has the right to redeem the property.

Meanwhile, on November 27, 1995, pursuant to this Court’s Decision in G.R. No. 76351, the property was sold at public
auction to Alejandro C. Sangalang, intervenor-respondent herein. Virgilio then received his share of the proceeds as well
as the rental payments due from Senen.

By then, Virgilio had moved to California, USA. It was only on January 25, 1997 that he was served, through the Philippine
Consulate in San Francisco, a copy of Senen’s complaint in Civil Case No. 95-039.

On February 24, 1997, Virgilio filed a motion to dismiss the complaint for lack of cause of action and forum shopping.

In an Order dated June 27, 1997, the trial court dismissed Civil Case No. 05-039 on the ground of laches, holding that
Senen incurred a delay of seven (7) years before asserting his right to redeem the property in question.

On appeal, the Court of Appeals affirmed the assailed Order of the trial court.

Hence, the instant petition for review on certiorari.

The sole issue for our resolution is whether the Court of Appeals erred in holding that Senen’s complaint for legal
redemption in Civil Case No. 05-039 is barred by laches.

Legal redemption (retracto legal de comuneros) is a privilege created by law, partly by reason of public policy and partly
for the benefit of the redemptioner to afford him a way out of a disagreeable or inconvenient association into which he has
been thrust.4

With respect to redemption by co-owners, in case the share of a co-owner is sold to a third person, the governing law is
Article 1620 of the Civil Code which provides:

"ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of
any of them are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a
reasonable rate.

Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share
they may respectively have in the thing owned in common."

The purpose behind Article 1620 is to provide a method for terminating the co-ownership and consolidating the dominion
in one sole owner.5

Article 1623 of the same Code also provides:

"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 vendee, 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 vendee that he has given written notice thereof to all
possible redemptioners.

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

From the above provisions, the following are the requisites for the exercise of legal redemption: (1) There must be a co-
ownership; (2) one of the co-owners sold his right to a stranger; (3) the sale was made before the partition of the co-
owned property; (4) the right of redemption must be exercised by one or more co-owners within a period of thirty days to
be counted from the time that he or they were notified in writing by the vendee or by the co-owner vendor; and (5) the
vendee must be reimbursed for the price of the sale.

In this case, the sale took place in January 1989. Petitioner admits that he has actual knowledge of the sale. However, he
only asserted his right to redeem the property in March 1995 by filing the instant complaint. Both the trial court and the
Appellate Court ruled that this was seven (7) years late.

Petitioner, however, now contends that there being no written notice to him of the sale by the vendee or vendor, the thirty-
day redemption period has not prescribed.

Petitioner’s contention lacks merit. The old rule is that a written notice of the sale by the vendor to his co-owners is
indispensable for the latter to exercise their retracto legal de comuneros.6 More recently, however, we have relaxed the
written notice requirement. Thus, in Si v. Court of Appeals,7 we ruled that a co-owner with actual notice of the sale is not
entitled to a written notice for such would be superfluous. The law does not demand what is unnecessary.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which could or should have
been done earlier through the exercise of due diligence.8 Otherwise stated, laches is the negligence or omission to assert
a right within a reasonable time warranting a presumption that the party entitled to assert it has either abandoned or
declined to assert it.9 Its elements are: (1) conduct on the part of the defendant, or of one under whom he claims, giving
rise to the situation for which the complaint seeks a remedy; (2) delay in asserting the complainant’s rights, the
complainant having had knowledge or notice of the defendant’s conduct as having been afforded an opportunity to
institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in
which he bases his suit; and (4) injury or prejudice to the defendant in the event, relief is accorded to the complainant, or
the suit is not held barred.10

Petitioner has actual knowledge of the sale of Virgilio’s share to Angel in 1989. As provided by Article 1623, he has thirty
days from such actual knowledge within which to exercise his right to redeem the property. Inexplicably, petitioner did not
take any action. He waited for seven (7) years before filing his complaint. Definitely, such an unexplained delay is
tantamount to laches. To be sure, to uphold his right would unduly cause injury to respondent-intervenor, a purchaser in
good faith and for value.

Moreover, by the time Senen filed Civil Case No. 95-039 for legal redemption, his right was no longer available to him. We
have held that after a property has been subdivided and distributed among the co-owners, the community has terminated
and there is no reason to sustain any right of pre-emption or redemption.11

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 55750
are AFFIRMED. Costs against petitioner.

SO ORDERED.