Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166714 February 9, 2007
AMELIA S. ROBERTS, Petitioner,
vs.
MARTIN B. PAPIO, Respondent.
D E C I S I O N
CALLEJO, SR., J.:
Assailed in this petition for review on certiorari is the Decision
1
of the Court of Appeals (CA), in CA-
G.R. CV No. 69034 which reversed and set aside the Decision
2
of the Regional Trial Court (RTC),
Branch 150, Makati City, in Civil Case No. 01-431. The RTC ruling had affirmed with modification the
Decision
3
of the Metropolitan Trial Court (MeTC), Branch 64, Makati City in Civil Case No. 66847. The
petition likewise assails the Resolution of the CA denying the motion for reconsideration of its
decision.
The Antecedents
The spouses Martin and Lucina Papio were the owners of a 274-square-meter residential lot located
in Makati (now Makati City) and covered by Transfer Certificate of Title (TCT) No. S-44980.
4
In order
to secure aP59,000.00 loan from the Amparo Investments Corporation, they executed a real estate
mortgage on the property. Upon Papios failure to pay the loan, the corporation filed a petition for
the extrajudicial foreclosure of the mortgage.
Since the couple needed money to redeem the property and to prevent the foreclosure of the real
estate mortgage, they executed a Deed of Absolute Sale over the property on April 13, 1982 in favor
of Martin Papios cousin, Amelia Roberts. Of the P85,000.00 purchase price, P59,000.00 was paid to
the Amparo Investments Corporation, while the P26,000.00 difference was retained by the
spouses.
5
As soon as the spouses had settled their obligation, the corporation returned the owners
duplicate of TCT No. S-44980, which was then delivered to Amelia Roberts.
Thereafter, the parties (Amelia Roberts as lessor and Martin Papio as lessee) executed a two-year
contract of lease dated April 15, 1982, effective May 1, 1982. The contract was subject to renewal or
extension for a like period at the option of the lessor, the lessee waiving thereby the benefits of an
implied new lease. The lessee was obliged to pay monthly rentals of P800.00 to be deposited in the
lessors account at the Bank of America, Makati City branch.
6

On July 6, 1982, TCT No. S-44980 was cancelled, and TCT No. 114478 was issued in the name of
Amelia Roberts as owner.
7

Martin Papio paid the rentals from May 1, 1982 to May 1, 1984, and thereafter, for another year.
8
He
then failed to pay rentals, but he and his family nevertheless remained in possession of the property
for a period of almost thirteen (13) years.
In a letter dated June 3, 1998, Amelia Roberts, through counsel, reminded Papio that he failed to pay
the monthly rental of P2,500.00 from January 1, 1986 to December 31, 1997, and P10,000.00 from
January 1, 1998 to May 31, 1998; thus, his total liability was P410,000.00. She demanded that Papio
vacate the property within 15 days from receipt of the letter in case he failed to settle the
amount.
9
Because he refused to pay, Papio received another letter from Roberts on April 22, 1999,
demanding, for the last time, that he and his family vacate the property.
10
Again, Papio refused to
leave the premises.
On June 28, 1999, Amelia Roberts, through her attorney-in-fact, Matilde Aguilar, filed a
Complaint
11
for unlawful detainer and damages against Martin Papio before the MeTC, Branch 64,
Makati City. She alleged the following in her complaint:
Sometime in 1982 she purchased from defendant a 274-sq-m residential house and lot situated at
No. 1046 Teresa St., Brgy. Valenzuela, Makati City.
12
Upon Papios pleas to continue staying in the
property, they executed a two-year lease contract
13
which commenced on May 1, 1982. The monthly
rental was P800.00. Thereafter, TCT No. 114478
14
was issued in her favor and she paid all the realty
taxes due on the property. When the term of the lease expired, she still allowed Papio and his family
to continue leasing the property. However, he took advantage of her absence and stopped payment
beginning January 1986, and refused to pay despite repeated demands. In June 1998, she sent a
demand letter
15
through counsel requiring Papio to pay rentals from January 1986 up to May 1998
and to vacate the leased property. The accumulated arrears in rental are as follows: (a) P360,000.00
from January 1, 1986 to December 31, 1997 at P2,500.00 per month; and (b) P50,000.00, from
January 1, 1998 to May 31, 1998 at P10,000.00 per month.
16
She came to the Philippines but all
efforts at an amicable settlement proved futile. Thus, in April 1999, she sent the final demand letter
to defendant directing him and his family to pay and immediately vacate the leased premises.
17

Roberts appended to her complaint copies of the April 13, 1982 Deed of Absolute Sale, the April 15,
1982 Contract of Lease, and TCT No. 114478.
In his Answer with counterclaim, Papio alleged the following:
He executed the April 13, 1982 deed of absolute sale and the contract of lease. Roberts, his cousin
who is a resident of California, United States of America (USA), arrived in the Philippines and offered
to redeem the property. Believing that she had made the offer for the purpose of retaining his
ownership over the property, he accepted. She then remitted P59,000.00 to the mortgagor for his
account, after which the mortgagee cancelled the real estate mortgage. However, he was alarmed
when the plaintiff had a deed of absolute sale over the property prepared (for P83,000.00 as
consideration) and asked him to sign the same. She also demanded that the defendant turn over the
owners duplicate of TCT No. S-44980. The defendant was in a quandary. He then believed that if he
signed the deed of absolute sale, Roberts would acquire ownership over the property. He asked her
to allow him to redeem or reacquire the property at any time for a reasonable amount.
18
When
Roberts agreed, Papio signed the deed of absolute sale.
Pursuant to the right to redeem/repurchase given him by Roberts, Papio purchased the property
for P250,000.00. In July 1985, since Roberts was by then already in the USA, he remitted to her
authorized representative, Perlita Ventura, the amount of P150,000.00 as partial payment for the
property.
19
On June 16, 1986, she again remittedP100,000.00, through Ventura. Both payments were
evidenced by receipts signed by Ventura.
20
Roberts then declared that she would execute a deed of
absolute sale and surrender the title to the property. However, Ventura had apparently
misappropriated P39,000.00 out of the P250,000.00 that she had received; Roberts then demanded
that she pay the amount misappropriated before executing the deed of absolute sale. Thus, the sole
reason why Roberts refused to abide by her promise was the failure of her authorized representative
to remit the full amount of P250,000.00. Despite Papios demands, Roberts refused to execute a deed
of absolute sale. Accordingly, defendant posited that plaintiff had no cause of action to demand
payment of rental and eject him from the property.
Papio appended to his Answer the following: (1) the letter dated July 18, 1986 of Perlita Ventura to
the plaintiff wherein the former admitted having used the money of the plaintiff to defray the plane
fares of Perlitas parents to the USA, and pleaded that she be allowed to repay the amount within one
year; (b) the letter of Eugene Roberts (plaintiffs husband) to Perlita Ventura dated July 25, 1986
where he accused Ventura of stealing the money of plaintiff Amelia (thus preventing the latter from
paying her loan on her house and effect the cancellation of the mortgage), and demanded that she
deposit the balance;
21
and (c) plaintiffs letter to defendant Papio dated July 25, 1986 requesting the
latter to convince Ventura to remit the balance of P39,000.00 so that the plaintiff could transfer the
title of the property to the defendant.
22

Papio asserted that the letters of Roberts and her husband are in themselves admissions or
declarations against interest, hence, admissible to prove that he had reacquired the property
although the title was still in her possession.
In her Affidavit and Position Paper,
23
Roberts averred that she had paid the real estate taxes on the
property after she had purchased it; Papios initial right to occupy the property was terminated when
the original lease period expired; and his continued possession was only by mere tolerance. She
further alleged that the Deed of Sale states on its face that the conveyance of the property was
absolute and unconditional. She also claimed that any right to repurchase the property must appear
in a public document pursuant to Article 1358, Paragraph 1, of the Civil Code of the
Phililppines.
24
Since no such document exists, defendants supposed real interest over the property
could not be enforced without violating the Statute of Frauds.
25
She stressed that her Torrens title to
the property was an "absolute and indefeasible evidence of her ownership of the property which is
binding and conclusive upon the whole world."
Roberts admitted that she demanded P39,000.00 from the defendant in her letter dated July 25,
1986. However, she averred that the amount represented his back rentals on the property.
26
She
declared that she neither authorized Ventura to sell the property nor to receive the purchase price
therefor. She merely authorized her to receive the rentals from defendant and to deposit them in her
account. She did not know that Ventura had received P250,000.00 from Papio in July 1985 and on
June 16, 1986, and had signed receipts therefor. It was only on February 11, 1998 that she became
aware of the receipts when she received defendant Papios letter to which were appended the said
receipts. She and her husband offered to sell the property to the defendant in 1984 for US$15,000.00
on a "take it or leave it" basis when they arrived in the Philippines in May 1984.
27
However,
defendant refused to accept the offer. The spouses then offered to sell the property anew on
December 20, 1997, for P670,000.00 inclusive of back rentals.
28
However, defendant offered to settle
his account with the spouses.
29
Again, the offer came on January 11, 1998, but it was rejected. The
defendant insisted that he had already purchased the property in July 1985 for P250,000.00.
Roberts insisted that Papios claim of the right to repurchase the property, as well as his claim of
payment therefor, is belied by his own letter in which he offered to settle plaintiffs claim for back
rentals. Even assuming that the purchase price of the property had been paid through Ventura, Papio
did not adduce any proof to show that Ventura had been authorized to sell the property or to accept
any payment thereon. Any payment to Ventura could have no binding effect on her since she was not
privy to the transaction; if at all, such agreement would be binding only on Papio and Ventura.
She further alleged that defendants own inaction belies his claim of ownership over the property:
first, he failed to cause any notice or annotation to be made on the Register of Deeds copy of TCT
No. 114478 in order to protect his supposed adverse claim; second, he did not institute any action
against Roberts to compel the execution of the necessary deed of transfer of title in his favor; and
third, the defense of ownership over the property was raised only after Roberts demanded him to
vacate the property.
Based solely on the parties pleadings, the MeTC rendered its January 18, 2001 Decision
30
in favor of
Roberts. The fallo of the decision reads:
WHEREFORE, premises considered, finding this case for the plaintiff, the defendant is hereby ordered
to:
1. Vacate the leased premises known as 1046 Teresa St., Valenzuela, Makati City;
2. Pay plaintiff the reasonable rentals accrual for the period January 1, 1996 to December 13,
1997 at the rate equivalent to Php2,500.00 per month and thereafter, Php10,000.00 from
January 1998 until he actually vacates the premises;
3. Pay the plaintiff attorneys fees as Php20,000.00; and
4. Pay the costs
SO ORDERED.
31

The MeTC held that Roberts merely tolerated the stay of Papio in the property after the expiration of
the contract of lease on May 1, 1984; hence, she had a cause of action against him since the only
elements in an unlawful detainer action are the fact of lease and the expiration of its term. The
defendant as tenant cannot controvert the title of the plaintiff or assert any right adverse thereto or
set up any inconsistent right to change the existing relation between them. The plaintiff need not
prove her ownership over the property inasmuch as evidence of ownership can be admitted only for
the purpose of determining the character and extent of possession, and the amount of damages
arising from the detention.
The court further ruled that Papio made no denials as to the existence and authenticity of Roberts
title to the property. It declared that "the certificate of title is indefeasible in favor of the person
whose name appears therein and incontrovertible upon the expiration of the one-year period from
the date of issue," and that a Torrens title, "which enjoys a strong presumption of regularity and
validity, is generally a conclusive evidence of ownership of the land referred to therein."
As to Papios claim that the transfer of the property was one with right of repurchase, the MeTC held
it to be bereft of merit since the Deed of Sale is termed as "absolute and unconditional." The court
ruled that the right to repurchase is not a right granted to the seller by the buyer in a subsequent
instrument but rather, a right reserved in the same contract of sale. Once the deed of absolute sale is
executed, the seller can no longer reserve the right to repurchase; any right thereafter granted in a
separate document cannot be a right of repurchase but some other right.
As to the receipts of payment signed by Ventura, the court gave credence to Robertss declaration in
her Affidavit that she authorized Ventura only to collect rentals from Papio, and not to receive the
repurchase price. Papios letter of January 31, 1998, which called her attention to the fact that she
had been sending people without written authority to collect money since 1985, bolstered the courts
finding that the payment, if at all intended for the supposed repurchase, never redounded to the
benefit of the spouses Roberts.
Papio appealed the decision to the RTC, alleging the following:
I.
THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT ON
THE GROUND OF LACK OF CAUSE OF ACTION.
II.
THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THE DOCUMENTARY EVIDENCE ADDUCED
BY DEFENDANT-APPELLANT WHICH ESTABLISHED THAT A REPURCHASE TRANSACTION EXISTED
BETWEEN THE PARTIES ONLY THAT PLAINTIFF-APPELLEE WITHHELD THE EXECUTION OF THE
ABSOLUTE DEED OF SALE AND THE TRANSFER OF TITLE OF THE SAME IN DEFENDANT-APPELLANTS
NAME.
III.
THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THAT THE LETTERS OF PLAINTIFF-
[APPELLEE] AND OF HER HUSBAND ADDRESSED TO DEFENDANT-APPELLANT AND HIS WIFE ARE IN
THEMSELVES ADMISSION AND/OR DECLARATION OF THE FACT THAT DEFENDANT-APPELLANT HAD
DULY PAID PLAINTIFF-APPELLEE OF THE PURCHASE AMOUNT COVERING THE SUBJECT PROPERTY.
IV.
THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT
CONSIDERING THAT PLAINTIFF-APPELLEE WHO IS [AN] AMERICAN CITIZEN AND RESIDENT THEREIN
HAD NOT APPEARED IN COURT ONCE, NEITHER WAS HER ALLEGED ATTORNEY-IN-FACT, MATILDE
AGUILAR NOR [DID] THE LATTER EVER [FURNISH] THE LOWER COURT A SPECIAL POWER OF
ATTORNEY AUTHORIZING HER TO APPEAR IN COURT IN BEHALF OF HER PRINCIPAL.
32

Papio maintained that Roberts had no cause of action for eviction because she had already ceded her
right thereto when she allowed him to redeem and reacquire the property upon payment
of P250,000.00 to Ventura, her duly authorized representative. He also contended that Robertss
claim that the authority of Ventura is limited only to the collection of the rentals and not of the
purchase price was a mere afterthought, since her appended Affidavit was executed sometime in
October 1999 when the proceedings in the MeTC had already started.
On March 26, 2001, Roberts filed a Motion for Issuance of Writ of Execution.
33
The court granted the
motion in an Order
34
dated June 19, 2001. Subsequently, a Writ of Execution
35
pending appeal was
issued on September 28, 2001. On October 29, 2001, Sheriff Melvin M. Alidon enforced the writ and
placed Roberts in possession of the property.
Meanwhile, Papio filed a complaint with the RTC of Makati City, for specific performance with
damages against Roberts. Papio, as plaintiff, claimed that he entered into a contract of sale with
pacto de retro with Roberts, and prayed that the latter be ordered to execute a Deed of Sale over
`the property in his favor and transfer the title over the property to and in his name. The case was
docketed as Civil Case No. 01-851.
On October 24, 2001, the RTC rendered judgment affirming the appealed decision of the MeTC. The
fallo of the decision reads:
36

Being in accordance with law and the circumstances attendant to the instant case, the court finds
merit in plaintiff-appellees claim. Wherefore, the challenged decision dated January 18, 2001 is
hereby affirmed in toto.
SO ORDERED.
37

Both parties filed their respective motions for reconsideration.
38
In an Order
39
dated February 26,
2002, the court denied the motion of Papio but modified its decision declaring that the computation
of the accrued rentals should commence from January 1986, not January 1996. The decretal portion
of the decision reads:
Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed with modification that
defendant pay plaintiff the reasonable rentals accrued for the period January 1, 1986 to December
[31, 1997] per month and thereafter and P10,000.00 [per month] from January 1998 to October 28,
2001 when defendant-appellant actually vacated the subject leased premises.
SO ORDERED.
40

On February 28, 2002, Papio filed a petition for review
41
in the CA, alleging that the RTC erred in not
finding that he had reacquired the property from Roberts for P250,000.00, but the latter refused to
execute a deed of absolute sale and transfer the title in his favor. He insisted that the MeTC and the
RTC erred in giving credence to petitioners claim that she did not authorize Ventura to receive his
payments for the purchase price of the property, citing Roberts letter dated July 25, 1986 and the
letter of Eugene Roberts to Ventura of even date. He also averred that the MeTC and the RTC erred in
not considering his documentary evidence in deciding the case.
On August 31, 2004, the CA rendered judgment granting the petition. The appellate court set aside
the decision of the RTC and ordered the RTC to dismiss the complaint. The decretal portion of the
Decision
42
reads:
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one
entered: (1) rendering an initial determination that the "Deed of Absolute Sale" dated April 13, 1982
is in fact an equitable mortgage under Article 1603 of the New Civil Code; and (2) resolving therefore
that petitioner Martin B. Papio is entitled to possession of the property subject of this action; (3) But
such determination of ownership and equitable mortgage are not clothed with finality and will not
constitute a binding and conclusive adjudication on the merits with respect to the issue of ownership
and such judgment shall not bar an action between the same parties respecting title to the land, nor
shall it be held conclusive of the facts therein found in the case between the same parties upon a
different cause of action not involving possession. All other counterclaims for damages are hereby
dismissed. Cost against the respondent.
SO ORDERED.
43

According to the appellate court, although the MeTC and RTC were correct in holding that the MeTC
had jurisdiction over the complaint for unlawful detainer, they erred in ignoring Papios defense of
equitable mortgage, and in not finding that the transaction covered by the deed of absolute sale by
and between the parties was one of equitable mortgage under Article 1602 of the New Civil Code.
The appellate court ruled that Papio retained the ownership of the property and its peaceful
possession; hence, the MeTC should have dismissed the complaint without prejudice to the outcome
of Civil Case No. 01-851 relative to his claim of ownership over the property.
Roberts filed a motion for reconsideration of the decision on the following grounds:
I. Petitioner did not allege in his Answer the defense of equitable mortgage; hence, the lower
courts [should] not have discussed the same;
II. Even assuming that Petitioner alleged the defense of equitable mortgage, the MeTC could
not have ruled upon the said defense,
III. The M[e]TC and the RTC were not remiss in the exercise of their jurisdiction.
44

The CA denied the motion.
In this petition for review, Amelia Salvador-Roberts, as petitioner, avers that:
I. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN DECLARING THAT THE
M[e]TC AN(D) THE RTC WERE REMISS IN THE EXERCISE OF THAT JURISDICTION ACQUIRED
BECAUSE IT DID NOT CONSIDER ALL PETITIONERS DEFENSE OF EQUITABLE MORTGAGE.
II. THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN REQUIRING THE M[e]TC
AND RTC TO RULE ON A DEFENSE WHICH WAS NEVER AVAILED OF BY RESPONDENT.
45

Petitioner argues that respondent is barred from raising the issue of equitable mortgage because his
defense in the MeTC and RTC was that he had repurchased the property from the petitioner; by such
representation, he had impliedly admitted the existence and validity of the deed of absolute sale
whereby ownership of the property was transferred to petitioner but reverted to him upon the
exercise of said right. The respondent even filed a complaint for specific performance with damages,
which is now pending in the RTC of Makati City, docketed as Civil Case No. 01-851 entitled "Martin B.
Papio vs. Amelia Salvador-Roberts." In that case, respondent claimed that his transaction with the
petitioner was a sale with pacto de retro. Petitioner posits that Article 1602 of the Civil Code applies
only when the defendant specifically alleges this defense. Consequently, the appellate court was
proscribed from finding that petitioner and respondent had entered into an equitable mortgage
under the deed of absolute sale.
Petitioner further avers that respondent was ably represented by counsel and was aware of the
difference between a pacto de retro sale and an equitable mortgage; thus, he could not have been
mistaken in declaring that he repurchased the property from her.
As to whether a sale is in fact an equitable mortgage, petitioner claims that the issue should be
properly addressed and resolved by the RTC in an action to enforce ownership, not in an ejectment
case before the MeTC where the main issue involved is possession de facto. According to her, the
obvious import of the CA Decision is that, in resolving an ejectment case, the lower court must pass
upon the issue of ownership (in this case, by applying the presumptions under Art. 1602) which, in
effect, would use the same yardstick as though it is the main action. The procedure will not only
promote multiplicity of suits but also place the new owner in the absurd position of having to first
seek the declaration of ownership before filing an ejectment suit.
Respondent counters that the defense of equitable mortgage need not be particularly stated to
apprise petitioner of the nature and character of the repurchase agreement. He contends that he had
amply discussed in his pleadings before the trial and appellate courts all the surrounding
circumstances of the case, such as the relative situation of the parties at the time; their attitude, acts,
conduct, and declarations; and the negotiations between them that led to the repurchase agreement.
Thus, he argues that the CA correctly ruled that the contract was one of equitable mortgage. He
insists that petitioner allowed him to redeem and reacquire the property, and accepted his full
payment of the property through Ventura, the authorized representative, as shown by the signed
receipts.
The threshold issues are the following: (1) whether the MeTC had jurisdiction in an action for
unlawful detainer to resolve the issue of who between petitioner and respondent is the owner of the
property and entitled to the de facto possession thereof; (2) whether the transaction entered into
between the parties under the Deed of Absolute Sale and the Contract of Lease is an equitable
mortgage over the property; and (3) whether the petitioner is entitled to the material or de facto
possession of the property.
The Ruling of the Court
On the first issue, the CA ruling (which upheld the jurisdiction of the MeTC to resolve the issue of who
between petitioner or respondent is the lawful owner of the property, and is thus entitled to the
material or de facto possession thereof) is correct. Section 18, Rule 70 of the Rules of Court provides
that when the defendant raises the defense of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall
be resolved only to determine the issue of possession. The judgment rendered in an action for
unlawful detainer shall be conclusive with respect to the possession only and shall in no wise bind the
title or affect the ownership of the land or building. Such judgment would not bar an action between
the same parties respecting title to the land or building.
46

The summary nature of the action is not changed by the claim of ownership of the property of the
defendant.
47
The MeTC is not divested of its jurisdiction over the unlawful detainer action simply
because the defendant asserts ownership over the property.
The sole issue for resolution in an action for unlawful detainer is material or de facto possession of
the property. Even if the defendant claims juridical possession or ownership over the property based
on a claim that his transaction with the plaintiff relative to the property is merely an equitable
mortgage, or that he had repurchased the property from the plaintiff, the MeTC may still delve into
and take cognizance of the case and make an initial or provisional determination of who between the
plaintiff and the defendant is the owner and, in the process, resolve the issue of who is entitled to the
possession. The MeTC, in unlawful detainer case, decides the question of ownership only if it is
intertwined with and necessary to resolve the issue of possession.
48
The resolution of the MeTC on
the ownership of the property is merely provisional or interlocutory. Any question involving the issue
of ownership should be raised and resolved in a separate action brought specifically to settle the
question with finality, in this case, Civil Case No. 01-851 which respondent filed before the RTC.
The ruling of the CA, that the contract between petitioner and respondent was an equitable
mortgage, is incorrect. The fact of the matter is that the respondent intransigently alleged in his
answer, and even in his affidavit and position paper, that petitioner had granted him the right to
redeem or repurchase the property at any time and for a reasonable amount; and that, he had, in
fact, repurchased the property in July 1985 for P250,000.00 which he remitted to petitioner through
an authorized representative who signed receipts therefor; he had reacquired ownership and juridical
possession of the property after his repurchase thereof in 1985; and consequently, petitioner was
obliged to execute a deed of absolute sale over the property in his favor.
Notably, respondent alleged that, as stated in his letter to petitioner, he was given the right to
reacquire the property in 1982 within two years upon the payment of P53,000.00, plus petitioners
airfare for her trip to the Philippines from the USA and back; petitioner promised to sign the deed of
absolute sale. He even filed a complaint against the petitioner in the RTC, docketed as Civil Case No.
01-851, for specific performance with damages to compel petitioner to execute the said deed of
absolute sale over the property presumably on the strength of Articles 1357 and 1358 of the New
Civil Code. Certainly then, his claim that petitioner had given him the right to repurchase the property
is antithetical to an equitable mortgage.
An equitable mortgage is one that, although lacking in some formality, form or words, or other
requisites demanded by a statute, nevertheless reveals the intention of the parties to change a real
property as security for a debt and contain nothing impossible or contrary to law.
49
A contract
between the parties is an equitable mortgage if the following requisites are present: (a) the parties
entered into a contract denominated as a contract of sale; and (b) the intention was to secure an
existing debt by way of mortgage.
50
The decisive factor is the intention of the parties.
In an equitable mortgage, the mortgagor retains ownership over the property but subject to
foreclosure and sale at public auction upon failure of the mortgagor to pay his obligation.
51
In
contrast, in a pacto de retro sale, ownership of the property sold is immediately transferred to the
vendee a retro subject only to the right of the vendor a retro to repurchase the property upon
compliance with legal requirements for the repurchase. The failure of the vendor a retro to exercise
the right to repurchase within the agreed time vests upon the vendee a retro, by operation of law,
absolute title over the property.
52

One repurchases only what one has previously sold. The right to repurchase presupposes a valid
contract of sale between the same parties.
53
By insisting that he had repurchased the property,
respondent thereby admitted that the deed of absolute sale executed by him and petitioner on April
13, 1982 was, in fact and in law, a deed of absolute sale and not an equitable mortgage; hence, he
had acquired ownership over the property based on said deed. Respondent is, thus, estopped from
asserting that the contract under the deed of absolute sale is an equitable mortgage unless there is
allegation and evidence of palpable mistake on the part of respondent;
54
or a fraud on the part of
petitioner. Respondent made no such allegation in his pleadings and affidavit. On the contrary, he
maintained that petitioner had sold the property to him in July 1985 and acknowledged receipt of the
purchase price thereof except the amount of P39,000.00 retained by Perlita Ventura. Respondent is
thus bound by his admission of petitioners ownership of the property and is barred from claiming
otherwise.
55

Respondents admission that petitioner acquired ownership over the property under the April 13,
1982 deed of absolute sale is buttressed by his admission in the Contract of Lease dated April 15,
1982 that petitioner was the owner of the property, and that he had paid the rentals for the duration
of the contract of lease and even until 1985 upon its extension. Respondent was obliged to prove his
defense that petitioner had given him the right to repurchase, and that petitioner obliged herself to
resell the property for P250,000.00 when they executed the April 13, 1982 deed of absolute sale.
We have carefully reviewed the case and find that respondent failed to adduce competent and
credible evidence to prove his claim.
As gleaned from the April 13, 1982 deed, the right of respondent to repurchase the property is not
incorporated therein. The contract is one of absolute sale and not one with right to repurchase. The
law states that if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.
56
When the language of the
contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it
any other intention that would contradict its plain import.
57
The clear terms of the contract should
never be the subject matter of interpretation. Neither abstract justice nor the rule of liberal
interpretation justifies the creation of a contract for the parties which they did not make themselves,
or the imposition upon one party to a contract or obligation to assume simply or merely to avoid
seeming hardships.
58
Their true meaning must be enforced, as it is to be presumed that the
contracting parties know their scope and effects.
59
As the Court held in Villarica, et al. v. Court of
Appeals:
60

The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument,
but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the
contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the
right to repurchase, and any right thereafter granted the vendor by the vendee in a separate
instrument cannot be a right of repurchase but some other right like the option to buy in the instant
case.
61

In Ramos v. Icasiano,
62
we also held that an agreement to repurchase becomes a promise to sell when
made after the sale because when the sale is made without such agreement the purchaser acquires
the thing sold absolutely; and, if he afterwards grants the vendor the right to repurchase, it is a new
contract entered into by the purchaser as absolute owner. An option to buy or a promise to sell is
different and distinct from the right of repurchase that must be reserved by means of stipulations to
that effect in the contract of sale.
63

There is no evidence on record that, on or before July 1985, petitioner agreed to sell her property to
the respondent for P250,000.00. Neither is there any documentary evidence showing that Ventura
was authorized to offer for sale or sell the property for and in behalf of petitioner for P250,000.00, or
to receive the said amount from respondent as purchase price of the property. The rule is that when
a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be
in writing; otherwise, the sale shall be void
64
and cannot produce any legal effect as to transfer the
property from its lawful owner.
65
Being inexistent and void from the very beginning, said contract
cannot be ratified.
66
Any contract entered into by Ventura for and in behalf of petitioner relative to
the sale of the property is void and cannot be ratified by the latter. A void contract produces no effect
either against or in favor of anyone.
67

Respondent also failed to prove that the negotiations between him and petitioner has culminated in
his offer to buy the property for P250,000.00, and that they later on agreed to the sale of the
property for the same amount. He likewise failed to prove that he purchased and reacquired the
property in July 1985. The evidence on record shows that petitioner had offered to sell the property
for US$15,000 on a "take it or leave it" basis in May 1984 upon the expiration of the Contract of
Lease
68
an offer that was rejected by respondentwhich is why on December 30, 1997, petitioner
and her husband offered again to sell the property to respondent for P670,000.00 inclusive of back
rentals and the purchase price of the property under the April 13, 1982 Deed of absolute Sale.
69
The
offer was again rejected by respondent. The final offer appears to have been made on January 11,
1998
70
but again, like the previous negotiations, no contract was perfected between the parties.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service.
71
Under Article 1318 of the New Civil Code,
there is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.
72
Once perfected, they bind the
contracting parties and the obligations arising therefrom have the form of law between the parties
which must be complied with in good faith. The parties are bound not only to the fulfillment of what
has been expressly stipulated but also to the consequences which, according to their nature, may be
in keeping with good faith, usage and law.
73

There was no contract of sale entered into by the parties based on the Receipts dated July 1985 and
June 16, 1986, signed by Perlita Ventura and the letter of petitioner to respondent dated July 25,
1986.
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of
and deliver a determinate thing and the other, to pay therefor a price certain in money or its
equivalent.
74
The absence of any of the essential elements will negate the existence of a perfected
contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo:
75

A definite agreement as to the price is an essential element of a binding agreement to sell personal or
real property because it seriously affects the rights and obligations of the parties. Price is an essential
element in the formation of a binding and enforceable contract of sale. The fixing of the price can
never be left to the decision of one of the contracting parties. But a price fixed by one of the
contracting parties, if accepted by the other, gives rise to a perfected sale.
76

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When
there is merely an offer by one party without acceptance of the other, there is no contract.
77
When
the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.
78

Respondents reliance on petitioners letter to him dated July 25, 1986 is misplaced. The letter reads
in full:
7-25-86
Dear Martin & Ising,
Enclosed for your information is the letter written by my husband to Perlita. I hope that you will be
able to convince your cousin that its to her best interest to deposit the balance of your payment to
me ofP39,000.00 in my bank acct. per our agreement and send me my bank book right away so that
we can transfer the title of the property.
Regards,
Amie
79

We have carefully considered the letter of Perlita Ventura, dated July 18, 1986, and the letter of
Eugene Roberts, dated July 25, 1986, where Ventura admitted having used the money of petitioner
amounting to P39,000.00 without the latters knowledge for the plane fare of Venturas parents.
Ventura promised to refund the amount ofP39,000.00, inclusive of interests, within one
year.
80
Eugene Roberts berated Ventura and called her a thief for stealing his and petitioners money
and that of respondents wife, Ising, who allegedly told petitioner that she, Ising, loaned the money
to her parents for their plane fare to the USA. Neither Ventura nor Eugene Roberts declared in their
letters that Ventura had used the P250,000.00 which respondent gave to her.
Petitioner in her letter to respondent did not admit, either expressly or impliedly, having
received P211,000.00 from Ventura. Moreover, in her letter to petitioner, only a week earlier, or on
July 18, 1986, Ventura admitted having spent the P39,000.00 and pleaded that she be allowed to
refund the amount within one (1) year, including interests.
Naririto ang total ng pera mo sa bankbook mo, P55,000.00 pati na yong deposit na sarili mo at bale
ang nagalaw ko diyan ay P39,000.00. Huwag kang mag-alala ibabalik ko rin sa iyo sa loob ng isang
taon pati interest.
Ate Per
81

It is incredible that Ventura was able to remit to petitioner P211,000.00 before July 25, 1986 when
only a week earlier, she was pleading to petitioner for a period of one year within which to refund
the P39,000.00 to petitioner.
It would have bolstered his cause if respondent had submitted an affidavit of Ventura stating that she
had remittedP211,000.00 out of the P250,000.00 she received from respondent in July 1985 and June
20, 1986.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court of
Appeals in CA-G.R. CV No. 69034 is REVERSED and SET ASIDE. The Decision of the Metropolitan Trial
Court, affirmed with modification by the Regional Trial Court, is AFFIRMED.
SO ORDERED.















SECOND DIVISION
[G.R. No. 152199. June 23, 2005]
LUIS S. MISTERIO, GABRIEL S. MISTERIO, FRANCIS S. MISTERIO, THELMA S. MISTERIO and ESTELLA
S. MISTERIO-TAGIMACRUZ, petitioners, vs. CEBU STATE COLLEGE OF SCIENCE AND
TECHNOLOGY (CSCST), duly represented by its President, DR. JOSE SAL TAN, respondent.
D E C I S I O N
CALLEJO, SR., J.:
This is a petition for review on certiorari to annul the Decision
[1]
dated July 31, 2000 of the Court
of Appeals (CA) in CA-G.R. CV No. 53592, as well as its Resolution
[2]
denying the motion for
reconsideration. The CA reversed and set aside the Decision
[3]
of the Regional Trial Court (RTC) of
Cebu City, Branch 18, in Civil Case No. CEB-15267.
The Antecedents
Sudlon Agricultural High School (SAHS) was established in Cebu Province on August 2, 1948. The
administrative and supervisory control of the school was handled by the Division of Schools of the
same province. The original site of the school was in Sudlon, about 33 kilometers from Cebu
City via the Tabunak-Talisay Highway.
In 1952, the Provincial Board of Cebu granted the usufruct of 41 parcels of land, covering
104.5441 hectares of the Banilad Friar Lands Estate to the SAHS. Pursuant to Republic Act No. 948,
SAHS was nationalized on June 20, 1953.
On December 31, 1956, Asuncion Sadaya-Misterio executed a Deed of Sale of a parcel of land
denominated as Lot No. 1064 of the Banilad Friar Lands Estate, in favor of the SAHS. The property
had an area of 4,563 square meters and was situated at Lahug, Cebu City, covered by Transfer
Certificate of Title (TCT) No. 13086 of the Registry of Deeds of the province of Cebu. The sale was
subject to the right of the vendor to repurchase the property after the high school shall have ceased
to exist, or shall have transferred its site elsewhere.
Consequently, on May 22, 1957, TCT No. 13086 was cancelled and in lieu thereof, TCT No. 15959
was issued by the Registry of Deeds of Cebu City in the name of SAHS.
[4]
The right of the vendor to
repurchase the property was annotated at the dorsal portion thereof.
On March 18, 1960, the Provincial Board of Cebu, through Resolution No. 491, donated the
aforementioned 41 lots to SAHS, subject to two (2) conditions: (1) that if the SAHS ceases to operate,
the ownership of the lots would automatically revert to the province, and (2) that the SAHS could not
alienate, lease or encumber the properties.
On June 10, 1983, Batas Pambansa (B.P.) Blg. 412, entitled An Act Converting the Cebu School of
Arts and Trades in Cebu City into a Chartered College to be Known as the Cebu State College of Science
and Technology, Expanding its Jurisdiction and Curricular Programs took effect. The law
incorporated and consolidated as one school system certain vocational schools in the province of
Cebu, including the SAHS, and which became an extension of the Cebu State College of Science and
Technology (CSCST).
In the meantime, the province of Cebu decided to recover the 41 lots it had earlier donated to
SAHS on the ground that the said deed was void. The province of Cebu opined that based on the
initial report of its provincial attorney, the SAHS had no personality to accept the donation.
In the meantime, Asuncion died intestate. When her heirs learned that the province of Cebu was
trying to recover the property it had earlier donated to SAHS, they went to the province of Cebu on
August 19, 1998, informing it of their intention to exercise their right to repurchase the property as
stipulated in the aforecited deed of sale executed by their predecessor-in-interest.
On February 1, 1989, the province of Cebu (represented by then Governor Emilio M. R. Osmea),
and the CSCST (represented by then DECS Secretary Lourdes R. Quisumbing), entered into a
Memorandum of Agreement over the 40 parcels of land, allocating 53 hectares to the province of
Cebu, and 51 hectares for the SAHS. The agreement was ratified by the Sangguniang
Panlalawigan and the SAHS Board of Trustees.
In a Letter
[5]
dated March 13, 1990, the heirs of the late Asuncion Sadaya-Misterio, through their
counsel, Atty. Ricardo G. Padilla, informed CSCST of the heirs intention to exercise the option to
repurchase Lot No. 1064 granted to them under the deed of sale, as the SAHS had ceased to exist.
In response thereto, Jesus T. Bonilla, as Vocational School Superintendent II of CSCST, wrote Atty.
Padilla on March 29, 1990, informing the latter that the SAHS still existed and *i+n fact, from a purely
secondary school it is now offering collegiate courses. He explained that what has been changed is
only the name of the school *to CSCST+ which does not imply the loss of its existence.
[6]

On December 23, 1993, Luis, Gabriel, Francis, Thelma, all surnamed Misterio, and Estella S.
Misterio-Tagimacruz, the legitimate heirs of the late Asuncion Sadaya-Misterio and herein
petitioners, filed a Complaint
[7]
before the RTC of Cebu City, Branch 18, for Nullity of Sale and/or
Redemption. Named party-defendants were the CSCST, Armand Fabella as CSCST Chairman, and Dr.
Mussolini C. Barillo as CSCST President, herein respondents. Docketed as Civil Case No. 66-15267, the
complaint alleged in part as follows:
FIRST CAUSE OF ACTION
12. Sudlon Agricultural High School at the time of the execution of the contract of sale with the
late Asuncion Sadaya sometime on December 31, 1956 had no juridical personality of its (sic) own.
Hence, it cannot acquire and possess any property, including the parcel of land subject of this action.
13. The Contract of Sale executed was, therefore, null and void and therefore non-existent. Thus,
the land subject of the sale should be reconveyed to the legitimate heirs of Asuncion Sadaya.
SECOND CAUSE OF ACTION
14. On June 10, 1983, Batas Pambansa Blg. 412 was enacted, abolishing the then Sudlon
Agricultural College and converting it to become part of the Cebu State College for Science and
Technology (CSCST).
15. The said law also transferred all the personnel, properties, including buildings, sites, and
improvements, records, obligations, monies and appropriation of Sudlon to the CSCST.
16. The abolition of Sudhon and its (sic) merger or consolidation as part of CSCST had rendered
operative the condition in the Deed of Sale granting the vendor and her heirs, Asuncion Sadaya, the
right to redeem Lot No. 1064.
17. By the legislative act of merging or consolidating Sudlon Agricultural College with other
colleges, the separate existence of the constituent schools including Sudlon Agricultural College has
ceased to exist as a legal consequence of merger or consolidation.
18. CSCST, as transferee of the land subject of sale, is the actual possessor of the land and is the
proper party-defendant for redemption.
[8]

The petitioners prayed that, after due proceeding, judgment be rendered in their favor, thus
WHEREFORE, the foregoing premises considered, it is most respectfully prayed of this Honorable
Court to render a decision in favor of the plaintiffs to the following effect:
1. Declare the Contract of Sale between the late Asuncion Sadaya and Sudlon Agricultural High
School as null and void for the latter has no legal personality and cannot own a real property.
As a consequence, to order the actual possessor of the land CSCST to deliver and reconvey the land to
plaintiffs and the latter is willing to return the money received.
2. In the alternative, declare that Sudlon Agricultural High School has ceased to exist and allow
the plaintiffs to redeem Lot 1064 in the amount stipulated in the contract.
3. Other reliefs just and equitable under the premises are prayed for.
[9]

In their answer to the complaint, the respondents alleged that:
11. Complainants in their complaint failed to state sufficient cause of action which may be
considered enough ground to dismiss this instant case;
12. The complainants are estopped from contesting the juridical capacity of Sudlon to own or
acquire this property which is the subject of this case, after a long period of silence or inaction from
the transfer of the title in favor of Sudlon Agricultural School;
13. The contract of sale having been mutually and freely entered into by the parties is valid and
binding between the vendor and the vendee, including their successors-in-interest; hence,
reconveyance is not proper;
14. The enactment of B.P. 412, which is the Charter of the College has not caused the abolition of
Sudlon Agricultural School. In fact, the school has now grown into a higher status, because it has now
admitted collegiate students, in addition to its secondary students;
15. The instruction of the Sudlon Agricultural School is actually carried out right on the same site
which complainants claim have ceased to exist not the site of the school transferred somewhere
else. Therefore, the conditions in the deed of sale have not rendered operative the right of the
vendor to exercise the same.
[10]

After the preliminary conference on May 23, 1994, the trial court issued a pre-trial order defining
the issues as follows:
(1) whether Sudlon Agricultural School has still retained its personality as such school or it had
ceased to exist, and (2) whether the plaintiffs have the right to exercise the right of redemption over
the property.
Upon the order of the RTC, the Clerk of Court conducted an ocular inspection on Lot No. 1064.
The court-appointed commissioner submitted his report
[11]
on June 10, 1994.
On November 29, 1995, the RTC rendered judgment, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing considerations, JUDGMENT is hereby rendered in favor of
the plaintiffs and against the defendants declaring the Deed of Sale entered into by and between
Asuncion Sadaya and Sudlon Agricultural High School as null and void for the latters lack of juridical
personality to acquire real property or to enter into such transaction or having ceased to exist and
ordering the Cebu State College of Science and Technology being the actual possessor of the land, Lot
1064, to deliver and reconvey the same to plaintiffs upon payment of the aforementioned purchased
price.
No pronouncement as to costs.
SO ORDERED.
[12]

The RTC ruled that the donation was void ab initio as the SAHS, in the first place, did not have the
personality to be a donee of real property. Moreover, with the enactment of B.P. Blg. 412, the SAHS
ceased to exist and to operate as such. The RTC declared that, under the Corporation Code, the
constituent corporations (SAHS and CSCST) became one through the merger or consolidation, with
CSCST as the surviving entity. Whether Lot No. 1064 was still being used for school purposes was of
no moment, and to say that *SAHS+ still exists but is now forming part of CSCST is stretching the
interpretation of the contract too far. It concluded that no prescription lay as against an inexistent
contract.
The CSCST, through the Office of Solicitor General (OSG), appealed the decision to the CA, and
outlined the following assignment of errors:
I
THE TRIAL COURT ERRED IN NOT STICKING TO THE ISSUES DEFINED BY THE PARTIES DURING PRE-
TRIAL.
II
THE TRIAL COURT ERRED IN NOT HOLDING THAT APPELLEES ARE ESTOPPED FROM QUESTIONING
THE PERSONALITY OF THE SUDLON AGRICULTURAL HIGH SCHOOL.
III
THE TRIAL COURT ERRED IN GIVING WEIGHT TO INADMISSIBLE AND SELF-SERVING EVIDENCE.
IV
THE TRIAL COURT ERRED IN NOT HOLDING THAT APPELLEES ACTION IS BARRED BY PRESCRIPTION.
V
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEED OF SALE IS A CONSENSUAL CONTRACT
FREELY ENTERED INTO BY THE PARTIES AND NOT A CONTRACT OF ADHESION.
VI
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEED OF SALE IS NOT AMBIGUOUS.
VII
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE LOT SUBJECT OF THE SALE IS STILL BEING USED
FOR SCHOOL PURPOSES AS ORIGINALLY INTENDED BY THE PARTIES.
VIII
THE TRIAL COURT ERRED IN NOT HOLDING THAT B.P. [BLG.] 412 DID NOT DISSOLVE OR EXTINGUISH
SUDLON AGRICULTURAL HIGH SCHOOL BUT MERELY SUBJECTED THE SAME TO THE SUPERVISION
AND ADMINISTRATION OF CSCST.
IX
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE SUDLON AGRICULTURAL HIGH SCHOOL
AND/OR CSCST IS/ARE NOT CORPORATIONS GOVERNED BY THE COPORATION CODE.
On October 3, 1997, the CSCST and the province of Cebu executed a Deed for Reversion, in which
the CSCST deeded to the province of Cebu the property covered by TCT No. 15959. Based on the said
deed, TCT No. 146351 was issued by the Register of Deeds on November 12, 1997 in the name of the
province of Cebu.
[13]
Annotated at the dorsal portion thereof was the notice of the pending cases
before the RTC and the CA.
On July 31, 2000, the CA rendered its decision reversing the RTCs decision. The fallo of the
decision reads:
WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a new one issued, DISMISSING
the instant complaint for lack of merit.
SO ORDERED.
[14]

The appellate court held that the lower court should have confined itself to the issues defined by
the parties during pre-trial, namely, (1) whether Sudlon Agricultural School still retained its
personality as such school or was still in existence; and (2) whether the petitioners had the right to
exercise the right to repurchase the property. The CA declared that the trial of the case should have
been limited to these two issues.
While it affirmed the RTC ruling that the SAHS had ceased to exist when B.P. Blg. 412 took effect,
the appellate court ruled that the period for the petitioners to repurchase the property expired on
June 1987, four years after the enactment of B.P. Blg. 412. It held that the period within which the
property was to be repurchased must be restrictively applied in order to settle ownership and title at
the soonest possible time, and not to leave such title to the subject property uncertain.
The petitioners filed a motion for the reconsideration of the decision, which the CA denied in a
Resolution dated January 25, 2002.
The petitioners filed the present petition for review on certiorari, contending that the CA erred in
(a) resolving the appeal of the respondents based on prescription, although the issue was never
raised during the trial; and (b) resolving that their action had already prescribed.
The petition is without merit.
The petitioners fault the CA for holding that their right to repurchase Lot No. 1064 had long since
prescribed. Citing Article 1606(3) of the New Civil Code, they argue that *p+rescription should start
to run from the time it is legally feasible for the party to redeem the land, which is the time when the
action to redeem has accrued. The petitioners argue that this is so since the issue of whether the
SAHS had ceased to exist had still yet to be resolved. The petitioners posit that unless and until
judgment would be rendered stating that the SAHS has ceased to exist, the period to repurchase the
property would not start to run. It is only from the finality of the said judgment that the right to
repurchase the property may be exercised; hence, they still had thirty (30) days from the date of the
promulgation of the CA decision within which to repurchase the property. The petitioners further
aver that since the lien, their right to repurchase the property, was annotated on the title of the land,
the right to exercise the same is imprescriptible. They argue that they had been vigilant of their right
to repurchase the property, as far back as 1973. In fact, they made tender of payment in March
1990, well within the ten-year prescriptive period. They point out that the CSCST had abandoned its
defense of prescription by contending that the condition for repurchase had not yet become
operational.
The OSG, for its part, contends that the petitioners reliance on Article 1606(3) of the New Civil
Code is misplaced, because the law applies only to sales where the right to repurchase is not
expressly agreed upon by the parties. Here, the right to repurchase is unquestionable. The OSG,
likewise, argues that the annotation of the right of redemption has no bearing on the issue of
prescription. It posits that the Torrens System has absolutely nothing to do with the period of
prescription of ones right to repurchase, as in the instant case. The OSG concludes that whatever
right the petitioners had on the property had already prescribed by the mere lapse of time, by reason
of negligence.
Central to the issue is the following provision in the deed of sale executed by Asuncion Sadaya-
Misterio in favor of the SAHS:
That the Vendee herein, the SUDLON AGRICULTURAL HIGH SCHOOL, hereby obligates itself to use the
aforementioned Lot No. 1064 for school purposes only, and it is a condition attached to this contract
that the aforementioned vendee obligates itself to give the Vendor herein, the right to repurchase
the said lot by paying to the Vendee herein the aforementioned consideration of P9,130.00 only,
after the aforementioned SUDLON AGRICULTURAL HIGH SCHOOL shall ceased (sic) to exist or shall
have transferred its school site elsewhere.
[15]

The essence of a pacto de retro sale is that title and ownership of the property sold is
immediately rested in the vendee a retro, subject to the restrictive condition of repurchase by the
vendor a retrowithin the period provided in Article 1606 of the New Civil Code, to wit:
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last
four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final
judgment was rendered in a civil action on the basis that the contract was a true sale with right to
repurchase.
The failure of the vendee a retro to repurchase the property vests upon the latter by operation of
law the absolute title and ownership over the property sold.
[16]

Pending the repurchase of the property, the vendee a retro may alienate, mortgage or encumber
the same, but such alienation or encumbrance is as revocable as is his right. If the vendor a
retrorepurchases the property, the right of the vendee a retro is resolved, because he has to return
the property free from all damages and encumbrances imposed by him.
[17]
The vendor a retro may
also register his right to repurchase under the Land Registration Act and may be enforced against any
person deriving title from the vendee a retro.
[18]

In this case, the vendor a retro and the vendee a retro did not agree on any period for the
exercise of the right to repurchase the property. Hence, the vendor a retro may extend the said right
within four days from the happening of the allocated condition contained in the deed: (a) the
cessation of the existence of the SAHS, or (b) the transfer of the school to other site.
We note that, as gleaned from the petitioners complaint before the trial court, they alleged that
the SAHS ceased to exist on June 10, 1983, when B.P. Blg. 412 took effect, abolishing therein the
SAHS which, in the meantime, had been converted into the Sudlon Agricultural College. The CA found
the position of the petitioners to be correct, and declared that conformably to the condition in the
deed of sale, and under Article 1606 of the New Civil Code, the right of the petitioners as successors-
in-interest of the vendee a retro commenced to run on June 10, 1983. Hence, they had until June 10,
1987 within which to repurchase the property; however, they failed to do so.
It is true that respondent CSCST, through counsel, was of the view that despite the effectivity of
B.P. Blg. 412, the structure and facilities of the SAHS remained in the property and, as such, it cannot
be said that the said school had ceased to exist. It argued that the phrase SAHS ceased to exist in
the deed meant that the structure and facilities of the school would be destroyed or dismantled, and
had no relation whatsoever to the abolition of the school and its integration into the Cebu State
College for Science and Technology. However, the CA rejected the position of the respondent CSCST,
as well as that of the OSG, and affirmed that of the petitioners.
The four-year period for the petitioners to repurchase the property was not suspended merely
and solely because there was a divergence of opinion between the petitioners, on the one hand, and
the respondent, on the other, as to the precise meaning of the phrase after the SAHS shall cease to
exist in the deed of sale. The existence of the petitioners right to repurchase the property was not
dependent upon the prior final interpretation by the court of the said phrase. Indeed, the petitioners
specifically alleged in the complaint that:
FIRST CAUSE OF ACTION
12. Sudlon Agricultural High School at the time of the execution of the contract of sale with the
late Asuncion Sadaya sometime on December 31, 1956 had no juridical personality of its own. Hence,
it cannot acquire and possess any property, including the parcel of land subject of this action.
13. The Contract of Sale executed was therefore null and void and therefore non-existent. Thus,
the land subject of sale should be reconveyed to the legitimate heirs of Asuncion Sadaya.
SECOND CAUSE OF ACTION
14. On June 10, 1983, Batas Pambansa Blg. 412 was enacted abolishing the then Sudlon
Agricultural College and converting it to become part of the Cebu State College for Science and
Technology (CSCST).
15. The said law also transferred all the personnel, properties, including buildings, sites, and
improvements, records, obligations, monies and appropriations of Sudlon to the CSCST.
16. The abolition of Sudlon and its merger or consolidation as part of CSCST had rendered
operative the condition in the Deed of Sale granting the vendor and her heirs, Asuncion Sadaya, the
right to redeem Lot No. 1064.
17. By the legislative act of merging or consolidating Sudlon Agricultural College with other
colleges, the separate existence of the constituent schools including Sudlon Agricultural College has
ceased to exist as a legal consequence of merger or consolidation.
18. CSCST, as transferee of the land subject of sale, is the actual possessor of the land and is the
proper party defendant for redemption.
[19]

The petitioners are estopped from changing on appeal their theory of the case in the trial court
and in the CA.
[20]

We agree with the contention of the OSG that the annotation of the petitioners right to
repurchase the property at the dorsal side of TCT No. 15959 has no relation whatsoever to the issue
as to when such right had prescribed. The annotation was only for the purpose of notifying third
parties of the petitioners right to repurchase the property under the terms of the deed of sale, and
the law.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. Costs against the
petitioners.
SO ORDERED.








THIRD DIVISION
[G.R. No. 117501. July 8, 1997]
SOLID HOMES, INC., petitioner, vs. HON. COURT OF APPEALS, STATE FINANCING CENTER, INC., and
REGISTER OF DEEDS FOR RIZAL, respondents.
D E C I S I O N
PANGANIBAN, J.:
Is the failure to annotate the vendor a retros right of repurchase in the certificates of title of the
real estate properties subject of dacion en pago conclusive evidence of the vendee a retros malice
and bad faith, entitling the former to damages? In a sale with pacto de retro, is the repurchase price
limited by Article 1616 of the Civil Code?
These are the basic questions raised in this petition for review on certiorari under Rule 45 of the
Rules of Court assailing the Court of Appeals
[1]
Decision
[2]
promulgated on April 25, 1994 and
Resolution
[3]
of September 26, 1994 in CA-G.R. CV No. 39154, affirming the decision
[4]
of the Regional
Trial Court of Pasig, Branch 157 in Civil Case No. 51214. The said RTC decision sustained the validity
of the subject dacion en pago agreement and declared the same as a true sale with right of
repurchase.
The Facts
The facts of the case as narrated by the trial court and reproduced in the assailed Decision of the
Court of Appeals are undisputed by the parties. These are the relevant portions:
It appears that on June 4, 1979, Solid Homes executed in favor of State Financing (Center, Inc.) a
Real Estate Mortgage (Exhibit 3) on its properties embraced in Transfer Certificate of Title No. 9633
(Exhibit 9) and Transfer Certificate of Title No. (492194) -11938 (Exhibit 8) of the Registry of Deeds
in Pasig, Metro Manila, in order to secure the payment of a loan of P10,000,000.00 which the former
obtained from the latter. A year after, Solid Homes applied for and was granted an additional loan
of P1,511,270.03 by State Financing, and to secure its payment, Solid Homes executed the
Amendment to Real Estate Mortgage dated June 4, 1980 (Exhibit 4) whereby the credits secured by
the first mortgage on the abovementioned properties were increased from P10,000,000.00
to P11,511,270.03. Sometime thereafter, Solid Homes obtained additional credits and financing
facilities from State Financing in the sum of P1,499,811,97, and to secure its payment, Solid Homes
executed in favor of State Financing the Amendment to Real Estate Mortgage dated March 5, 1982
(Exhibit 5) whereby the mortgage executed on its properties on June 4, 1979 was again amended so
that the loans or credits secured thereby were further increased from P11,511,270.03
to P13,011,082.00.
When the loan obligations abovementioned became due and payable, State Financing made
repeated demands upon Solid Homes for the payment thereof, but the latter failed to do so. So, on
December 16, 1982, State Financing filed a petition for extrajudicial foreclosure of the mortgages
abovementioned with the Provincial Sheriff of Rizal, who, in pursuance of the petition, issued a
Notice of Sheriffs Sale dated February 4, 1983 (Exhibit 6), whereby the mortgaged properties of
Solid Homes and the improvements existing thereon, including the V.V. Soliven Towers II Building,
were set for public auction sale on March 7, 1983 in order to satisfy the full amount of Solid Homes
mortgage indebtedness, the interest thereon, and the fees and expenses incidental to the foreclosure
proceedings.
Before the scheduled public auction sale x x x, the mortgagor Solid Homes made representations
and induced State Financing to forego with the foreclosure of the real estate mortgages referred to
above. By reason thereof, State Financing agreed to suspend the foreclosure of the mortgaged
properties, subject to the terms and conditions they agreed upon, and in pursuance of their said
agreement, they executed a document entitled MEMORANDUM OF AGREEMENT/DACION EN
PAGO (Memorandum) dated February 28, 1983 (Exhibits C and 7) x x x. Among the terms and
conditions that said parties agreed upon were x x x:
1. (Solid Homes) acknowledges that it has an outstanding obligation due and payable to
(State Financing) and binds and obligates to pay (State Financing) the totality of its
outstanding obligation in the amount ofP14,225,178.40, within one hundred eighty
(180) days from date of signing of this instrument. However, it is understood and
agreed that the principal obligation of P14,225,178.40 shall earn interest at the rate of
14% per annum and penalty of 16% per annum counted from March 01, 1983 until
fully paid.
2. The parties agree that should (Solid Homes) be able to pay (State Financing) an
amount equivalent to sixty per centum (60%) of the principal obligation, or the amount
of P8,535,107.04, within the first one hundred eighty (180) days, (State Financing) shall
allow the remaining obligation of (Solid Homes) to be restructured at a rate of interest
to be mutually agreed between the parties.
3. It is hereby understood and agreed that in the event (Solid Homes) fails to comply with
the provisions of the preceding paragraphs, within the said period of one hundred
eighty (180) days, this document shall automatically operate to be an instrument of
dacion en pago without the need of executing any document to such an effect and
(Solid Homes) hereby obligates and binds itself to transfer, convey and assign to (State
Financing), by way of dacion en pago, its heirs, successors and assigns, and (State
Financing) does hereby accept the conveyance and transfer of the above-described
real properties, including all the improvements thereon, free from all liens and
encumbrances, in full payment of the outstanding indebtedness of (Solid Homes) to
(State Financing) x x x.
x x x x x x x x x
6. (State Financing) hereby grants (Solid Homes) the right to repurchase the aforesaid
real properties, including the condominium units and other improvements thereon,
within ten (10) months counted from and after the one hundred eighty (180) days
from date of signing hereof at an agreed price of P14,225,178.40, or as reduced
pursuant to par. 5 (d), plus all cost of money equivalent to 30% per annum,
registration fees, real estate and documentary stamp taxes and other incidental
expenses incurred by (State Financing) in the transfer and registration of its ownership
via dacion en pago x x x.
xxx xxx xxx
Subsequently, Solid Homes failed to pay State Financing an amount equivalent to 60%
(or P8,535,107.04) of the principal obligation of P14,225,178.40 within 180 days from the signing of
the (Memorandum) on February 28, 1983, as provided under paragraph 2 of the said
document. Hence, and in pursuance of paragraph 3 thereof which provided that this document shall
automatically operate to be an instrument of dacion en pago without the need of executing any
document to such an effect x x x(,) State Financing registered the said (Memorandum) with the
Register of Deeds in Pasig, Metro Manila on September 15, 1983. Consequently, the said Register of
Deeds cancelled TCT No. 9633 and TCT No. (492194) 11938 in the name of Solid Homes which were
the subject matter of the (Memorandum) abovementioned, and in lieu thereof, the said office issued
Transfer Certificate of Title No. 40533 (Exhibits J and 11) and Transfer Certificate of Title No. 40534
(Exhibits K and 12) in the name of State Financing. x x x
In a letter dated October 11, 1983 (Exhibit 16), State Financing informed Solid Homes of the
transfer in its name of the titles to all the properties subject matter of the (Memorandum) and
demanded among other things, that Solid Homes turn over to State Financing the possession of the
V.V. Soliven Towers II Building erected on two of the said properties. Solid Homes replied with a
letter dated October 14, 1983, (Exhibit 20) asking for a period of ten (10) days within which to
categorize its position on the matter; and in a subsequent letter dated October 24, 1983, Solid Homes
made known to State Financing its position that the (Memorandum) is null and void because the
essence thereof is that State Financing, as mortgagee creditor, would be able to appropriate unto
itself the properties mortgaged by Solid Homes which is in contravention of Article 2088 of the Civil
Code. State Financing then sent to Solid Homes another letter dated November 3, 1983 (Exhibit 17),
whereby it pointed out that Art. 2088 of the Civil Code is not applicable to the (Memorandum) they
have executed, and also reiterated its previous demand that Solid Homes turn over to it the
possession of the V.V. Soliven Towers II Building within five (5) days, but Solid Homes did not comply
with the said demand.
x x x and within that period of repurchase, Solid Homes wrote to State Financing a letter dated April
30, 1984 containing its proposal for repayment schemes under terms and conditions indicated
therein for the repurchase of the properties referred to. In reply to said letter, State Financing sent a
letter dated May 17, 1984 (Exhibit 18) advising Solid Homes that State Financings management was
not amenable to its proposal, and that by way of granting it some concessions, said management
made a counter-proposal requiring Solid Homes to make an initial payment of P10 million until 22
May 1984 and the balance payable within the remaining period to repurchase the properties as
provided for under the (Memorandum) x x x. Thereafter, a number of conferences were held among
the corporate officers of both companies wherein they discussed the payment arrangement of Solid
Homes outstanding obligation, x x x. In a letter dated June 7, 1984 (Exhibit 19), State Financing
reiterated the counter-proposal in its previous letter dated May 17, 1984 to Solid Homes as a way of
making good its account, and at the same time reminded Solid Homes that it has until 27 June 1984
to exercise its right to repurchase the properties pursuant to the terms and conditions of the
(Memorandum), otherwise, it will have to vacate and turn over the possession of said properties to
State Financing. In return, Solid Homes sent to State Financing a letter dated June 18, 1984 (Exhibits
N and 22) containing a copy of the written offer made by C.L. Alma Jose & Sons, Inc. (Exhibits M
and 22-A) to avail of Solid Homes right to repurchase the V.V. Soliven Towers II pursuant to the
terms of the Dacion En Pago. The letter also contained a request that the repurchase period under
said Dacion En Pago which will expire on June 27, 1984 be extended by sixty (60) days to enable Solid
Homes to comply with the conditions in the offer of Alma Jose & Sons, Inc. referred to, and
thereafter, to avail of the one year period to pay the balance based on the verbal commitment of
State Financings President. x x x
However, on June 26, 1984, a day before the expiry date of its right to repurchase the properties
involved in the (Memorandum) on June 27, 1984, Solid Homes filed the present action against
defendants State Financing and the Register of Deeds for Metro Manila District II (Pasig), seeking the
annulment of said (Memorandum) and the consequent reinstatement of the mortgages over the
same properties; x x x
[5]

As earlier stated, the trial court held that the Memorandum of Agreement/Dacion En
Pago executed by the parties was valid and binding, and that the registration of said instrument in
the Register of Deeds was in accordance with law and the agreement of the parties. It disposed of
the case thus:
WHEREFORE, this Court hereby renders judgment, as follows:
1. Declaring that the Memorandum of Agreement/Dacion En Pago entered into by and
between plaintiff Solid Homes and defendant State Financing on February 28, 1983 is a valid and
binding document which does not violate the prohibition against pactum commisorium under Art.
2088 of the Civil Code;
2. Declaring that the said Memorandum of Agreement/Dacion En Pago is a true sale with right
of repurchase, and not an equitable mortgage;
3. Declaring that the registration of the said Memorandum of Agreement/Dacion En Pago with
the defendant Register of Deeds in Pasig, Metro Manila by defendant State Financing on September
15, 1983 is in accordance with law and the agreement of the parties in the said document; but the
annotation of the said document by the said Register of Deeds on the certificates of title over the
properties subject of the Memorandum of Agreement/Dacion En Pago without any mention of the
right of repurchase and the period thereof, is improper, and said Register of Deeds cancellation of
the certificates of title in the name of Solid Homes over the properties referred to and issuance of
new titles in lieu thereof in the name of State Financing - during the period of repurchase and without
any judicial order - is in violation of Art. 1607 of the Civil Code, which renders said titles null and void;
4. Ordering the defendant State Financing to surrender to the defendant Register of Deeds in
Pasig, Metro Manila for the cancellation thereof, all the certificates of title issued in its name over the
properties subject of the Memorandum of Agreement/Dacion En Pago, including those titles covering
the fully paid condominium units and the substitute collateral submitted in exchange for said
condominium units;
5. Ordering the said defendant Register of Deeds to cancel all the titles in the name of State
Financing referred to and to reinstate the former titles over the same properties in the name of Solid
Homes, with the proper annotation thereon of the Memorandum of Agreement/Dacion En Pago
together with the right of repurchase and the period thereof - as provided in said document - and to
return the said reinstated former titles (owners copies) in the name of Solid Homes to State
Financing;
6. Ordering the defendant State Financing to release to plaintiff Solid Homes all the
certificates of title over the fully paid condominium units in the name of Solid Homes, free from all
liens and encumbrances by releasing the mortgage thereon;
7. Granting the plaintiff Solid Homes the opportunity to exercise its right to repurchase the
properties subject of the Memorandum of Agreement/Dacion En Pago within thirty (30) days from
the finality of this Decision, by paying to defendant State Financing the agreed price
of P14,225,178.40 plus all cost of money equivalent to 30% (interest of 14% and penalty of 16% from
March 1, 1983) per annum, registration fees, real estate and documentary stamp taxes and other
incidental expenses incurred by State Financing in the transfer and registration of its ownership via
the Dacion En Pago, as provided in the said document and in pursuance of Articles 1606 and 1616 of
the Civil Code; and
8. Ordering the defendant Register of Deeds in Pasig, Metro Manila - should plaintiff Solid
Homes fail to exercise the abovementioned right to repurchase within 30 days from the finality of this
judgment - to record the consolidation of ownership in State Financing over the properties subject of
the Memorandum of Agreement/Dacion En Pago in the Registry of Property, in pursuance of this
Order, but excluding therefrom the fully paid condominium units and their corresponding titles to be
released by State Financing.
For lack of merit, the respective claims of both parties for damages, attorneys fees, expenses of
litigation and costs of suit are hereby denied.
[6]

Both parties appealed from the trial courts decision. Solid Homes raised a lone question
contesting the denial of its claim for damages. Such damages allegedly resulted from the bad faith
and malice of State Financing in deliberately failing to annotate Solid Homes right to repurchase the
subject properties in the formers consolidated titles thereto. As a result of the non-annotation, Solid
Homes claimed to have been prevented from generating funds from prospective buyers to enable it
to comply with the Agreement and to redeem the subject properties.
State Financing, on the other hand, assigned three errors against the RTC decision: (1) granting
Solid Homes a period of thirty (30) days from finality of the judgment within which to exercise its
right of repurchase; (2) ordering Solid Homes to pay only 30% per annum as interest and penalty on
the principal obligation, rather than reasonable rental value from the time possession of the
properties was illegally withheld from State Financing; and (3) failing to order the immediate turnover
of the possession of the properties to State Financing as the purchaser a retro from whom no
repurchase has been made.
As to the lone issue raised by Solid Homes, the Court of Appeals agreed with the trial court that
the failure to annotate the right of repurchase of the vendor a retro is not by itself an indication of
bad faith or malice. State Financing was not legally bound to cause its annotation, and Solid Homes
could have taken steps to protect its own interests. The evidence shows that after such registration
and transfer of titles, State Financing willingly negotiated with Solid Homes to enable the latter to
exercise its right to repurchase the subject properties,
[7]
an act that negates bad faith.
Anent the first error assigned by State Financing, Respondent Court likewise upheld the trial
court in applying Article 1606, paragraph 3
[8]
of the Civil Code. Solid Homes was not in bad faith in
filing the complaint for the declaration of nullity of the Memorandum of Agreement/Dacion En
Pago. There is statutory basis for petitioners claim that an equitable mortgage existed since it
believed that (1) the price of P14 million was grossly inadequate, considering that the building alone
was allegedly built at a cost of P60 million in 1979 and the lot was valued at P5,000.00 per square
meter and (2) it remained in possession of the subject properties.
[9]
Furthermore, Article 1607
[10]
of
the Civil Code abolished automatic consolidation of ownership in the vendee a retro upon expiration
of the redemption period by requiring the vendee to institute an action for consolidation where the
vendor a retro may be duly heard. If the vendee succeeds in proving that the transaction was indeed
a pacto de retro, the vendor is still given a period of thirty days from the finality of the judgment
within which to repurchase the property.
[11]

Respondent Court also affirmed the trial courts imposition of the 30% interest per annum on top
of the redemption price in accordance with paragraph 6 of the parties Memorandum of
Agreement.
[12]

However, Respondent Court of Appeals ruled favorably on State Financings last assigned error
by ordering Solid Homes to deliver possession of the subject properties to the private respondent,
citing jurisprudence that in a sale with pacto de retro, the vendee shall immediately acquire title over
and possession of the real property sold, subject only to the vendors right of redemption.
[13]
The full
text of the dispositive portion of the assailed Decision is as follows:
WHEREFORE, the judgment appealed from is affirmed with the modification that plaintiff Solid
Homes is further ordered to deliver the possession of the subject property to State Financing.
[14]

The two opposing parties filed their respective motions for reconsideration of the assailed
Decision. Both were denied by said Court for lack of merit. Both parties thereafter filed separate
petitions for review before this Court. In a minute Resolution
[15]
dated December 5, 1994, this Court
(Third Division) denied State Financing Centers petition because of its failure to show that a
reversible error was committed by the appellate court. Its motion for reconsideration of said
resolution was likewise denied for lack of merit. This case disposes only of the petition filed by Solid
Homes, Inc.
Issues
In its petition, Solid Homes repeats its arguments before the Court of Appeals. It claims damages
allegedly arising from the non-annotation of its right of repurchase in the consolidated titles issued to
private respondent. Petitioner reiterates its attack against the inclusion of 30% interest per annum as
part of the redemption price. It asserts that Article 1616 of the Civil Code authorizes only the return
of the (1) price of the sale, (2) expenses of the contract and any other legitimate payments by reason
of the sale and (3) necessary and useful expenses made on the thing sold. Considering that the
transfer of titles was null and void, it was thus erroneous to charge petitioner the registration fees,
documentary stamp taxes and other incidental expenses incurred by State Financing in the transfer
and registration of the subject properties via the dacion en pago. Lastly, petitioner argues that there
is no need for the immediate turnover of the properties to State Financing since the same was not
stipulated under their Agreement, and the latters rights were amply protected by the issuance of
new certificates of title in its name.
The Courts Ruling
First Issue: Damages
To resolve the issue of damages, an examination of factual circumstances would be necessary, a
task that is clearly beyond this Courts dominion. It is elementary that in petitions for review
oncertiorari, only questions of law may be brought by the parties and passed upon by this
Court. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme Court
except when the findings are grounded on speculation, surmises or conjectures; when the inference
made is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion in the
appreciation of facts; when the factual findings of the trial and appellate courts are conflicting; when
the Court of Appeals, in making its findings, has gone beyond the issues of the case and such findings
are contrary to the admissions of both appellant and appellee;
[16]
when the judgment of the appellate
court is premised on a misapprehension of facts or when it has failed to notice certain relevant facts
which, if properly considered, will justify a different conclusion; when the findings of fact are
conclusions without citation of specific evidence upon which they are based; and when findings of
fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the
evidence on record.
[17]

The petitioner has not shown any -- and indeed the Court finds none -- of the above-mentioned
exceptions to warrant a departure from the general rule.
In fact, petitioner has not even bothered to support with evidence its claim for actual, moral
and punitive/nominal damages as well as exemplary damages and attorneys fees. It is basic that
the claim for these damages must each be independently identified and justified; such claims cannot
be dealt with in the aggregate, since they are neither kindred or analogous terms nor governed by a
coincident set of rules.
[18]

The trial court found, and the Court of Appeals affirmed, that petitioners claim for actual
damages was baseless. Solid Homes utterly failed to prove that respondent corporation had
maliciously and in bad faith caused the non-annotation of petitioners right of repurchase so as to
prevent the latter from exercising such right. On the contrary, it is admitted by both parties that
State Financing informed petitioner of the registration with the Register of Deeds of Pasig of their
Memorandum of Agreement/Dacion en Pago and the issuance of new certificates of title in the name
of the respondent corporation. Petitioner exchanged communications and held conferences with
private respondent in order to draw a mutually acceptable payment arrangement for the formers
repurchase of the subject properties. A written offer from another corporation alleging willingness to
avail itself of petitioners right of repurchase was even attached to one of these
communications. Clearly, petitioner was not prejudiced by the non-annotation of such right in the
certificates of titles issued in the name of State Financing. Besides, as the Court of Appeals noted, it
was not the function of respondent corporation to cause said annotation. It was equally the
responsibility of petitioner to protect its own rights by making sure that its right of repurchase was
indeed annotated in the consolidated titles of private respondent.
The only legal transgression of State Financing was its failure to observe the proper procedure in
effecting the consolidation of the titles in its name. But this does not automatically entitle the
petitioner to damages absent convincing proof of malice and bad faith
[19]
on the part of private
respondent and actual damages suffered by petitioner as a direct and probable consequence
thereof. In fact, the evidence proffered by petitioner consist of mere conjectures and speculations
with no factual moorings. Furthermore, such transgression was addressed by the lower courts when
they nullified the consolidation of ownership over the subject properties in the name of respondent
corporation, because it had been effected in contravention of the provisions of Article 1607
[20]
of the
Civil Code. Such rulings are consistent with law and jurisprudence.
Neither can moral damages be awarded to petitioner. Time and again, we have held that a
corporation -- being an artificial person which has no feelings, emotions or senses, and which cannot
experience physical suffering or mental anguish -- is not entitled to moral damages.
[21]

While the amount of exemplary damages need not be proved, petitioner must show that he is
entitled to moral or actual damages;
[22]
but the converse obtains in the instant case. Award of
attorneys fees is likewise not warranted when moral and exemplary damages are eliminated and
entitlement thereto is not demonstrated by the claimant.
[23]

Lastly, (n)ominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
[24]
As elaborated above and in the decisions
of the two lower courts, no right of petitioner was violated or invaded by respondent corporation.
Second Issue: Redemption Price
Another fundamental principle of procedural law precludes higher courts from entertaining
matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for
the first time only in a motion for reconsideration or on appeal.
[25]
On appeal, only errors specifically
assigned and properly argued in the brief will be considered, with the exception of those affecting
jurisdiction over the subject matter as well as plain and clerical errors.
[26]

As stated earlier, the single issue raised by petitioner in its appeal of the RTC decision to the
Court of Appeals concerned only the denial of its claim for damages. Petitioner succinctly stated such
issue in its brief as follows:
I. LONE ASSIGNMENT OF ERROR
The trial court erred in that after having found that the registration of the Memorandum of
Agreement/Dacion en Pago on September 15, 1983 [and the consequent cancellation of the titles of
plaintiff-appellant Solid Homes, Inc. and issuance in lieu thereof of titles to defendant-appellant State
Financing Center, Inc. (SFCI)] was null and void because of failure to duly annotate the right to
repurchase granted to plaintiff-appellant Solid Homes, Inc. under par. 6 thereof still then subsisting
up to June 28, 1984 and the failure to comply with the provisions of Art. 1607, Civil Code x x x
I*t+ nonetheless did not rule that such irregular registration unduly deprived plaintiff-appellant Solid
Homes, Inc. of its right of repurchase and that it further erred in not having declared that defendant-
appellant SFCI liable in favor of said plaintiff-appellant for damages.
[27]

Petitioner is thus barred from raising a new issue in its appeal before this Court. Nevertheless, in
the interest of substantial justice, we now resolve the additional question posed with respect to the
composition of the redemption price prescribed by the trial court and affirmed by the Court of
Appeals, as follows:
7. Granting the plaintiff Solid Homes the opportunity to exercise its right to repurchase the
properties x x x by paying to defendant State Financing the agreed price of P14,225,178.40 plus all
cost of money equivalent to 30% (interest of 14% and penalty of 16% from March 1, 1983) per
annum, registration fees, real estate and documentary stamp taxes and other incidental expenses
incurred by State Financing in the transfer and registration of its ownership via the Dacion En Pago, as
provided in the said document and in pursuance of Articles 1606 and 1616 of the Civil Code;
[28]

Petitioner argues that such total redemption price is in contravention of Art. 1616 of the Civil
Code. We do not, however, find said legal provision to be restrictive or exclusive, barring additional
amounts that the parties may agree upon. Said provision should be construed together with Art.
1601 of the same Code which provides as follows:
Art. 1601. Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other
stipulations which may have been agreed upon. (emphasis supplied)
It is clear, therefore, that the provisions of Art. 1601 require petitioner to comply with x x x the
other stipulations of the Memorandum of Agreement/Dacion en Pago it freely entered into with
private respondent. The said Memorandums provision on redemption states:
6. The FIRST PARTY (State Financing) hereby grants the SECOND PARTY (Solid Homes) the right to
repurchase the aforesaid real properties, including the condominium units and other improvements
thereon, within ten (10) months counted from and after the one hundred eighty (180) days from date
of signing hereof at an agreed price of P14,225,178.40, or as reduced pursuant to par. 5 (d), plus all
cost of money equivalent to 30% per annum, registration fees, real estate and documentary stamp
taxes and other incidental expenses incurred by the FIRST PARTY (State Financing) in the transfer and
registration of its ownership via dacion en pago x x x
[29]
(underscoring supplied)
Contracts have the force of law between the contracting parties who may establish such
stipulations, clauses, terms and conditions as they may want, subject only to the limitation that their
agreements are not contrary to law, morals, customs, public policy or public order
[30]
-- and the
above-quoted provision of the Memorandum does not appear to be so.
Petitioner, however, is right in its observation that the Court of Appeals inclusion of registration
fees, real estate and documentary stamp taxes and other incidental expenses incurred by State
Financing in the transfer and registration of its ownership (of the subject properties) via dacion en
pago was vague, if not erroneous, considering that such transfer and issuance of the new titles were
null and void. Thus, the redemption price shall include only those expenses relating to the
registration of the dacion en pago, but not the registration and other expenses incurred in the
issuance of new certificates of title in the name of State Financing.
Possession of the Subject Properties During the Redemption Period
The Court of Appeals Decision modified that of the trial court only insofar as it ordered petitioner
to deliver possession of the subject properties to State Financing, the vendee a retro. We find no
legal error in this holding. In a contract of sale with pacto de retro, the vendee has a right to the
immediate possession of the property sold, unless otherwise agreed upon. It is basic that in a pacto
de retro sale, the title and ownership of the property sold are immediately vested in the vendee a
retro, subject only to the resolutory condition of repurchase by the vendor a retro within the
stipulated period.
[31]

WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED with
the MODIFICATION that the redemption price shall not include the registration and other expenses
incurred by State Financing Center, Inc. in the issuance of new certificates of title in its name, as this
was done without the proper judicial order required under Article 1607 of the Civil Code.

SECOND DIVISION
[G.R. No. 125055. October 30, 1998]
A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS and
SPOUSES ROMULO S.A. JAVILLONAR and ERLINDA P. JAVILLONAR, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for review on certiorari of the decision rendered on February 29, 1996 by the
Court of Appeals
[1]
reversing, in toto, the decision of the Regional Trial Court of Pasig City in Civil Case
No. 62290, as well as the appellate courts resolution of May 7, 1996 denying reconsideration.
Petitioner A. Francisco Realty and Development Corporation granted a loan of P7.5 Million to
private respondents, the spouses Romulo and Erlinda Javillonar, in consideration of which the latter
executed the following documents: (a) a promissory note, dated November 27, 1991, stating an
interest charge of 4% per month for six months; (b) a deed of mortgage over realty covered by TCT
No. 58748, together with the improvements thereon; and (c) an undated deed of sale of the
mortgaged property in favor of the mortgagee, petitioner A. Francisco Realty.
[2]

The interest on the said loan was to be paid in four installments: half of the total amount agreed
upon (P900,000.00) to be paid in advance through a deduction from the proceeds of the loan, while
the balance to be paid monthly by means of checks post-dated March 27, April 27, and May 27, 1992.
The promissory note expressly provided that upon failure of the MORTGAGOR *private respondents+
to pay the interest without prior arrangement with the MORTGAGEE [petitioner], full possession of
the property will be transferred and the deed of sale will be registered.
[3]
For this purpose, the
owners duplicate of TCT No. 58748 was delivered to petitioner A. Francisco Realty.
Petitioner claims that private respondents failed to pay the interest and, as a consequence, it
registered the sale of the land in its favor on February 21, 1992. As a result, TCT No. 58748 was
cancelled and in lieu thereof TCT No. PT-85569 was issued in the name of petitioner A. Francisco
Realty.
[4]

Private respondents subsequently obtained an additional loan of P2.5 Million from petitioner on
March 13, 1992 for which they signed a promissory note which reads:
PROMISSORY

NOTE
For value received, I promise to pay A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION, the
additional sum of Two Million Five Hundred Thousand Pesos (P2,500,000.00) on or before April 27,
1992, with interest at the rate of four percent (4%) a month until fully paid and if after the said date
this note and/or the other promissory note of P7.5 Million remains unpaid and/or unsettled, without
any need for prior demand or notification, I promise to vacate voluntarily and willfully and/or allow A.
FRANCISCO REALTY AND DEVELOPMENT CORPORATION to appropriate and occupy for their exclusive
use the real property located at 56 Dragonfly, Valle Verde VI, Pasig, Metro Manila.
[5]

Petitioner demanded possession of the mortgaged realty and the payment of 4% monthly
interest from May 1992, plus surcharges. As respondent spouses refused to vacate, petitioner filed
the present action for possession before the Regional Trial Court in Pasig City.
[6]

In their answer, respondents admitted liability on the loan but alleged that it was not their intent
to sell the realty as the undated deed of sale was executed by them merely as an additional security
for the payment of their loan. Furthermore, they claimed that they were not notified of the
registration of the sale in favor of petitioner A. Francisco Realty and that there was no interest then
unpaid as they had in fact been paying interest even subsequent to the registration of the sale. As an
alternative defense, respondents contended that the complaint was actually for ejectment and,
therefore, the Regional Trial Court had no jurisdiction to try the case. As counterclaim, respondents
sought the cancellation of TCT No. PT-85569 as secured by petitioner and the issuance of a new title
evidencing their ownership of the property.
[7]

On December 19, 1992, the Regional Trial Court rendered a decision, the dispositive portion of
which reads as follows:
WHEREFORE, prescinding from the foregoing considerations, judgment is hereby rendered declaring
as legal and valid, the right of ownership of A. Francisco Realty And Development Corporation, over
the property subject of this case and now registered in its name as owner thereof, under TCT No.
85569 of the Register of Deeds of Rizal, situated at No. 56 Dragonfly Street, Valle Verde VI, Pasig,
Metro Manila.
Consequently, defendants are hereby ordered to cease and desist from further committing acts of
dispossession or from withholding possession from plaintiff, of the said property as herein described
and specified.
Claim for damages in all its forms, however, including attorneys fees, are hereby denied, no
competent proofs having been adduced on record, in support thereof.
[8]

Respondent spouses appealed to the Court of Appeals which reversed the decision of the trial
court and dismissed the complaint against them. The appellate court ruled that the Regional Trial
Court had no jurisdiction over the case because it was actually an action for unlawful detainer which
is exclusively cognizable by municipal trial courts. Furthermore, it ruled that, even presuming
jurisdiction of the trial court, the deed of sale was void for being in fact apactum
commissorium which is prohibited by Art. 2088 of the Civil Code.
Petitioner A. Francisco Realty filed a motion for reconsideration, but the Court of Appeals denied
the motion in its resolution, dated May 7, 1996. Hence, this petition for review on certiorari raising
the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE REGIONAL TRIAL COURT HAD
NO JURISDICTION OVER THE COMPLAINT FILED BY THE PETITIONER.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACTUAL DOCUMENTS
SUBJECT OF THE INSTANT CASE ARE CONSTITUTIVE OF PACTUM COMMISSORIUM AS DEFINED UNDER
ARTICLE 2088 OF THE CIVIL CODE OF THE PHILIPPINES.
On the first issue, the appellate court stated:
Ostensibly, the cause of action in the complaint indicates a case for unlawful detainer, as contra-
distinguished from accion publiciana. As contemplated by Rule 70 of the Rules of Court, an action for
unlawful detainer which falls under the exclusive jurisdiction of the Metropolitan or Municipal Trial
Courts, is defined as withholding from by a person from another for not more than one year, the
possession of the land or building to which the latter is entitled after the expiration or termination of
the supposed rights to hold possession by virtue of a contract, express or implied. (Tenorio vs.
Gamboa, 81 Phil. 54; Dikit vs. Dicaciano, 89 Phil. 44). If no action is initiated for forcible entry or
unlawful detainer within the expiration of the 1 year period, the case may still be filed under the
plenary action to recover possession by accion publiciana before the Court of First Instance (now the
Regional Trial Court) (Medina vs. Valdellon, 63 SCRA 278). In plain language, the case at bar is a
legitimate ejectment case filed within the 1 year period from the jurisdictional demand to vacate.
Thus, the Regional Trial Court has no jurisdiction over the case. Accordingly, under Section 33 of B.P.
Blg. 129 Municipal Trial Courts are vested with the exclusive original jurisdiction over forcible entry
and unlawful detainer case. (Sen Po Ek Marketing Corp. vs. CA, 212 SCRA 154 [1990])
[9]

We think the appellate court is in error. What really distinguishes an action for unlawful detainer
from a possessory action (accion publiciana) and from a reivindicatory action (accion
reivindicatoria) is that the first is limited to the question of possession de facto.
An unlawful detainer suit (accion interdictal) together with forcible entry are the two forms of an
ejectment suit that may be filed to recover possession of real property. Aside from the summary
action of ejectment, accion publicianaor the plenary action to recover the right of possession
and accion reivindicatoria or the action to recover ownership which includes recovery of possession,
make up the three kinds of actions to judicially recover possession.
Illegal detainer consists in withholding by a person from another of the possession of a land or
building to which the latter is entitled after the expiration or termination of the formers right to hold
possession by virtue of a contract, express or implied. An ejectment suit is brought before the proper
inferior court to recover physical possession only or possession de facto and not possession de jure,
where dispossession has lasted for not more than one year. Forcible entry and unlawful detainer are
quieting processes and the one-year time bar to the suit is in pursuance of the summary nature of the
action. The use of summary procedure in ejectment cases is intended to provide an expeditious
means of protecting actual possession or right to possession of the property. They are not processes
to determine the actual title to an estate. If at all, inferior courts are empowered to rule on the
question of ownership raised by the defendant in such suits, only to resolve the issue of possession.
Its determination on the ownership issue is, however, not conclusive.
[10]

The allegations in both the original and the amended complaints of petitioner before the trial
court clearly raise issues involving more than the question of possession, to wit: (a) the validity of the
transfer of ownership to petitioner; (b) the alleged new liability of private respondents
for P400,000.00 a month from the time petitioner made its demand on them to vacate; and (c) the
alleged continuing liability of private respondents under both loans to pay interest and surcharges on
such. As petitioner A. Francisco Realty alleged in its amended complaint:
5. To secure the payment of the sum of P7.5 Million together with the monthly interest, the
defendant spouses agreed to execute a Deed of Mortgage over the property with the
express condition that if and when they fail to pay monthly interest or any infringement
thereof they agreed to convert the mortgage into a Deed of Absolute Sale in favor of the
plaintiff by executing Deed of Sale thereto, copy of which is hereto attached and
incorporated herein as Annex A;
6. That in order to authorize the Register of Deeds into registering the Absolute Sale and
transfer to the plaintiff, defendant delivered unto the plaintiff the said Deed of Sale together
with the original owners copy of Transfer Certificate of Title No. 58748 of the Registry of
Rizal, copy of which is hereto attached and made an integral part herein as Annex B;
7. That defendant spouses later secured from the plaintiff an additional loan of P2.5 Million
with the same condition as aforementioned with 4% monthly interest;
8. That defendants spouses failed to pay the stipulated monthly interest and as per
agreement of the parties, plaintiff recorded and registered the Absolute Deed of Sale in
its favor on and was issued Transfer Certificate of Title No. PT-85569, copy of which is
hereto attached and incorporated herein as Annex C;
9. That upon registration and transfer of the Transfer Certificate of Title in the name of the
plaintiff, copy of which is hereto attached and incorporated herein as Annex C, plaintiff
demanded the surrender of the possession of the above-described parcel of land together
with the improvements thereon, but defendants failed and refused to surrender the same to
the plaintiff without justifiable reasons thereto; Neither did the defendants pay the interest
of 4% a month from May, 1992 plus surcharges up to the present;
10. That it was the understanding of the parties that if and when the defendants shall fail to
pay the interest due and that the Deed of Sale be registered in favor of plaintiff, the
defendants shall pay a monthly rental of P400,000.00 a month until they vacate the
premises, and that if they still fail to pay as they are still failing to pay the amount
of P400,000.00 a month as rentals and/or interest, the plaintiff shall take physical
possession of the said property;
[11]

It is therefore clear from the foregoing that petitioner A. Francisco Realty raised issues which
involved more than a simple claim for the immediate possession of the subject property. Such issues
range across the full scope of rights of the respective parties under their contractual arrangements.
As held in an analogous case:
The disagreement of the parties in Civil Case No. 96 of the Justice of the Peace of Hagonoy, Bulacan
extended far beyond the issues generally involved in unlawful detainer suits. The litigants therein did
not raise merely the question of who among them was entitled to the possession of the fishpond of
Federico Suntay. For all judicial purposes, they likewise prayed of the court to rule on their respective
rights under the various contractual documents their respective deeds of lease, the deed of
assignment and the promissory note upon which they predicate their claims to the possession of
the said fishpond. In other words, they gave the court no alternative but to rule on the validity or
nullity of the above documents. Clearly, the case was converted into the determination of the nature
of the proceedings from a mere detainer suit to one that is incapable of pecuniary estimation and
thus beyond the legitimate authority of the Justice of the Peace Court to rule on.
[12]

Nor can it be said that the compulsory counterclaim filed by respondent spouses challenging the
title of petitioner A. Francisco Realty was merely a collateral attack which would bar a ruling here on
the validity of the said title.
A counterclaim is considered a complaint, only this time, it is the original defendant who becomes the
plaintiff (Valisno v. Plan, 143 SCRA 502 (1986). It stands on the same footing and is to be tested by
the same rules as if it were an independent action. Hence, the same rules on jurisdiction in an
independent action apply to a counterclaim (Vivar v. Vivar, 8 SCRA 847 (1963); Calo v. Ajax
International, Inc. v. 22 SCRA 996 (1968); Javier v. Intermediate Appellate Court, 171 SCRA 605
(1989); Quiason, Philippine Courts and Their Jurisdictions, 1993 ed., p. 203).
[13]

On the second issue, the Court of Appeals held that, even on the assumption that the trial court
has jurisdiction over the instant case, petitioners action could not succeed because the deed of sale
on which it was based was void, being in the nature of a pactum commissorium prohibited by Art.
2088 of the Civil Code which provides:
ART. 2088. The creditor cannot appropriate the things given by way to pledge or mortgage, or dispose
of them. Any stipulation to the contrary is null and void.
With respect to this question, the ruling of the appellate court should be affirmed. Petitioner
denies, however, that the promissory notes contain a pactum commissorium. It contends that
What is envisioned by Article 2088 of the Civil Code of the Philippines is a provision in the deed of
mortgage providing for the automatic conveyance of the mortgaged property in case of the failure of
the debtor to pay the loan (Tan v. West Coast Life Assurance Co., 54 Phil. 361). A pactum
commissorium is a forfeiture clause in a deed of mortgage (Hechanova v. Adil, 144 SCRA 450;
Montevergen v. Court of Appeals, 112 SCRA 641; Report of the Code Commission, 156).
Thus, before Article 2088 can find application herein, the subject deed of mortgage must be
scrutinized to determine if it contains such a provision giving the creditor the right to appropriate
the things given by way of mortgage without following the procedure prescribed by law for the
foreclosure of the mortgage (Ranjo v. Salmon, 15 Phil. 436). IN SHORT, THE PROSCRIBED
STIPULATION SHOULD BE FOUND IN THE MORTGAGE DEED ITSELF.
[14]

The contention is patently without merit. To sustain the theory of petitioner would be to allow a
subversion of the prohibition in Art. 2088.
In Nakpil v. Intermediate Appellate Court,
[15]
which involved the violation of a constructive trust,
no deed of mortgage was expressly executed between the parties in that case. Nevertheless, this
Court ruled that an agreement whereby property held in trust was ceded to the trustee upon failure
of the beneficiary to pay his debt to the former as secured by the said property was void for being
a pactum commissorium. It was there held:
The arrangement entered into between the parties, whereby Pulong Maulap was to be considered
sold to him (respondent) x x x in case petitioner fails to reimburse Valdes, must then be construed as
tantamount to a pactum commissorium which is expressly prohibited by Art. 2088 of the Civil
Code. For, there was to be automatic appropriation of the property by Valdez in the event of failure
of petitioner to pay the value of the advances. Thus, contrary to respondents manifestations, all the
elements of a pactum commissorium were present: there was a creditor-debtor relationship
between the parties; the property was used as security for the loan; and, there was automatic
appropriation by respondent of Pulong Maulap in case of default of petitioner.
[16]

Similarly, the Court has struck down such stipulations as contained in deeds of sale purporting to
be pacto de retro sales but found actually to be equitable mortgages.
It has been consistently held that the presence of even one of the circumstances enumerated in Art.
1602 of the New Civil Code is sufficient to declare a contract of sale with right to repurchase an
equitable mortgage. This is so becausepacto de retro sales with the stringent and onerous effects that
accompany them are not favored. In case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage.
Petitioner, to prove her claim, cannot rely on the stipulation in the contract providing that complete
and absolute title shall be vested on the vendee should the vendors fail to redeem the property on
the specified date. Such stipulation that the ownership of the property would automatically pass to
the vendee in case no redemption was effected within the stipulated period is void for being
a pactum commissorium which enables the mortgagee to acquire ownership of the mortgaged
property without need of foreclosure. Its insertion in the contract is an avowal of the intention to
mortgage rather that to sell the property.
[17]

Indeed, in Reyes v. Sierra
[18]
this Court categorically ruled that a mortgagees mere act of
registering the mortgaged property in his own name upon the mortgagors failure to redeem the
property amounted to the exercise of the privilege of a mortgagee in a pactum commissorium.
Obviously, from the nature of the transaction, applicants predecessor-in-interest is a mere
mortgagee, and ownership of the thing mortgaged is retained by Basilia Beltran, the mortgagor. The
mortgagee, however, may recover the loan, although the mortgage document evidencing the loan
was nonregistrable being a purely private instrument. Failure of mortgagor to redeem the property
does not automatically vest ownership of the property to the mortgagee, which would grant the
latter the right to appropriate the thing mortgaged or dispose of it. This violates the provision of
Article 2088 of the New Civil Code, which reads:
The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose by
them. Any stipulation to the contrary is null and void.
The act of applicant in registering the property in his own name upon mortgagors failure to redeem
the property would amount to a pactum commissorium which is against good morals and public
policy.
[19]

Thus, in the case at bar, the stipulations in the promissory notes providing that, upon failure of
respondent spouses to pay interest, ownership of the property would be automatically transferred
to petitioner A. Francisco Realty and the deed of sale in its favor would be registered, are in
substance a pactum commissorium. They embody the two elements of pactum commissorium as laid
down in Uy Tong v. Court of Appeals,
[20]
to wit:
The prohibition on pactum commissorium stipulations is provided for by Article 2088 of the Civil
Code:
Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgagee, or
dispose of the same. Any stipulation to the contrary is null and void.
The aforequoted provision furnishes the two elements for pactum commissorium to exist: (1) that
there should be a pledge or mortgage wherein a property is pledged or mortgaged by way of security
for the payment of the principal obligation; and (2) that there should be a stipulation for an
automatic appropriation by the creditor of the thing pledged or mortgaged in the event of non-
payment of the principal obligation within the stipulated period.
[21]

The subject transaction being void, the registration of the deed of sale, by virtue of which
petitioner A. Francisco Realty was able to obtain TCT No. PT-85569 covering the subject lot, must also
be declared void, as prayed for by respondents in their counterclaim.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED, insofar as it dismissed
petitioners complaint against respondent spouses on the ground that the stipulations in the
promissory notes are void for being apactum commissorium, but REVERSED insofar as it ruled that
the trial court had no jurisdiction over this case. The Register of Deeds of Pasig City is hereby
ORDERED to CANCEL TCT No. PT-85569 issued to petitioner and ISSUE a new one in the name of
respondent spouses.
SECOND DIVISION
VIRGILIO A. CADUNGOG, G.R. No. 161223
Petitioner,

Present:

PUNO, J., Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.


JOCELYN O. YAP, Promulgated:
Respondent.
September 12, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I O N
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision
[1]
of the Court of Appeals (CA) in CA-
G.R. CV No. 72761 which reversed and set aside the Decision of the Regional Trial Court (RTC) of
Oslob, Cebu, Branch 62, in Civil Case No. OS-96-46.
The Antecedents
Franklin Ong and his sister, Jocelyn Ong-Yap, are first cousins of Virgilio Cadungog. Cresenciano
Ong Aranas, the Municipal Mayor of Ginatilan, Cebu, from 1955 to 1978,
[2]
is their uncle.
On August 17, 1979, Virgilio executed a Deed of Sale with Right of Repurchase
[3]
in which he
sold to his cousin, Franklin Ong, the following six parcels of land located in Ginatilan, Cebu
for P7,144.28:
Parcel Number Tax Dec. No. Area
1 000821 1,170 square
meters
2 4978 1,444 square
meters
3 29586 4,257 square
meters
4 5478 1,140 square
meters
5 5486 980 square meters
6 5486 1,020 square
meters
Parcel Nos. 5 and 6 are located in Sitio Cayam, Ginatilan, Cebu.
[4]

Under the deed, Virgilio had the right to repurchase the property within 10 years from the
said date.
[5]

Virgilio failed to redeem the property. Nevertheless, upon the prodding of Franklin, Virgilio,
who was merely a letter-carrier, executed a Deed of Absolute Sale
[6]
in favor of Jocelyn in which it
appears that he sold Parcel Nos. 1, 2 and 3 for the price of P5,000.00. Virgilio declared therein that he
inherited Parcel Nos. 2 and 3 from his mother, Soledad, who inherited the same from her parents,
Jose Aranas and Basilia Rocaberte, under a Deed of Partition executed by their heirs. Franklin signed
as one of the witnesses to the deed.
[7]

On December 23, 1996, Cresenciano Ong executed a Deed of Absolute Sale of Parcel No. 2 in
favor of the APC Group, Inc. for P32,380.00. Cresenciano declared that he was the sole and absolute
owner, in fee simple, of the said lot.
[8]
On January 23, 1997, Virgilio executed a Deed of Absolute Sale
of Parcel No. 1 in favor of the APC Group, Inc. for P35,400.00, alleging therein that he was the sole
and exclusive owner of the property.
[9]

When Franklin learned of the said sales, he objected. Virgilio, thus, delivered to Franklin Check
No. 0000997
[10]
dated May 24, 1997, drawn and issued by Cresenciano against his account with the
Prudential Bank, in the amount of P25,000.00. Virgilio also delivered to Franklin Check No.
0000999
[11]
drawn and issued by Cresenciano against his account with the same bank in the amount
of P25,000.00. On May 26, 1997, Franklin signed Receipts dated May 25 and 26, 1997, embodied in a
piece of paper.
[12]
In the Receipt dated May 26, 1997, Franklin acknowledged to have received
the P25,000.00 check representing full payment for the refund of the lot sold in Ginatilan.
[13]

When Jocelyn learned that Virgilio had sold Parcel No. 1 to the APC Group, Inc., she filed a
criminal complaint for estafa against him. After the requisite preliminary investigation, an
Information for estafa was filed against Virgilio with the RTC.
By way of riposte, Virgilio filed a Complaint before the RTC, on December 8, 1998, against
Jocelyn for the declaration of nullity of the September 30, 1991 Deed of Absolute Sale. He alleged
therein that he had executed the subject deed in favor of Jocelyn only because her brother, Franklin,
had requested him to do so to lessen Jocelyns tax liability in Canada. He also alleged that he
agreed to execute the deed on the belief that it would not be notarized, as no consideration was
involved. He further claimed that he informed Franklins emissary (who brought the deed for his
signature) that he owned Parcel No. 1, Cresenciano owned Parcel No. 2, and he did not know who
owned Parcel No. 3. To his surprise, Jocelyn filed a criminal complaint for estafa against him before
the Provincial Prosecutors Office, and later an Information before the RTC of Oslob, Cebu. He further
claimed that he and his wife signed a one-page document; the acknowledgment page was merely
added to it, as it, in fact, did not contain their signatures.
Virgilio further stated that his uncle, Cresenciano Ong, sold Parcel No. 2, one of the lots
included in the Deed of Sale dated September 30, 1991, to the APC Group, Inc. He himself then sold
Parcel No. 1, with an area of 1,770 square meters, to the same vendee for P35,400.00.
Virgilio prayed for the following reliefs
WHEREFORE, in view of the foregoing premises, it is most respectfully prayed
of this Honorable Court that after notice and hearing judgment be rendered in favor of
plaintiff and against the defendant declaring the aforesaid Deed of Absolute Sale as
null and void from the very beginning for being without consideration and the
defendant be ordered to pay the plaintiff the following:
P200,000.00 as moral damages;
100,000.00 as exemplary damages;
20,000.00 as attorneys fee plus P1,500.00 per court
appearance;
10,000.00 as litigation expenses;
Other reliefs and remedies consistent with justice and equity are likewise
prayed for.
[14]

In her answer with special and affirmative defenses, Jocelyn averred that the Deed of
Absolute Sale dated September 30, 1991 was genuine, and reflected the true and correct intention of
Virgilio as the vendor. She pointed out that the document was notarized, a public document which
carried evidentiary weight. She further alleged that Virgilio had, in fact, previously sold the
questioned lots through a Deed of Sale with Right of Repurchase in favor of her brother Franklin. Her
brother then told her that, since Virgilio could no longer repurchase the subject properties, it would
be better for him to execute a Deed of Absolute Sale in her favor. She denied Virgilios allegations
that the subject deed was fictitious, and averred that it was genuine in all respects and amply
supported by valuable consideration.
Jocelyn further averred that the filing of the instant case was a subterfuge or a mere
afterthought on the part of Virgilio, as a defense in the criminal case for estafa she had filed against
him. Moreover, Virgilio was in estoppel, and could not now be heard to negate the contents of the
deed of absolute sale which he had previously executed in her favor.
Alleging that the complaint was filed in evident gross bad faith and that she suffered untold
mental anguish, sleepless nights, anxiety and besmirched reputation, Jocelyn prayed that the case be
dismissed, and that the following amounts in damages be awarded to her: P500,000.00 as moral
damages; P100,000.00 as exemplary damage; P50,000.00 as attorneys fees; andP100,000.00 as
actual litigation expenses.
[15]

The Testimonies of the Witnesses
Cresenciano Ong Aranas testified that he was the owner of Parcel No. 2, which Virgilio had sold
to Jocelyn. The said lot was part of a bigger parcel, with an area of 1,619 square meters situated in
Malatbo, Ginatilan Cebu. He sold the said lot on December 23, 1996 to the APC Group, Inc., a mining
company, for P32,380.00 as evidenced by a Deed of Absolute Sale.
[16]
He admitted that he allowed
Virgilio to include the said lot in the Deed of Sale with Right of Repurchase which Virgilio executed in
favor of Franklin on August 17, 1979. He, however, admitted that he did not execute any document
authorizing Virgilio to sell Parcel No. 2 since the latter was his nephew.
[17]

Upon Virgilios prodding, he issued two checks: Check No. 0000997
[18]
for P25,000.00 on May 24,
1997, and Check No. 0000999
[19]
for P25,000.00 on May 26, 1997. These checks were issued to
redeem Parcel Nos. 1, 2 and 3, the lots subject of the Deed of Sale dated September 30,
1991.
[20]
Franklin signed receipts for said checks.
[21]

Ricardo Acojedo, caretaker of Virgilios properties and that of the Yap siblings, testified that he
was in Virgilios house when a certain Emok Dacillo brought a deed of sale to be signed by Virgilio and
his wife. He saw the couple sign the document, but did not get to read it. There was no other person
who signed the document. After Virgilio said the document should not be notarized, he
immediately handed it over to Emok.
[22]

Virgilio testified that he and his wife, Rebecca, were in their house on the last week of
September 1991, when Emok, an emissary of Franklin, arrived. Emok showed him the Deed of
Absolute Sale dated September 30, 1991, and told him that Franklin wanted him and Rebecca to sign
the deed. He read the document and was sure that it consisted of only one page. He told the
emissary that he was the owner of Parcel No. 1; Parcel No. 2 was in the name of his uncle,
Cresenciano; while the records of Parcel No. 3 could no longer be found at the Municipal Assessors
Office. Nevertheless, he and his wife signed the deed. He also claimed that he was able to
repurchase the lots subject of the Deed of Sale with Right of Repurchase on May 26, 1997
for P50,000.00 at the house of his aunt, Tasiana Belarmino.
Virgilio admitted, however, that at the time he made the two payments, the period to
repurchase the subject parcels of land had already expired.
[23]

The defendant did not testify in her behalf. Atty. Emmanuel P. Rama testified for the
defendant and declared that he notarized the subject deed, which to his knowledge was prepared by
Franklin Ong. He was then in the office of his brother, who was the Vice-Governor of Cebu, when
Franklin and Virgilio and his wife, Rebecca, arrived to have the deed notarized.
[24]
However, Virgilio,
his wife, and the witnesses to the deed failed to sign on the left margin of its second page.
Franklin, a bachelor of laws graduate, testified that he was employed as an Interpreter in
Branch 14 of the Court of First Instance of Cebu;
[25]
he prepared the deed of sale with right of
repurchase which Virgilio executed on August 17, 1979 and the September 30, 1991 Deed of Absolute
Sale which Virgilio and his wife executed.
[26]
According to him, the lots subject of the complaint,
together with the other lots sold under the first deed of sale, were not repurchased by Virgilio.
[27]

Franklin further narrated that sometime in 1991, Virgilio sought financial help because his
house was about to be foreclosed by the Development Bank of the Philippines. He then
gave P7,000.00 to Virgilio, and suggested that Parcel Nos. 1, 2 and 3 be sold to Jocelyn to augment
his contribution. Franklin, however, agreed to buy Parcel Nos. 5 and 6 and inquired from Jocelyn if
she was interested to buy Parcel Nos. 1, 2 and 3; Jocelyn replied that she was.
[28]
He then prepared a
Deed of Absolute Sale over Parcel Nos. 1, 2 and 3, which Virgilio and his wife signed on September 30,
1991 before Notary Public Emmanuel P. Rama.
[29]
Virgilio agreed to sell the three lots for P5,000.00
only because the said amount was in addition to the P7,144.28 paid for the six parcels of land earlier
sold to Franklin in 1979.
[30]
Franklin claimed he gave the P5,000.00 purchase price of the property to
Virgilio on September 30, 1991.
[31]

Franklin declared that the receipts
[32]
for P50,000.00 which he signed (and which Virgilio
adduced in evidence) were refunds for Parcel Nos. 5 and 6 which he bought from Virgilio and later
sold by the latter to the APC Group, Inc.; they were not payments for the repurchase of the six
parcels of land subject of the first sale as Virgilio claimed.
[33]
After Jocelyn purchased Parcel Nos. 1, 2
and 3, their sister Loreta and their mother took charge and administered the property, and paid the
realty taxes thereon.
[34]

Taciana Aranas Belarmino, an aunt of Virgilio, Franklin and Jocelyn, testified that she and her
son, Fermin Belarmino, as well as her brother Cresenciano, witnessed Franklin sign the receipts dated
May 25 and 26, 1997, for the total amount of P50,000.00, in their house. The payment was made to
redeem Parcel Nos. 5 and 6, which Virgilio sold to the APC Group, Inc.
[35]
Franklin
demanded P200,000.00, but Virgilio had only P50,000.00, (inclusive of the P25,000.00 Virgilio
borrowed from Cresenciano).
[36]

By way of rebuttal, Virgilio presented Federico Erac, the Postmaster of Ginatilan, who testified
that he (Virgilio) was a letter-carrier and was at his place of work at the post office on September 30,
1991; hence, he could not have signed the Deed of Absolute Sale of Parcel Nos. 1, 2 and 3 in favor of
Jocelyn in the Office of the Vice-Governor on the said date before Notary Public Emmanuel
Rama.
[37]
He adduced in evidence his daily time record for September 30, 1991.
[38]

After the trial, the court rendered judgment in favor of Virgilio. The fallo of the decision
reads:
WHEREFORE, the Deed of Absolute Sale dated September 30, 1991 allegedly
executed by plaintiff in favor of defendant is declared NULL and VOID
SO ORDERED.
[39]

The trial court held that, since Franklin failed to consolidate his title to the parcels of land
following the lapse of the 10-year period for Virgilio to redeem the same, the period for redemption
was deemed extended until the said lots were repurchased on May 25 and 26, 1997, upon payment
of P50,000.00 to Franklin. The trial court ruled that there was a need for Franklin to consolidate the
title over the parcels of land by court proceedings. It also held that the Deed of Absolute Sale dated
September 30, 1991 had no consideration because theP5,000.00 stated therein, as the price of the
property, was insufficient. Since the deed was not supported by any consideration, it was null and
void.
Jocelyn appealed the decision to the CA, assailing the trial courts ruling on the following
grounds:
- I -
The Honorable Trial Court erred in ruling that there was no action on the part of
the defendant-appellant to consolidate the title in her name when plaintiff-appellee
failed to repurchase the properties subject matter of the deed of sale with right to
repurchase executed on August 17, 1979.
-II-
The Honorable Trial Court erred in ruling that on May 25 and 26, 1997 the
amount of P50,000.00 was paid to the defendant-appellant through Franklin Ong and
upon acceptance of the latter the real properties subject matter of the deed of sale
with right to repurchase was deemed repurchased.
- III -
The Honorable Trial Court erred in ruling that the amount of P5,000.00 is not
sufficient consideration for the purchase of three parcels of land.
[40]

The CA reversed the ruling of the trial court. The dispositive portion reads:
WHEREFORE, the foregoing considered, the May 4, 2001 Decision of the
Regional Trial Court of Oslob, Cebu is REVERSED AND SET ASIDE. A new one is entered
declaring the Deed of Absolute Sale dated September 30, 1991 executed by Virgilio
Cadungog in favor of Jocelyn Yap, valid and binding.
SO ORDERED.
[41]

The appellate court held that the period to redeem the subject properties had already elapsed
as early as 1989, or 10 years after the execution of the Deed of Sale with Right of Repurchase on
August 17, 1979. In view of Virgilios failure to redeem the same, he lost ownership over the disputed
lots. Jocelyn acquired ownership over the property when she purchased the same from Virgilio on
September 30, 1991 under the Deed of Absolute Sale. Citing Cruz v. Leis,
[42]
the CA ruled that Jocelyn
could not be faulted for not consolidating the title over the subject lots, as the act of consolidating
title is not a condition sine qua non to the transfer of ownership. The appellate court declared that
the P50,000.00 Franklin received from Virgilio on May 25 and 26, 1997 was the refund of the cost of
Parcel Nos. 5 and 6 which Virgilio sold to the APC Group, Inc., the same lots sold to Franklin in 1999.
The CA further stated that the inadequacy of the purchase price does not per se support the
conclusion that the contract was a loan, or that the property was not at all sold. CitingAbapo v. Court
of Appeals
[43]
and Article 1355 of the Civil Code, the CA ruled that such inadequacy of price is not
sufficient to set aside the sale, unless it is grossly inadequate or purely shocking to the conscience.
Moreover, except for his own self-serving testimony, Virgilio did not submit any other testimony to
refute the said sale.
Finally, the CA ruled that the subject deed of sale is a public document, having been executed
and attested through the intervention of a notary public; as such, it is evidence of the facts therein
expressed. While Virgilios officemate testified that he could not have been present for the
notarization of the said document because he was at work on the said date, such testimony could not
negate the existence of the said deed.
Virgilio filed a motion for reconsideration, which the CA denied.
Virgilio, now the petitioner, assails the said ruling and ascribes to the appellate court the
following errors:
GROUND I
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN
REVERSING THE DECISION OF THE RTC BRANCH 62 OF OSLOB, CEBU, DECLARING THE
DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS
OF LAND VALID AND BINDING AND IN NOT TAKING INTO ACCOUNT ITS FINDINGS
WHICH CONSIDERED THAT THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991,
COVERING THREE (3) PARCELS OF LAND IS NOT SUPPORTED BY ANY
CONSIDERATION AND DID NOT REFLECT THE TRUE INTENTION OF THE PARTIES, A
FICTITIOUS AND SIMULATED ONE, HENCE NON-EXISTENT AND VOID AB INITIO.
GROUND II
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ALSO ERRED IN NOT
TAKING INTO CONSIDERATION THAT THE DEED OF ABSOLUTE SALE DATED SEPTEMBER
30, 1991, COVERING THREE (3) PARCELS OF LAND WAS TAINTED WITH DECEPTION AS
THE CONSENT WAS OBTAINED THROUGH DECEIT AND DISHONEST MEANS.
GROUND III
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN NOT
TAKING INTO CONSIDERATION THAT SINCE THE DEED OF ABSOLUTE SALE DATED
SEPTEMBER 30, 1991, COVERING THREE PARCELS OF LAND, WHICH WAS COMPOSED
ORIGINALLY OF ONLY ONE (1) PAGE, WAS NOT INTENDED TO BE
ACKNOWLEDGED ANDNOTARIZED BY A NOTARY PUBLIC, WAS ALREADY COMPOSED
OF TWO (2) PAGES AND ACKNOWLEDGED AND NOTARIZED BY A NOTARY PUBLIC, THE
SECOND PAGE OF WHICH DID NOT CONTAIN THE SIGNATURES OF THE
PARTIES AND THEIR INSTRUMENTAL WITNESSES. APPARENTLY, THIS INDICATES A
FRAUDULENT ACT WORTHY OF CONSIDERATION OF THE HONORABLE COURT OF
APPEALS.
GROUND IV
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN NOT
TAKING INTO ACCOUNT OVER THE FACT THAT RESPONDENT FAILED TO CONSOLIDATE
HER OWNERSHIP OVER THE DISPUTED LAND SUBJECT TO THE
FICTITIOUS AND SIMULATED SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3)
PARCELS OF LAND. APPARENTLY, INDICATING AN ACT CONTRADICTORY TO WHAT A
NORMAL PERSON MIGHT HAVE ACTED UNDER SIMILAR CIRCUMSTANCE.
GROUND V
THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN FAILING
TO UPHOLD THE FACTUAL FINDINGS OF THE RTC BRANCH 62 OF OSLOB, CEBU WHICH
WAS IN THE POSITION TO EVALUATE AND APPRECIATE THE MERITS OF THE CASE AND
HAD THE OPPORTUNITY OF OBSERVING THE DEMEANOR AND SINCERITY OF THE
WITNESSES.
[44]

The petitioner reiterates that the subject deed is fictitious and simulated, having been
executed merely to afford respondent Jocelyn Yap a claim for the reduction of her tax liabilities in
Canada. The petitioner points out that the true intention of the parties was never that of sale, but
only for accommodation purposes.
The petitioner, likewise, points out that his cousin Franklin added a second page to the one-
page agreement and had it notarized; the second page of the deed bore the acknowledgment of the
notary public, which, however, did not contain the signatures of the supposed parties and their
instrumental witnesses. According to the petitioner, Franklin, through false pretenses, succeeded in
obtaining his consent in executing a simulated deed of sale over the subject parcel of land. Moreover,
considering the clear and convincing evidence that he was at work on the date the deed of sale was
purportedly executed, the notary public could not have notarized the document in his presence and
the other parties concerned. The petitioner insists that the transaction subject of the dispute is
wantonly devoid of any consideration, did not reflect the true intention of the parties, and was
obtained through fraudulent means, fictitious and simulated; hence, void from the very beginning.
The petitioner further points out that after the supposed sale, the respondent made no move
to consolidate her ownership over the property, or other similar behavior or acts of dominion.
Finally, the petitioner contends that it is the findings of the trial court which should prevail,
considering that it was in a better position to evaluate and appreciate the merits of the case and had
the opportunity to observe the demeanor and sincerity of the witnesses presented.
The respondent, for her part, avers that the petitioner and his wife appeared before Notary
Public Emmanuel P. Rama and acknowledged the Deed of Absolute Sale dated September 30, 1991.
Such notarized deed enjoys the presumption of regularity; there must be clear and convincing
evidence to contradict the same. The respondent insists that the petitioner failed to overturn the
testimony of Atty. Rama, and that his bare denial will not suffice to overcome the positive value of
the notarized document. The respondent further posits that the appellate court correctly ruled that
the consideration of the three lots was P5,000.00, and that mere inadequacy of price is not sufficient
to set aside a contract of sale.
The respondent further alleges that the petition is one under Rule 45 of the Rules of Court.
Only errors of law, not of facts, are reviewable under the said rule, and in this case, no error of law
was alleged by the petitioner. Moreover, the CA correctly held that the P50,000.00 was not a
redemption price, but a refund of the costs of Parcel Nos. 5 and 6, which the petitioner sold
to APC Group, Inc.
The petition is meritorious.
We note that the issues raised by the petitioner are factual. Under Rule 45 of the Rules of
Court, only questions of law may be raised in a petition for review on certiorari. However, the Court
may delve into and resolve factual issues in exceptional cases, such as when the finding of facts and
the conclusions based therein by the trial court are frontally inconsistent with those of the appellate
court, or that the factual findings of the trial court and appellate court are not based on the evidence
on record, or arbitrary or capricious.
[45]

In the present case, the trial court held that the petitioner was able to repurchase the 6
parcels of land on May 25 and 26, 1997, after the lapse of 18 years from the execution of the deed of
sale with right of repurchase (August 17, 1979) when he paid to Franklin the total amount
of P50,000.00. The court held that the 10-year period fixed in the deed for the petitioner to
repurchase the property was deemed extended because Franklin failed to consolidate his title over
the property. On the other hand, the CA held that the petitioner failed to repurchase the property,
and that the respondent acquired ownership over Parcel Nos. 1, 2 and 3 when the petitioner sold the
same to her under the September 30, 1991 Deed of Absolute Sale.
We agree with the CA that the petitioner, as vendor a retro, failed to repurchase the property
within the 10-year period fixed by the parties in the Deed of Sale with Right of Repurchase.
Consequently, Franklin Ong, the vendee a retro, had acquired absolute title and ownership over the
six parcels of land after August 17, 1979 when the petitioner, as vendor a retro, failed to repurchase
the same within the stipulated period.
A sale with pacto de retro transfers the legal title to the vendee a retro.
[46]
The essence of
a pacto de retro sale is that the title and ownership of the property sold are immediately vested in the
vendee a retro, subject to the resolutory condition of repurchase by a vendor a retro within the
stipulated period.
[47]
Failure on the part of a vendor a retro to repurchase the property within the
period agreed upon by them, or, in the absence thereof, as provided for by law, vests upon the
vendee a retro absolute title and ownership over the property sold by operation of law.
[48]
The failure
of the vendee a retro to consolidate his title under Art. 1607 of the New Civil Code does not impair
such title and ownership because the method prescribed thereunder is merely for the purpose of
registering and consolidating titles to the property.
[49]
Franklin Ong, and not the petitioner, was the
lawful owner of the six parcels of land. The petitioner, thus, had no right to mortgage or sell the
same to the respondent on September 30, 1991 under the deed of absolute sale. As the Latin adage
goes: NEMO DAT QUOD NON HABET.
[50]
Hence, the ruling of the CA that the respondent acquired
ownership over the three parcels of land from the petitioner under the Deed of Absolute Sale dated
September 30, 1991 is erroneous. Not being the owner of the parcels of land, the petitioner could
not have lawfully sold the same to the respondent.
We are not convinced that the petitioner and the respondent had agreed to the sale of Parcel
Nos. 1, 2 and 3 for P5,000.00. The respondent was a resident of Canada on September 30, 1991.
There is no evidence that on or before said date, the petitioner had talked to the respondent relative
to the sale of the said lots. Although Franklin testified that he talked to the respondent relative to
the sale and that the latter had agreed, no evidence was adduced to show a special power of
attorney authorizing him (Franklin) to agree to the purchase of the property for P5,000.00. The
declaration in the September 30, 1991 Deed of Absolute Sale with Right of Repurchase, that the
petitioner received P5,000.00 from the respondent on September 30, 1991, or prior thereto, is
negated by the fact that the respondent was then in Canada.
What is so worrisome is that Franklin, a law graduate, even induced the petitioner to execute
the deed of sale in favor of his sister, the respondent herein, despite the fact that he, and not the
petitioner, was the owner of the three parcels of land. Franklin even falsely declared in the
September 30, 1991 deed, which he prepared for the petitioner, that the latter was the owner of the
parcels of land, when he knew, for a fact, that he was the lawful owner of the property. In fact,
when he learned that Cresenciano Ong Aranas had sold Parcel No. 2 to the APC Group, Inc. and that
the petitioner had also sold Parcel No. 1, Franklin vehemently objected. He relented only when the
petitioner gave the P50,000.00 to him in consideration for his agreement to the said sale of Parcel
Nos. 1 and 2 to the APC Group, Inc. There is no evidence on record that the P50,000.00 which the
petitioner paid was a refund of the purchase price of Parcel Nos. 5 and 6 as regards the sale to APC
Group, Inc. In fact, there is no evidence on record to show that the petitioner had sold Parcel Nos. 5
and 6 to the APC Group, Inc.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the Court of
Appeals in CA-G.R. CV No. 72761 is REVERSED and SET ASIDE. The decision of the Regional Trial
Court nullifying the September 30, 1991 Deed of Absolute Sale executed by the petitioner in favor of
the respondent is REINSTATED. No costs.


Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-32670 December 29, 1977
ARSENIO GERARDINO, SR., VIRGINIA GERARDINO SY, ANGELINA GERARDINO GUMBA, and
CORAZON GERARDINO LEGAYADA, petitioners,
vs.
THE HONORABLE JUDGE, COURT OF FIRST INSTANCE (BR. III), CAPIZ and JOVITO
GLORIA, respondents.
Manuel P. Beaniza for petitioners.
Francisco D. Firmalino for private respondent.
FERNANDEZ, J.:
This is a petition for certiorari to review the decision of the Court of First Instance of Capiz in Civil
Case No. M-79 entitled "Jovito Gloria versus Arsenio Gerardino Sr., et al.", the dispositive part of
which reads:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants,
ordering, as it hereby, orders the consolidation of the title and/or ownership over the
property in question in favor of the former, without pronouncement as to costs.
SO ORDERED.
Mambusao, Capiz, December 26, 1969.
(SGD) SILVESTRE Br. BELLOJudge
1

On July 12, 1966, Jovito Gloria, private respondent herein, instituted against Rosario Artuz Civil Case
No. M-79 in the Court of First Instance of Capiz for consolidation of ownership of a parcel of land.
The complaint stated that on October 10, 1964 Rosario Artuz executed in favor of Jovito Gloria a deed
of sale with right to repurchase within a period of one (1) year of a parcel of residential land located
in Poblacion, Tapaz, Capiz, containing an area of 750 square meters and embraced in Tax Declaration
No. 3516 for a consideration of P2,025.00; that the defendant allegedly failed to exercise her right to
repurchase within the stipulated period; that the plaintiff had been in possession of the property
immediately after the execution of the document; and that said plaintiff had been paying the taxes
thereon.
2

In her answer the defendant Rosario Artuz admitted the existence of the deed of sale with right to
repurchase but denied the legality and genuineness thereof and alleged as affirmative defenses that
the document in question was an equitable mortgage, the real intention of the parties being merely
to secure the payment of a loan in the amount of P2.025.00; that the defendant, who was then deaf.
totally blind and senile, did not understand English and was made to affix her thumbmark on the
alleged deed of sale with right to repurchase upon representation of the plaintiff that the same was a
mere equitable mortgage; that the defendant had remained in possession of the property in question
and had been paying the taxes thereon that a tender of payment was made by defendant to the
plaintiff on or before October 10, 1965 to repurchase the property but plaintiff refused to accept the
amount of P2,025.00 because he was asking for a much bigger amount of P6,000.00; that by reason
of such refusal, the defendant consigned the amount of P2,025.00 with the court; and that the actual
amount of the loan received by the defendant from the plaintiff was only P1,525.00 inasmuch as the
amount of P500.00 was retained by plaintiff as interest on the transaction.
3

The original defendant Rosario Artuz died. Hence the complaint was amended to substitute the
deceased defendant with her surviving heirs, namely, Arsenio Gerardino, Sr., Virginia Gerardino Sy.
Angelina Gerardino Gumba and Corazon Gerardino Legayada.
In an order rendered on February 17, 1969, the lower court set the pre-trial of the case on March 15,
1969.
On motion of counsel for the defendants, the pre- trial was reset to March 28, 1969.
Inasmuch as the counsel for the defendants failed to appear on March 28, 1969, the lower court reset
the pre-trial of the case, for the last time, on April 29, 1969.
In an order issued by the lower court on April 29, 1969, the defendants were given 15 days within
which to file a memorandum sustaining their view that they can still repurchase the property.
On June 17, 1969, the counsel of the plaintiff filed a motion for judgment on the pleadings and/or
upon confession, which was set for hearing on June 30, 1969. The lower court denied said motion and
ordered the pre-trial of the case to be held on September 19, 1969.
The parties manifested on September 19, 1969 that there was a strong possibility of an amicable
settlement. They waived the pretrial in order to save time and asked the court to set the date of the
trial on the merits. The lower court set the case for trial on October 17, 1969.
On October 17, 1969 a telegraphic motion for postponement sent by the counsel of the defendants
was denied and the plaintiff was allowed to present evidence in the absence of the defendants and
their counsel.
The defendants, petitioners herein, filed on November 14, 1969 a motion for relief from the order
allowing the plaintiff, private respondent herein, to present evidence. The motion was denied on
December 18, 1969 on the ground that "... the failure of defendants and their counsel to appear on
the date set for hearing, on October 17, 1969, was not due to accident, mistake or excusable
negligence, but due to the unexcusable negligence of the counsel for the defendants, the
consequence of which, must be suffered by his clients.
4

In its decision dated December 26, 1969, the lower court ordered the consolidation of the title and/or
ownership over the property in question in the name of the plaintiff because:
From the evidence of the plaintiff, it appears that he bought the property in question
from the original defendant, namely, the deceased Rosario Artuz, on October 10, 1964,
for a purchase price of P2,025.00, with said vendor-a-retro reserving the right to
repurchase within a period of one (1) year from the date thereof, i. e., under a "Deed
of Sale with Right of Repurchase" (See Exh. 'A'), which the vendee-a-retro registered in
the Office of the Register of Deeds of Capiz; that immediately upon the execution of
the document of sale, the plaintiff, as vendee-a-retro, took actual and material
possession of the property bought and constructed a nipa house thereon, which is
presently occupied by his son, the picture of which nipa house, is Exhibit 'B'; that since
the time said plaintiff took actual and physical possession of said property, nobody
prevented him from doing so, much less has his possession of the same been disturbed
by anybody up to the present time; that when plaintiff took possession of the property
in question, there were three (3) coconut, two (2) orange and three (3) mango trees
already standing thereon, the former are now fruit bearing which said plaintiff had
enjoyed and/or perceived and as to the mango trees, it is only this year that they are
bearing fruits as the plaintiff was smoking them; that the property bought is covered
by Tax Declaration No. 3516, still in the name of the vendor-a-retro, the original
defendant (Exh, 'C') which has not yet been declared in his name because at the time
he bought said property, the same was delinquent in real estate taxes since the year
1953, that when he paid the delinquent real estate taxes on June 20, 1966 (Exh. 'D'),
he was not able to pay all the delinquent taxes and besides, the land was then involved
in the instant case, which was filed by said plaintiff on July 2, 1966, and that said
property in question was not redeemed and/or repurchased by anybody on or before
the expiration of the date of repurchase October 10, 1965.
For what has been said, above, there can be no more dispute that the plaintiff bought
the property in litigation from the d original defendant, Rosario Artuz, for the sum of
P2,025.00 on October 10, 1964, with right of repurchase within a period of one (1)
year. The period of one (1) year within which to repurchase having expired without the
vendor-a-retro having exercise her right to repurchase the property sold, it follows as a
consequence thereof, that the plaintiff, is entitled to consolidation of his ownership.
Indeed, the fact that the original defendant, Rosario Artuz, as vendor-a-retro
deposited the repurchase price of P2,025.00, with the court on August 30, 1966, under
Official Receipt No. 595356, issued by the Clerk of Court Leopoldo B. Dorado, with
which counsel for the substituted defendants wanted to be transferred with the
Philippine National Bank, Roxas City Branch, in his urgent motion filed on October 8,
1968 (see pp. 53-55, record), is not only the best reflection and healthiest index that
she knew that what she had executed in favor of the plaintiff was a sale with right of
repurchase (Exh. 'A'), the same deposit having been made by her on August 30, 1966,
before she died on February 11, 1968, and after the expiration of the period of
repurchase but also an abandonment and/or waiver of what she had alleged in the
answer that the real intention of the parties, i.e., the vendee-a-retro and vendor-a-
retro, in the Deed of Sale with Right of Repurchase (Exh. 'A') was only an "Equitable
Mortgage."
5

On March 2, 1970, the defendants, petitioners herein, filed a motion for new trial based on the
grounds provided in Section 1 (a) and (c), Rule 37, Revised Rules of Court. The motion was denied in
an order of March 30, 1970.
6

The defendants appealed to this Court assigning the following errors:
I
THE LOWER COURT ERRED IN HOLDING AND DECLARING THAT THE CONTRACT IN
QUESTION IS A TRUE SALE WITH RIGHT OF REPURCHASE AND NOT AN EQUITABLE
MORTGAGE.
II
THE LOWER COURT ERRED IN NOT PRONOUNCING CATEGORICALLY
(GRANTING ARGUENDO,THAT THE CONTRACT IS A SALE WITH RIGHT OF REPURCHASE)
WHETHER OR NOT ARTICLE 1606, THE LAST PARAGRAPH THEREOF, OF THE NEW CIVIL
CODE OF THE PHILIPPINES IS APPLICABLE OR AVAILABLE TO DEFENDANTS.
III
THE LOWER COURT ERRED IN HOLDING AND DECLARING THAT DEFENDANTS WERE IN
DEFAULT AND DENYING THEM THE REMEDY PRAYED FOR IN THEIR MOTION FOR
RELIEF FROM SAID ORDER OF DEFAULT.
IV
THE LOWER COURT ERRED IN HOLDING AND DECLARING THAT DEFENDANTS' MOTION
FOR NEW TRIAL WITHOUT MERIT AND DENYING THEM THE REMEDY PRAYED FOR
THEREIN.
7

This appeal is meritorious.
While the record discloses that the defendants and their counsel have been lackadaisical in attending
to the case, substantial justice demands that petitioners be given their day in court. It appears from
the answer that the vendor-a-retro, Rosario Artuz, who died on February 11, 1968, was deaf and
blind and was senile when she was made to thumbmark the alleged deed of sale with right to
repurchase. The document is written in English which was not understood by Rosario Artuz. The
answer alleged that the intention of the parties was only to execute a deed of equitable mortgage to
secure the loan of P2,025.00; and that Rosario Artuz actually received only the amount of P1,525.00
because the private respondent retained the amount of P500.00 as interest. It is clear that the
defendants have a meritorious defense. Their motion for new trial should have been granted.
The nature of the document in question was squarely placed in issue. The defendants contend that
the document was only an equitable mortgage The third paragraph of Article 1606 of the Civil Code of
the Philippines provides that "the vendor may still exercise the right to repurchase within thirty days
from the time final judgment was rendered in a civil action on the basis that the contract was a true
sale with right to repurchase." Hence even if after a new trial it is found that the document in
question is a true sale with right of repurchase, the defendants may still exercise the right to
repurchase the land in question within thirty days from the time final judgment is rendered.
In view of the foregoing, it is no longer necessary to remand this case to the lower court for a new
trial.
The lower court erred in not allowing the defendants, as successors-in-interest of Rosario Artuz, to
repurchase the land within thirty days from the date the decision had become final. Since the
petitioners had duly consigned the repurchase price, their consignation of the amount of P2,025.00
validly effected redemption.
WHEREFORE, the decision appealed from is hereby set aside and the private respondent's complaint
for consolidation of ownership is dismissed. The petitioners are declared entitled to the ownership
and ion of the property in question and the private respondent is ordered to deriver to petitioners
the said property or any part thereof in his possession. Without pronouncement as to costs.
SO ORDERED.




Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-14961 September 19, 1961
FLORA QUINGA, etc., petitioner,
vs.
HON. COURT OF APPEALS and FILOMENA SALAS, respondents.
Manuel P. Villa and Vicente Castronuevo, Jr. for petitioner.
Filomena Salas for and in her own behalf as respondent.
DIZON, J.:
Appeal from the decision of the Court of Appeals of the following tenor:
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, we believe we should, as we do hereby,
and as prayed for in plaintiff-appellant's brief, reverse the decision appealed from and,
A. Order defendant-appellee Flora Quinga, in her capacity as administratrix of the intestate
estate of her deceased husband Ceferino Datoon, to execute a deed of reconveyance in favor
of the plaintiff-appellant Filomena Salas upon the former's withdrawal of the sum of P100.00
which was deposited by the latter with the Clerk of the Court of First Instance of Iloilo on
February 7, 1948 as evidenced by Official Receipt No. 452848 within ten days after this
decision has been final and executory;
B. Immediately after the execution of said deed, it is the duty of the appellee and/or receiver
to turn over the material possession of the lot in question to the plaintiff-appellant, to whom
shall also be delivered all the funds which the receiver may have in his hands less his
compensation;
C. Order the Clerk of this Court to take the necessary steps with a view to the collection of the
fines which had been imposed upon Stenographer Manuel E. Enicola for non-compliance with
Resolutions Nos. 12-a and 25 of the Second Division of this Court dated, respectively, June 13,
1953 and November 24, 1953; and
D. Order defendant-appellee to pay the costs in both instances.
Filomena Salas commenced this action in the Court of First Instance of Iloilo to compel Flora Quinga,
in her capacity as Administratrix of the Intestate Estate of Ceferino Datoon, to resell to her lot No.
7741 of the Cadastral Survey of Pototan, Iloilo, and to recover damages. She claimed that prior to
September, 1934, she owed Ceferino Datoon the sum of P200.00; that when she could not meet the
demands for payment made on her, she offered to mortgage or sell under pacto de retro to her
creditor the property in question; that, instead of a deed of mortgage or a pacto de retro sale, Datoon
caused the preparation of a deed of absolute sale on September 18, 1934, which plaintiff signed on
condition that she would remain in possession of the land and could repurchase the same; that
Datoon registered the deed of sale and secured the cancellation of Original Certificate of Title No.
40792 and the issuance in his name of Transfer Certificate of Title No. 14841 on October 30, 1935;
that an accounting made on or about October 10, 1940 showed that the unpaid portion of her
indebtedness was only P100.00, and on the same day, complying with a previous promise, Datoon
executed a private document now in the record as Exhibit A allowing her to repurchase the
property within ten years; that upon Datoon's death in 1943, Flora Quinga was appointed judicial
administratrix of his estate; that because the latter had refused to allow her to repurchase the
property, she was forced to file suit and to deposit the sum of P100.00 in the Court of First Instance
of Iloilo as consideration for the repurchase.1awphl.nt
The administratrix interposed the defense that the transaction between the plaintiff and her husband
was an absolute sale. By way of counterclaim she likewise sought to recover from plaintiff the
physical possession of the lot in question as well as damages.
After trial the Court of First Instance of Iloilo found that the transaction between Datoon and plaintiff
was an absolute sale and that the private instrument Exhibit A was a forgery. Consequently, it
rendered judgment dismissing the complaint and ordering the plaintiff (and/or the receiver
appointed in the case) to deliver possession the property in question to the defendant and to pay her
damages in the sum of P400.00 for each of the agricultural years 1947-1948, 1948-1949; P500.00 for
the agricultural year 1949-1950 and P240.00 for the agricultural year 1950-1951, plus the costs of
suit.
From the above decision the plaintiff appealed to the Court of Appeals which rendered the decision
mentioned heretofore.
On the question of whether the transaction between Filomena Salas and Ceferino Datoon was one of
sale or otherwise, the Court of Appeals found "that the real contract which had been entered into
was an equitable mortgage" on the following grounds:
Firstly, because of the inadequacy of the price of sale. Who is the person of sound mind who
would sell riceland containing an area of two (2) hectares, twenty-seven (27) ares and
eighteen (18) centares, which can produce eighty (80) bultos equivalent to one hundred sixty
(160) cavanes of palay at P20.00 or P250.00 per bulto, which has an assessed value of P960.00
for the sum of P200.00?
Secondly, the supposed vendor remained in the material possession of the property allegedly
as tenant until the alleged vendee and his successor asserted ownership over the property to
the prejudice of the former.
Thirdly, if Ceferino Datoon became owner of the property since October 30, 1935 as shown by
Transfer Certificate of Title No. 14841 (Exh. 6), which cancelled Original Certificate of Title No.
40792 of the plaintiff, both of the Office of the Register of Deeds of Iloilo, why is it that the
alleged new owner began to receive the share in the crops only from the year 1944, or during
the Japanese occupation?
On the question of whether the private document Exhibit A is a forgery, the Court of Appeals found
that the pertinent evidence elevated to it was incomplete because it did not include the transcript of
the testimony of "defendant's witnesses Arthur Mombar . . ., Felipe P. Logan . . . and Isidoro
Cordero", for the reason that the court stenographer probably lost or misplaced the stenographic
notes, thus compelling the parties to submit the case for decision in the lower court upon the
incomplete record; that the report of the NBI examiner Logan, admitted as Exhibit 18, was not
sufficient to prove that the questioned document was a forgery because, as against his conclusion to
that effect, there was in the record "the natural and straight-forward testimonies of the plaintiff
Filomena Salas and of her witness Virginia Cordero" whose credibility had not been successfully
assailed. For this reason the conclusion of the Court of Appeals was that there was insufficient
evidence to prove that the questioned document was a forgery. In connection with the same
document, however, said court further said:
Moreover, from the view we take of the case, even if the falsity of Exhibit A is admitted, the
fact would not alter the true nature of the transaction, namely, that it was and is an equitable
mortgage. That the property was included in the amended and second amended inventories
of the defendant as administratrix of the intestate estate of her deceased husband in Special
Proceeding No. 8 of the Court of First Instance of Iloilo is of no moment. To strengthen the
position taken to be consistent that had to be done.
The first assignment of error submitted in petitioner's brief refers to the ruling of the Court of
Appeals regarding the true nature of the transaction between the now deceased Ceferino Datoon
and Filomena Salas that it was not one of sale but a mere equitable mortgage. Considering the
reasons supporting the findings of the Court Appeals in this matter, we are constrained to say that
petitioner's contention is without merits. Even disregarding the inadequacy of the price of P200.00
for the more two hectares of riceland alleged to have been sold by Salas to Datoon, there remains the
important circumstance that, in spite of the alleged sale, Salas remained in possession of the property
and the vendee started receiving his share in the fruits of the land only in 1944, that is, more than
nine years after the alleged sale. If the real transaction was one of sale, Datoon would have asserted
his right to receive from the alleged tenant his share in the fruits of the property right after the sale,
specially considering the fact that he had registered the deed of sale and secured the issuance of a
transfer certificate of title in his name.
With respect to the genuineness of the private document Exhibit A, we are also of the opinion that
even assuming that the same is a forgery, it could only mean that respondent made use of a false
document to prove her case. This would, at most, render the document of no probative value and
unfavorably affect the credibility of said respondent and of the other witness who testified regarding
the genuineness of the questioned document. With the other evidence of record, however, there is
sufficient justification for the finding of the Court of Appeals that the transaction was not one of sale
but one of loan secured by an equitable mortgage.
Lastly, petitioner contends that the Court of Appeals should have held that the cause of action of
respondent Salas had long prescribed. We find this to be likewise without merit. As the property in
question was merely mortgaged to Datoon, and inasmuch as there had not been any foreclosure
proceedings in the proper court, it is obvious that the property remains to this date subject to the
same contract. Consequently, upon petitioner's refusal to accept payment of the mortgage debt and
to give a discharge of mortgage, respondent Salas' cause of action accrued and was entitled to sue, as
she in fact sued immediately to enforce it.
WHEREFORE, the appealed judgment is affirmed, with costs.















Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48198 July 31, 1978
PRUDENCIA GLORIA-DIAZ and EUGENIO DIAZ, petitioners,
vs.
HON. COURT OF APPEALS, FELIX B. MAGALONG and ISIDRA G. MAGALONG, respondents.
Tarcisio S. Calilung for petitioners.
Roberto S. Vinzon for respondents.
TEEHANKEE, J.:
The Court sets aside respondent appellate court's resolution which countermanded its original
decision declaring that in the light of the admitted facts of record the transaction between the parties
was truly and in reality a simple loan and equitable mortgage regardless of the nomenclature given
thereto as a pacto de retro sale, The original decision correctly held that it is not the parties but the
law that determines the juridical situation created by the parties through their contract and the rights
and obligations arising therefrom.
On May 8, 1972, petitioners-spouses Prudencia Gloria- Diaz and Eugenio Diaz as plaintiffs filed their
complaint in the Pangasinan court of first instance praying that respondents-spouses Felix B.
Magalong and Isidra G. Magalong as defendants be compelled to accept the tender of payment of
P4,500.00 deposited in the court by way of redemption of their 40,000-square meter riceland in
Bayambang, Pangasinan, subject of several contracts entitled "Deed of Sale with Conventional
Redemption" executed by them with respondents as vendees and to execute the necessary deed
reconveying the said property to them.
The trial court in its decision of November 29, 1973 dismissed the complaint on the ground of lapse of
the 10-year repurchase period and ruling that if "[respondents] had set certain conditions for the
reconveyance of the property to [petitioners] other than those agreed upon, [respondents] were well
within their right to do so."
1

Petitioners appealed to respondent Court of Appeals
2
which restated the facts in its decision
of November 3, 1977, as follows:
... plaintiff, Prudencia Gloria, married to plaintiff Eugenio Diaz, is the aunt of Isidra
Gloria-Magalong, wife of defendant, Felix B. Magalong; the parties are from
Pangasinan, but the spouses Magalong are U.S. residents, the husband being with the
U.S. Army; now, on 27 January, 1958, Prudencia with assistance of her husband,
Eugenia executed Exh. A being a deed entitled one of sale with conventional
redemption over 2 parcels of land in Barrio Buayaan, town of Bayambang, Pangasinan,
in favor of Isidra Gloria, wife of Magalong for the sum of P3,600.00, redeemable with
10 years then 2 years later, on 21 August 1961, a new deed of same tenor was signed
by spouses Diaz increasing the original consideration of P3.600.00 by P 200.00, Exh. B;
again, on 1 October, 1964, a new deed once more of the same tenor executed by
spouses Diaz increasing the sum received by P400, so that the total became P4,200.00,
Exh. C; finally on 26 June 1965, another sum was added of P30.00, and a new deed
once again of the same tenor was signed by Prudencia, Exh. D, so that the
total became P4,500.00 now remember that the period of redemption not having
been changed either in Exh. B, C or D, was to expired by 27 January 1968, and
apparently because they did not have money to redeem, spouses Diaz wrote to
spouses Magalong in America sometime in December, 1967 asking to renew and it is
here where complication arose.
Because according to plaintiffs, spouses Magalong answered in letter of 19 February,
1968 indicating willingness, Exh. F, which is in handwriting, instructing that new
document of same tenor be drafted by Notary Public, Mr. Numeriano de Castro,
Magalong's friend, this despite the fact that 10 year redemption period had already
expired, on the other hand, according to defendants, Magalong, they never sent
this handwritten letter, Exh. F, what they had sent was the letter, Exh. 6 dated 12
January 1968 (duplicate carbon of that is Exh. 6) wherein they manifested their
willingness to accept a new document of the same tenor but upon certain conditions,
among them that because of depreciation of value of the peso, that the consideration
should be placed at P9,000.00 if the dollar was worth 4 times the peso, further, that
draft of new document to be sent unto them for perusal and if they were agreeable,
they would send it back for notarization, and that also, before finalization, they should
be notified, for them to send a special power of attorney for a relative who spoke
English welt,
And the misunderstanding began with that, plaintiffs, on the position that they
were complying with Exh. F, caused preparation of new deed, Exh. E, on 21 June, 1968,
with consideration being only for P4,500.00, and had it ratified before the above-
mentioned notary public, Mr. Numeriano G. de Castro, but in turn, defendants refused
to accept claiming they were not bound thereby, there was further interchange of
communications, until plaintiffs filed present case on 8 May, 1972 and according to
her, she deposited the money coincidentally; and in the trial, her position and
evidence were to the effect that it became obligation of defendants to execute deed of
redemption, which defendants spouses Magalong resist, on the position and
evidence that no, and that the period of redemption having expired, title should be
consolidated, ... .
3

While respondent appellate court did not give its sanction to the last deed of sale executed
unilaterally by petitioners on June 21, 1968 for P4,500.00 with right to repurchase within a period of
five (5) years from said date of execution, it held however that in the fight of the admitted facts the
transaction was in reality an equitable mortgage and therefore set aside the trial court's dismissal of
the case.
The appellate court cited petitioners' contention on appeal "that the agreement was only
an equitable mortgage, not a sale with right of redemption at an, and they point to the undisputed
fact that the first document of 27 January, 1958, Exh. A, was for P3,600.00, then a second document
of exactly the same tenor was executed on 21 August, 1958, or hardly 7 months later, adding a sum
that had been later on received as addition to the price ofP200.00, making the redemption
price, P3,800.00, then four years later, 179 cause an additional amount was again received
of P400.00, a new document was once more executed, Exh. C, raising the redemption price
toP4,200.00, and then a year later, because still another sum of P300.00 had been received, still
another document of the same tenor was once more executed, Exh. D, on June, 1965, raising the
redemption price to P4,500.00."
4

The appellate court found that "(I)n the mind of this Court, (the) foregoing facts, admitted on both
sides, can not have any other interpretation than that there could have been no legal purposes for
the additions of P200.00, P400.00, and P500.00 to increase the redemption price than to erase the
nomenclature of the transaction from a deed of sale with conventional redemption, into the
revelation that it was truly and in reality, a simple loan, surely, if Exh. A was a true deed of sale
with pacto de retro, the price was P3,600.00, nothing not even a centavo more, the only right of
vendor-a-retro would have been to redeem at that price; if vendee-a- retro himself gave afterwards
several additional amounts, and himself consented that they be aggregated to the price of
redemption, that was absolutely inconsistent with the designation of the agreement, Exh. A, as a true
sale with pacto de retro, a sale with pacto de retro is a true, a good sale, it transfers title to vendee,
only subject to a resolutory condition, the addition of further sums accepted by vendee-a-retro,
becomes incomprehensible, in other words, the net conclusion must have to that consistent with
their own conduct, especially that of 'vendee-a-retro', the Courts should understand the agreement
to have been really only loan with equitable mortgage, for the parties neither have any legal night to
change the juridical qualification that the law attaches to their conduct, it is the law, not their written
contract, that does that for them."
5

The appellate court rejected respondents' defense of estoppel, thus: "(N)ow, of course, defendants
contend in this connection, that plaintiffs are in estoppel to raise this question that it was only an
equitable mortgage, since plaintiffs themselves have described the transaction as a sale with right of
conventional redemption in their complaint, but the answer to this is not only that as this Court
has said, it is not the parties but the law, that determines the juridical situation created by the parties
thru their contract, but not only this, but this Court, reviewing the record, notices that no less
than defendants themselves apparently accepted that this had become an issue in the trial, so much
so that they presented witness Atty. Felipe Santillan, a practising lawyer and Notary Public in
Pangasinan, versed in the Pangasinan dialect, and who confronted with the very letters of defendants
Magalong wherein the latter referred to the transaction they had had with plaintiffs as 'prindaan,'
declared. ... A. 'Well, this word PRINDAAN is a general term in Pangasinan. It may mean a pledge,
chattel mortgage, a simple mortgage and it may mean also a deed of sale with conventional
redemption.' (tsn. 11:2021, witness Felipe Santillan). The long and short of it is that as Courts of
Justice can not close their eyes to the evidence presentedby the parties themselves and foregoing
testimony of a witness submitted by defendants no less going to show that they understood that the
true meaning of the transaction had to be clarified, that point had become materialtherefore the
argument of estoppel by them stated in answer to Error 2 cannot persuade, and since with that, this
Court becomes not only free but in fact, obliged to rule, and said additional sums by them receive
having no other meaning than that this was in reality a series of loans."
6

The appellate court accordingly reversed the lower court's decision and rendered judgment for
petitioners allowing their redemption of the property for the stipulated sum of P4,500.00 within 30
days from finality of the decision.
7

Upon respondent's motion for reconsideration, however, respondent appellate court (with a changed
composition with the compulsory retirement on January 1, 1978 of the ponente Acting Presiding
Justice Gatmaitan)
8
issued its Resolution of February 3, 1978 setting aside its original decision of
November 3, 1977 and instead affirming the lower court's dismissal of petitioners' complaint, on the
following ratiocination:
That on 3 occasions, the purchase price was increased under Exhs. B, C and D may
indeed be interpreted as meaning that only a simple loan was intended by the
contracting parties, but then.
a) This is not one of the circumstances listed in Art. 1602 of the Civil Code;
b) The additional amounts did not result in any extension of the redemption period;
and
c) The payment of the additional amounts did not in any way benefit the vendees and
were acts of liberality extended to a close relative by blood.
It is also important to note that the complaint is anchored on Exh. E (dated June 21,
1968 after the expiration of the redemption period) which the Court a quo found to
be self-serving as it was the unilateral act of the appellants. And the complaint is
totally silent as to Exhs. A, B, C and D; seeks no reformation; and alleges that the
consignation was not in payment of a loan, but in payment of the repurchase price
(par. 9). In asking that the motion for reconsideration be denied, the appellants in
effect uphold that they are entitled to reformation. This is a remedy not sought by
them in the trial court and is not a matter even discussed in the briefs.
Finally, the 10-year redemption period expired on January 27, 1968, but the
consignation was made and the complaint was filed only in 1972.
The appellate court in its Resolution of April 14, 1973 denied petitioners' motion for reconsideration
in turn and reaffirmed its legal conclusion that the true transaction was a sale with rights to
repurchase rather than a simple loan as held by the original decision of November 3, 1977.
Hence, the petition at bar, which the Court finds to be well taken for the following principal
considerations.
1. The conclusion in the appellate court's countermanding Resolution of February 3, 1978 that the
true transaction a pacto de retro sale is contrary to the very admission of respondent Felix B.
Magalong in his letter of March 28, 1972 to petitioner Eugenie Diaz wherein said respondent
expressly referred to petitioners' proposal "to redeem the land which has been mortgaged to us."
9

2. The appellate court's countermanding Resolution of February 3, 1978, supra, recognized that the
undisputed fact that on three occasions the original "purchase price" of P3,600.00 was increased with
the "additional payments" of P200.00, P400.00 and P300.00, which added up to a total increased
"purchased price" of P4,500.00indicated that only a simple loan was intended by the contracting
parties." Yet, it rejected this correct indication and conclusion on three manifestly mistaken
inferences as follows:
1st that "this is not one of the circumstances listed in Article 1602 of the Civil Code", completely
disregarding the 6th circumstance or badge of equitable mortgage fisted in the article, to wit, "(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";
2nd, "The additional amounts did not result in any extension of the redemption period." Precisely, as
stressed in the original decision of November 3, 1977, if the transaction were a true pacto de retro,
the purchase price had been fixed at P3,600.00 not a centavo more and respondents' giving of
additional amounts on three different occasions to be aggregated to the redemption price "was
absolutely inconsistent" with the concept of "a true sale with pacto de retro"; and
3rd, the inference that the additional amounts did not benefit the respondents and were "acts of
liberality" is patently mistaken. As already pointed out, such addition amounts merely reveal the
nature of the transaction as a series of loans which did not involve any "liberality." As a matter of
fact, respondents expressly insisted that they be repaid in dollars at the equivalent increased rate
then of P6.40 to the dollar not, withstanding the prohibitory provision to the contrary of Republic Act
No. 529.
3. The appellate court's countermanding Resolution of February 3, 1978 furthermore completely
disregarded the applicable provisions of Article 1603, Civil Code that "In case of doubt, a contract
purporting to be a sale with right to repurchase shall be construed as an equitable mortgage" and of
Article 1606, Civil Code, 3rd paragraph that "the vendor may still exercise the right to
repurchase within thirty days from the time final judgment was rendered in a civil action on the basis
that the contract was a true sale with right to repurchase", which latter provision was aptly applied in
the original decision although it did not expressly cite the codal article.
ACCORDINGLY, judgment is hereby rendered setting aside the appellate court's Resolutions of
February 3, 1978 and April 14, 1979 and reinstating the original decision and judgment of November
3, 1977. Without costs.
Makasiar, Muoz Palma, Fernandez and Guerrero, JJ., concur.







Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-36083 September 5, 1975
Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and
GAUDELIA VEGA, petitioners,
vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA, respondents.
Salonga, Ordonez, Yap, Parlade and Associates and Marvin J. Mirasol for petitioners. Arturo H.
Villanueva, Jr. for private respondent.

BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R. No. 47945-R entitled Filomena
Javellana vs. Spouses Ramon Doromal, Sr., et al. which reversed the decision of the Court of First
Instance of Iloilo that had in turn dismissed herein private respondent Filomena Javellana's action for
redemption of a certain property sold by her co-owners to herein petitioners for having been made
out of time.
The factual background found by the Court of Appeals and which is binding on this Court, the same
not being assailed by petitioners as being capricious, is as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral survey of Iloilo,
situated in the poblacion of La Paz, one of its districts, with an area of a little more
than 2- hectares was originally decreed in the name of the late Justice Antonio
Horilleno, in 1916, under Original Certificate of Title No. 1314, Exh. A; but before he
died, on a date not particularized in the record, he executed a last will and testament
attesting to the fact that it was a co-ownership between himself and his brothers and
sisters, Exh. C; so that the truth was that the owners or better stated, the co-owners
were; beside Justice Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was succeeded by
her only daughter and heir herein plaintiff. Filomena Javellana, in the proportion of 1/7
undivided ownership each; now then, even though their right had not as yet been
annotated in the title, the co-owners led by Carlos, and as to deceased Justice Antonio
Horilleno, his daughter Mary, sometime since early 1967, had wanted to sell their
shares, or if possible if Filomena Javellana were agreeable, to sell the entire property,
and they hired an acquaintance Cresencia Harder, to look for buyers, and the latter
came to interest defendants, the father and son, named Ramon Doromal, Sr. and Jr.,
and in preparation for the execution of the sale, since the brothers and sisters
Horilleno were scattered in various parts of the country, Carlos in Ilocos Sur, Mary in
Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan City, they all
executed various powers of attorney in favor of their niece, Mary H. Jimenez Exh. 1-8,
they also caused preparation of a power of attorney of identical tenor for signature by
plaintiff, Filomena Javellana, Exh. M, and sent it with a letter of Carlos, Exh. 7 dated 18
January, 1968 unto her thru Mrs. Harder, and here, Carlos informed her that the price
was P4.00 a square meter, although it now turns out according to Exh. 3 that as
early as 22 October, 1967, Carlos had received in check as earnest money from
defendant Ramon Doromal, Jr., the sum of P5,000.00 and the price therein agreed
upon was five (P5.00) pesos a square meter as indeed in another letter also of Carlos
to Plaintiff in 5 November, 1967, Exh. 6, he had told her that the Doromals had given
the earnest money of P5,000.00 at P5.00 a square meter, at any rate, plaintiff not
being agreeable, did not sign the power of attorney, and the rest of the co-owners
went ahead with their sale of their 6/7, Carlos first seeing to it that the deed of sale by
their common attorney in fact, Mary H. Jimenez be signed and ratified as it was signed
and ratified in Candon, Ilocos Sur, on 15 January, 1968, Exh. 2, then brought to Iloilo by
Carlos in the same month, and because the Register of Deeds of Iloilo refused to
register right away, since the original registered owner, Justice Antonio Horilleno was
already dead, Carlos had to ask as he did, hire Atty. Teotimo Arandela to file a petition
within the cadastral case, on 26 February, 1968, for the purpose, Exh. C, after which
Carlos returned to Luzon, and after compliance with the requisites of publication,
hearing and notice, the petition was approved, and we now see that on 29 April, 1968,
Carlos already back in Iloilo went to the Register of Deeds and caused the registration
of the order of the cadastral court approving the issuance of a new title in the name of
the co-owners, as well as of the deed of sale to the Doromals, as a result of which on
that same date, a new title was issued TCT No. 23152, in the name of the Horillenos to
6/7 and plaintiff Filomena Javellana to 1/7, Exh. D, only to be cancelled on the same
day under TCT No. 23153, Exh. 2, already in the names of the vendees Doromals for
6/7 and to herein plaintiff, Filomena Javellana, 1/7, and the next day 30 April, 1968,
the Doromals paid unto Carlos by check, the sum of P97,000.00 Exh. 1, of Chartered
Bank which was later substituted by check of Phil. National Bank, because there was
no Chartered Bank Branch in Ilocos Sur, but besides this amount paid in check, the
Doromals according to their evidence still paid an additional amount in cash of
P18,250.00 since the agreed price was P5.00 a square meter; and thus was
consummated the transaction, but it is here where complications set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, plaintiff's lawyer,
Atty. Arturo H. Villanueva, bringing with him her letter of that date, reading,
"P.O. Box
189, Bacolod
City
June 10,
1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of
this City. Through him, I am making a formal offer to repurchase or
redeem from you the 6/7 undivided share in Lot No. 3504, of the Iloilo
Cadastre, which you bought from my erstwhile co-owners, the
Horillenos, for the sum of P30,000.00, Atty. Villanueva has with him the
sum of P30,000.00 in cash, which he will deliver to you as soon as you
execute the contract of sale in my favor.
Thank you very much for whatever favorable consideration you can give this request.
Very truly yours,
(SIGNED)
Mrs.
FILOMENA
JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he had the
P30,000.00 with him in cash, and tendered it to them, for the exercise of the legal
redemption, the Doromals were aghast, and refused. and the very next day as has
been said. 11 June, 1968, plaintiff filed this case, and in the trial, thru oral and
documentary proofs sought to show that as co-owner, she had the right to redeem at
the price stated in the deed of sale, Exh. 2, namely P30,000.00 of the but defendants in
answer, and in their evidence, oral and documentary sought to show that plaintiff had
no more right to redeem and that if ever she should have, that it should be at the true
and real price by them paid, namely, the total sum of P115,250.00, and trial judge,
after hearing the evidence, believed defendants, that plaintiff had no more right, to
redeem, because,
"Plaintiff was informed of the intended sale of the 6/7 share belonging
to the Horillenos." and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno because in the
petition for declaration of heirs of her late uncle Antonio Horilleno in whose name only
the Original Certificate of Title covering the Lot in question was issued, her uncle Atty.
Carlos Horilleno included her as one of the heirs of said Antonio Horilleno. Instead, she
filed this case to redeem the 6/7 share sold to the Doromals for the simple reason that
the consideration in the deed of sale is the sum of P30,000.00 only instead of
P115,250.00 approximately which was actually paid by the defendants to her co-
owners, thus she wants to enrich herself at the expense of her own blood relatives
who are her aunts, uncles and cousins. The consideration of P30,000.00 only was
placed in the deed of sale to minimize the payment of the registration fees, stamps,
and sales tax. pp. 77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees, and moral and
exemplary damages as set forth in few pages back, it is because of this that plaintiff
has come here and contends, that Lower Court erred:
"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo
Cadastre, the right of legal redemption under Art. 1620, of the Civil Code:
"II. ... as a consequence of the above error, in refusing to order the defendants-
appellees, the vendees of a portion of the aforesaid Lot No. 3504 which they bought
from the co-owners of the plaintiff-appellant, to reconvey the portion they purchased
to the herein plaintiff-appellant..
"III. ... in admitting extrinsic evidence in the determination of the consideration of the
sale, instead of simply adhering to the purchase price of P30,000.00, set forth in the
pertinent Deed of Sale executed by the vendors and owners of the plaintiff-appellant
in favor of the defendants-appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,.
which can be reduced to the simple question of whether or not on tile basis of the
evidence and the law, the judgment appealed from should be maintained; (Pp. 16-22,
Record.) .
Upon these facts, the Court of Appeals reversed the trial court's decision and held that although
respondent Javellana was informed of her co-owners' proposal to sell the land in question to
petitioners she was, however, "never notified ... least of all, in writing", of the actual execution and
registration of the corresponding deed of sale, hence, said respondent's right to redeem had not yet
expired at the time she made her offer for that purpose thru her letter of June 10, 1968 delivered to
petitioners on even date. The intermediate court further held that the redemption price to be paid by
respondent should be that stated in the deed of sale which is P30,000 notwithstanding that the
preponderance of the evidence proves that the actual price paid by petitioners was P115,250. Thus,
in their brief, petitioners assign the following alleged errors:
I
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF
THE SALE CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE
IN WRITING AFTER THE EXECUTION AND REGISTRATION OF THE INSTRUMENT OF SALE,
HENCE, OF THE DOCUMENT OF SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF THE SALE
IN THE REGISTRY OF PROPERTY TAKES EFFECT AS AGAINST THIRD PERSONS INCLUDING
CLAIMS OF POSSIBLE REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE
COURT OF APPEALS ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE
THAT STATED IN THE DEED OF SALE. (Pp. 1-2, Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 co-owner of the
property in dispute. The thrust of their first assignment of error is that for purposes of Article 1623 of
the Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or by the
vendor, as the case may be. The deed of sale shall not be recorded in the Registry of
Property, unless accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and
November 5, 1967, Exhibit 6, constituted the required notice in writing from which the 30-day period
fixed in said provision should be computed. But to start with, there is no showing that said letters
were in fact received by respondent and when they were actually received. Besides, petitioners do
not pinpoint which of these two letters, their dates being more than two months apart, is the
required notice. In any event, as found by the appellate court, neither of said letters referred to a
consummated sale. As may be observed, it was Carlos Horilleno alone who signed them, and as of
January 18, 1968, powers of attorney from the various co-owners were still to be secured. Indeed,
the later letter of January 18, 1968 mentioned that the price was P4.00 per square meter whereas in
the earlier letter of November 5, 1967 it was P5.00, as in fact, on that basis, as early as October 27,
1967, Carlos had already received P5,000 from petitioners supposedly as earnest money, of which,
however, mention was made by him to his niece only in the later letter of January 18, 1968, the
explanation being that "at later negotiation it was increased to P5.00 per square meter." (p. 4 of
petitioners' brief as appellees in the Court of Appeals quoting from the decision of the trial court.) In
other words, while the letters relied upon by petitioners could convey the idea that more or less
some kind of consensus had been arrived at among the other co-owners to sell the property in
dispute to petitioners, it cannot be said definitely that such a sale had even been actually perfected.
The fact alone that in the later letter of January 18, 1968 the price indicated was P4.00 per square
meter while in that of November 5, 1967, what was stated was P5.00 per square meter negatives the
possibility that a "price definite" had already been agreed upon. While P5,000 might have indeed
been paid to Carlos in October, 1967, there is nothing to show that the same was in the concept of
the earnest money contemplated in Article 1482 of the Civil Code, invoked by petitioner, as signifying
perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We
are more inclined to believe that the said P5,000 were paid in the concept of earnest money as the
term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back
out, considering that it is not clear that there was already a definite agreement as to the price then
and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse
to agree to part with her 1/7 share.
In the light of these considerations, it cannot be said that the Court of Appeals erred in holding that
the letters aforementioned sufficed to comply with the requirement of notice of a sale by co-owners
under Article 1623 of the Civil Code. We are of the considered opinion and so hold that for purposes
of the co-owner's right of redemption granted by Article 1620 of the Civil Code, the notice in writing
which Article 1623 requires to be made to the other co-owners and from receipt of which the 30-day
period to redeem should be counted is a notice not only of a perfected sale but of the actual
execution and delivery of the deed of sale. This is implied from the latter portion of Article 1623
which requires that before a register of deeds can record a sale by a co-owner, there must be
presented to him, an affidavit to the effect that the notice of the sale had been sent in writing to the
other co-owners. A sale may not be presented to the register of deeds for registration unless it be in
the form of a duly executed public instrument. Moreover, the law prefers that all the terms and
conditions of the sale should be definite and in writing. As aptly observed by Justice Gatmaitan in the
decision under review, Article 1619 of the Civil Code bestows unto a co-owner the right to redeem
and "to be subrogated under the same terms and conditions stipulated in the contract", and to avoid
any controversy as to the terms and conditions under which the right to redeem may be exercised, it
is best that the period therefor should not be deemed to have commenced unless the notice of the
disposition is made after the formal deed of disposal has been duly executed. And it being beyond
dispute that respondent herein has never been notified in writing of the execution of the deed of sale
by which petitioners acquired the subject property, it necessarily follows that her tender to redeem
the same made on June 10, 1968 was well within the period prescribed by law. Indeed, it is
immaterial when she might have actually come to know about said deed, it appearing she has never
been shown a copy thereof through a written communication by either any of the petitioners-
purchasers or any of her co-owners-vendees. (Cornejo et al. vs.CA et al., 16 SCRA 775.)
The only other pivotal issue raised by petitioners relates to the price which respondent offered for
the redemption in question. In this connection, from the decision of the Court of Appeals, We gather
that there is "decisive preponderance of evidence" establishing "that the price paid by defendants
was not that stated in the document, Exhibit 2, of P30,000 but much more, at least P97,000,
according to the check, Exhibit 1, if not a total of P115,250.00 because another amount in cash of
P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of fact of the
intermediate court, it erred in holding nevertheless that "the redemption price should be that stated
in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under review, the trial
court found that "the consideration of P30,000 only was placed in the deed of sale to minimize the
payment of the registration fees, stamps and sales tax." With this undisputed fact in mind, it is
impossible for the Supreme Court to sanction petitioners' pragmatic but immoral posture. Being
patently violative of public policy and injurious to public interest, the seemingly wide practice of
understating considerations of transactions for the purpose of evading taxes and fees due to the
government must be condemned and all parties guilty thereof must be made to suffer the
consequences of their ill-advised agreement to defraud the state. Verily, the trial court fell short of its
devotion and loyalty to the Republic in officially giving its stamp of approval to the stand of
petitioners and even berating respondent Javellana as wanting to enrich herself "at the expense of
her own blood relatives who are her aunts, uncles and cousins." On the contrary, said "blood
relatives" should have been sternly told, as We here hold, that they are in pari-delicto with
petitioners in committing tax evasion and should not receive any consideration from any court in
respect to the money paid for the sale in dispute. Their situation is similar to that of parties to an
illegal contract.
1

Of course, the Court of Appeals was also eminently correct in its considerations supporting the
conclusion that the redemption in controversy should be only for the price stipulated in the deed,
regardless of what might have been actually paid by petitioners that style inimitable and all his own,
Justice Gatmaitan states those considerations thus:
CONSIDERING: As to this that the evidence has established with decisive
preponderance that the price paid by defendants was not that stated in the document,
Exh. 2 of P30,000.00 but much more, at least P97,000.00 according to the check, Exh. 1
if not a total of P115,250.00 because another amount in cash of P18,250.00 was paid
afterwards, perhaps it would be neither correct nor just that plaintiff should be
permitted to redeem at only P30,000.00, that at first glance would practically enrich
her by the difference, on the other hand, after some reflection, this Court can not but
have to bear in mind certain definite points.
1st According to Art. 1619
"Legal redemption is the right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby ownership is transmitted by
onerous title." pp. 471-472, New Civil Code,
and note that redemptioner right is to be subrogated
"upon the same terms and conditions stipulated in the contract."
and here, the stipulation in the public evidence of the contract, made public by both
vendors and vendees is that the price was P30,000.00;
2nd According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all the other co-
owners or 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 one. p. 472, New Civil Code, .
from which it is seen that if the price paid is 'grossly excessive' redemptioner is
required to pay only a reasonable one; not that actually paid by the vendee, going to
show that the law seeks to protect redemptioner and converts his position into one
not that of a contractually but of a legally subrogated creditor as to the right of
redemption, if the price is not 'grossly excessive', what the law had intended
redemptioner to pay can be read in Art. 1623.
The right of a legal pre-emption or redemption shall not be exercised
except within thirty (30) days from the notice in writing by the
prospective vendor, or by the vendor as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written
notice thereof of all possible redemptioners.' p. 473, New Civil Code,
if that be so that affidavit must have been intended by the lawmakers for a definite
purpose, to argue that this affidavit has no purpose is to go against all canons of
statutory construction, no law mandatory in character and worse, prohibitive should
be understood to have no purpose at all, that would be an absurdity, that purpose
could not but have been to give a clear and unmistakable guide to redemptioner, on
how much he should pay and when he should redeem; from this must follow that that
notice must have been intended to state the truth and if vendor and vendee should
have instead, decided to state an untruth therein, it is they who should bear the
consequences of having thereby misled the redemptioner who had the right to rely
and act thereon and on nothing else; stated otherwise, all the elements of equitable
estoppel are here since the requirement of the law is to submit the affidavit of notice
to all possible redemptioners, that affidavit to be a condition precedent to registration
of the sale therefore, the law must have intended that it be by the parties understood
that they were there asking a solemn representation to all possible redemptioners,
who upon faith of that are thus induced to act, and here worse for the parties to the
sale, they sought to avoid compliance with the law and certainly refusal to comply
cannot be rewarded with exception and acceptance of the plea that they cannot be
now estopped by their own representation, and this Court notes that in the trial and to
this appeal, plaintiff earnestly insisted and insists on their estoppel;
3rd If therefore, here vendors had only attempted to comply with the law, they
would have been obligated to send a copy of the deed of sale unto Filomena Javellana
and from that copy, Filomena would have been notified that she should if she had
wanted to redeem, offered no more, no less, that P30,000.00, within 30 days, it would
have been impossible for vendors and vendees to have inserted in the affidavit that
the price was truly P97,000.00 plus P18,250.00 or a total of P115,250.00; in other
words, if defendants had only complied with the law, they would have been obligated
to accept the redemption money of only P30,000.00;
4th If it be argued that foregoing solution would mean unjust enrichment for
plaintiff, it need only be remembered that plaintiff's right is not contractual, but a
mere legal one, the exercise of a right granted by the law, and the law is definite that
she can subrogate herself in place of the buyer,
"upon the same terms and conditions stipulated in the contract,"
in the words of Art. 1619, and here the price
"stipulated in the contract"
was P30,000.00, in other words, if this be possible enrichment on the part of Filomena,
it was not unjust but just enrichment because permitted by the law; if it still be argued
that plaintiff would thus be enabled to abuse her right, the answer simply is that what
she is seeking to enforce is not an abuse but a mere exercise of a right; if it be stated
that just the same, the effect of sustaining plaintiff would be to promote not justice
but injustice, the answer again simply is that this solution is not unjust because it only
binds the parties to make good their solemn representation to possible redemptioners
on the price of the sale, to what they had solemnly averred in a public document
required by the law to be the only basis for that exercise of redemption; (Pp. 24-27,
Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against petitioners..










Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. NO. 142408 September 30, 2005
SPOUSES RICARDO ALMENDRALA and ROSARIO DOROJA, Petitioners,
vs.
SPOUSES WING ON NGO and LILY T. NGO, and the HONORABLE COURT OF APPEALS, Respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
Decision
1
of the Court of Appeals (CA) dated September 30, 1999 in CA-G.R. CV No. 56458, which
reversed and set aside the Decision dated April 30, 1997 of the Regional Trial Court, Branch 24, Bian,
Laguna (RTC) upholding petitioners right of legal redemption; and the CA Resolution dated March 9,
2000, which denied petitioners motion for reconsideration.
The factual background of the case is as follows:
On February 4, 1992, petitioner spouses Ricardo Almendrala and Rosario Doroja (Almendrala spouses
for brevity) filed a complaint for legal redemption and damages against respondent spouses Wing On
Ngo and Lily T. Ngo (Ngo spouses for brevity) before the RTC of Bian, Laguna, docketed as Civil Case
No. B-3714 and assigned to Branch 24 thereof.
2

They alleged that: they are the registered owners of a lot situated along Mabini St., San Pedro,
Laguna, known as Lot 5-B of the Subdivision Plan Csd-04-003353 with an area of 304 square meters
under Transfer Certificate of Title (TCT) No. T-169139; the spouses Josefina and Lysias
Manalo
3
(Manalo spouses for brevity), Ricardos sister and brother-in-law, respectively, used to be
the registered owners of Lot 5-D also of Subdivision Plan Csd-04-003353, with an area of 22 square
meters, covered by TCT No. T-150411, adjoining their lot; they discovered that the Manalo spouses
sold the lot to the Ngo spouses for the sum of P44,000.00 per a Deed of Absolute Sale dated July 25,
1991; on August 21, 1991, TCT No. T-234792 was issued in the name of the Ngo spouses; the sale was
registered without the requisite vendors affidavit regarding service of written notices thereof to
adjacent owners; the subject land is not only needed by them for a reasonable frontage of the
adjoining street but is actually occupied by their own house; and, they are ready, able and willing to
exercise their right of legal redemption.
On March 20, 1992, the Almendrala spouses filed a motion to declare the Ngo spouses in default for
the failure to file their Answer.
4

On March 26, 1992, the Ngo spouses filed the opposition to the motion for default with motion to
admit their answer.
5
In their Answer dated March 25, 1992, the Ngo spouses claimed that they
merely relied in good faith on Josefina Manalos assurance that none of her relatives wanted to buy
the property and that they have no intention to oppose the desire of the Almendrala spouses to
redeem the same. They prayed that the case be dismissed for being premature and for lack of merit.
6

In its Order dated March 27, 1992, the RTC denied the motion for default and admitted the answer of
the Ngo spouses in the interest of substantial justice.
7

At the scheduled pre-trial conference on April 27, 1992, only the Almendrala spouses and their
counsel appeared. Thus, upon motion of the Almendrala spouses, the RTC declared the Ngo spouses
as in default for their failure to attend the scheduled pre-trial conference. It also authorized the
Almendrala spouses to present their evidence ex-parte.
8

On May 29, 1992, the Ngo spouses filed a motion for reconsideration.
9
On June 4, 1992, the RTC
granted the motion for reconsideration and gave the Ngo spouses the right to cross-examine the
witnesses of the Almendrala spouses considering that the latter had already presented their
evidence.
10

However, for failure of the Ngo spouses to cross-examine the witnesses of the Almendrala spouses
on four scheduled hearing dates called for such purpose, the RTC declared, in its Order dated October
7, 1992, that they waived such right.
11

On November 18, 1992, the Ngo spouses filed a motion for reconsideration of the Order dated
October 7, 1992.
12
On the same date, the Ngo spouses filed a motion for leave to file an amended
answer.
13
In their amended answer, the Ngo spouses alleged that the Almendrala spouses have
neither the right nor privilege to redeem the land in litigation; they intend to use the land for their
business needs; the complaint was filed purely for harassment purposes and stated no cause of
action.
14
They also filed a motion for leave to file third-party complaint against the Manalo spouses
for supposed breach of the latters guarantee as vendors to keep the vendees in peaceful possession
of the property sold.
15

On December 2, 1992, the Almendrala spouses filed their opposition to the motion for
reconsideration, motion to amend answer and motion to file third-party complaint.
16
However, on
January 29, 1993, the RTC granted the three motions of the Ngo spouses.
17

On May 7, 1993, the Almendrala spouses filed a motion to declare third-party defendant Manalo
spouses in default for failure to file their third- party answer.
18
On May 13, 1993, the RTC granted the
motion.
19

A day before, however, or on May 12, 1993, the Manalo spouses filed their answer, claiming therein
that verbal notice of the questioned sale was given to the Almendrala spouses and that their inclusion
in the instant suit was tainted with malice.
20
Thus, on May 31, 1993, the Manalo spouses filed a
motion for reconsideration of the May 13, 1993 default order.
21

On June 10, 1993, the RTC granted the motion for reconsideration and admitted the answer of third-
party defendants Manalo spouses.
22

On July 5, 1993, the Manalo spouses filed a motion to admit their amended answer to the third-party
complaint.
23
In their amended answer to the third-party complaint, they allege that: the P44,000.00
consideration stated in the deed of absolute sale actually represented their indebtedness to the Ngo
spouses in the sum of P44,000.00; in executing the same deed of absolute sale, it was agreed
between the parties that in the meantime they shall be allowed to remain in possession of the
property and to later redeem it at the same price; and, that the land was first offered to the
Almendrala spouses at P12,000.00 per square meter to no avail. In addition to tendering the sum
of P44,000.00 as repayment of their loan as aforesaid, the Manalo spouses prayed that the sale be
considered as a plain mortgage and that the Ngo spouses be ordered to reconvey the subject land
and to pay their counterclaims for attorneys fees and the costs of the suit.
24

On September 12, 1994, the Ngo spouses and the Manalo spouses executed a compromise
agreement with the following provisions:
1. The THIRD PARTY DEFENDANTS hereby acknowledge the THIRD PARTY PLAINTIFFS ownership over
that parcel of land situated in Poblacion, San Pedro, Laguna and now registered in the latters names
under Transfer Certificate of Title No. 23472 of the Registry of Deeds of the Province of Laguna.
2. The THIRD PARTY DEFENDANTS hereby undertake to vacate the aforesaid premises, and voluntarily
surrender possession thereof to the THIRD PARTY PLAINTIFFS, on or before November 12, 1994.
3. The THIRD PARTY PLAINTIFFS and THIRD PARTY DEFENDANTS hereby waive and quitclaim their
respective claims against each other of whatever nature except the enforcement of this Agreement
by means of a writ of execution in the event that they fail to comply with what is incumbent of them
to do.
25

On December 26, 1994, the RTC approved the foregoing compromise agreement.
26

On April 30, 1997, the RTC rendered its decision upholding the right of legal redemption of the
Almendrala spouses based on: (a) the testimony of Ricardo Almendrala, as corroborated by Ariel
Uypico, that the Ngo spouses were selling the lot; (b) the non-approval by the proper building official
or municipal engineer of the building design and plan for the lot prepared by Jaime Patalud for the
Ngo spouses; (c) the failure of the building design and plan to comply with the legal requirement
imposed by the National Building Code and its Implementing Rules and Regulations that a commercial
building with an area of 20 to 24 square meters must allow a road right of way of 6 meters in front, 3
meters at the side and 3 meters at the rear. It held that the lot is so small that it cannot be used for
any practical purpose within a reasonable time and was bought by the Ngo spouses for speculation.
27

Dissatisfied, the Ngo spouses filed an appeal with the CA which, on September 30, 1999, set aside the
decision of the RTC and dismissed the complaint for legal redemption and damages.
28

The CA held that the Almendrala spouses failed to allege and prove that the disputed area of 22
square meters cannot be used for any practical purpose or was bought by the Ngo spouses merely for
speculation; and that on the contrary, the Ngo spouses showed that they planned to use the lot for a
two-storey bakery, store and restaurant and had not bought the lot for speculation.
The Almendrala spouses filed a motion for reconsideration
29
but it was denied in the CA Resolution
dated March 9, 2000.
30

Hence, the present petition for review on certiorari based on the following grounds:
The Court of Appeals committed grave error and abuse of discretion tantamount to lack or excess of
jurisdiction when it replaced the trial courts factual findings with its own second hand appreciation.
31

The Court of Appeals gravely erred and committed grave abuse of discretion tantamount to lack or
excess of jurisdiction when it favored the patently false and perjured testimonies of the respondent
and his witness.
32

Anent the first ground, the Almendrala spouses admit that they did not allege in the complaint that
the Ngo spouses bought the lot for speculation. They insist, however, that they offered evidence,
without objection from the Ngo spouses, proving that the latter acquired the lot for speculation.
As to the second ground, they argue that the CA gave credence to the testimonies of Wing On Ngo
and Jaime Patalud despite the patent perjuries they committed. They maintain that Wing On Ngo lied
in four instances, to wit: when he swore that he inspected the lot before he purchased it; when he
informed the Almendrala spouses that he was buying the lot; that he revealed to them his alleged
project of a two-storey bakery and store; and that they agreed to remove the eave overhanging the
lot.
The Ngo spouses, on the other hand, submit that the arguments in the present petition are a mere
rehash of those submitted in the motion for reconsideration before the CA and already resolved by
the said court.
As to the first ground, the Ngo spouses contend that: speculation was neither alleged nor proven; the
Almendrala spouses were duly notified of the sale but they failed to exercise the right of pre-emption
or redemption within the 30-day period required by Article 1623
33
of the Civil Code; there is no
rightful redemption as there was no valid tender of payment or even consignation in court of
redemption price but simply an offer to redeem.
On the second ground, they maintain that the alleged perjured testimonies of Wing On Ngo and
Jaime Patalud are normal reactions of someone on the witness stand. They submit that the
Almendrala spouses lack a full grasp of the applicability of the maxim "falsus in uno, falsus in
omnibus" because it deals only with the weight of evidence and is not a positive rule of law of
universal application. They further assert that their good faith and honest intention in acquiring the
land was evident as early as July 31, 1991 when the National Housing Authority issued a certification
approving the request of the original owner, Josefina Manalo, to transfer her rights over the lot in
favor of Wing On Ngo.
At any rate, they raise, as additional error for the Courts consideration, the CAs refusal to grant their
claim for payment of damages and attorneys fees.
The petition lacks merit.
It is a settled rule that in the exercise of the Supreme Courts power of review, the Court is not a trier
of facts and does not normally undertake the re-examination of the evidence presented by the
contending parties during the trial of the case considering that the findings of facts of the CA are
conclusive and binding on the Court. While jurisprudence has recognized several exceptions in which
factual issues may be resolved by this Court, such as: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its
findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial
court; (8) when the findings are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; or (11) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion,
34
none of these exceptions find application here.
The Almendrala spouses maintain that they anchored their cause of action on Article 1622 of the Civil
Code, which provides that:
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 the adjoining land shall have the 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.
There are 4 elements necessary for the application of Article 1622, to wit: (1) that the piece of land is
urban land; (2) that the land is so small that a major portion thereof cannot be used for any practical
purpose within a reasonable time; (3) that it was bought merely for speculation; and (4) that the land
is about to be resold, or that its resale has been perfected. Before a party may avail of the right of
pre-emption or redemption under this provision, it is necessary that all these elements be alleged in
the complaint and proved at the trial.
35

A thorough reading of the complaint in this case reveals that the Almendrala spouses failed to allege
in their complaint that they based their cause of action under Article 1622 because they did not
allege the elements necessary for the application of said provision. They insist, nonetheless, that they
adduced sufficient evidence to support their claim.
Admittedly, the failure of the Almendrala spouses to plead in the complaint that the Ngo spouses
bought the lot for speculation does not forestall relief under Article 1622 if they offered sufficient
evidence to support their claim thereon. As provided for in Section 5,
36
Rule 10 of the Rules of Court,
when issues not raised by the pleadings are tried by express or implied consent of the parties, they
shall be treated in all respects, as if they had been raised in the pleadings. Thus, even if the complaint
be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces
sufficient evidence to constitute the particular cause of action which it intended to allege in the
original complaint, and the defendant voluntarily produces witnesses to meet the cause of action
thus established, an issue is joined as fully and as effectively as if it had been previously joined by the
most perfect pleadings.
37

In the present case, the Court finds, however, that the Almendrala spouses failed to prove the
existence of all of the elements for the application of Article 1622.
It is undisputed that the subject property is urban land and that it is small at 22 square meters.
However, the Almendrala spouses failed to convincingly show that a major portion of the subject
property cannot be used for any practical purpose, that the lot was bought merely for speculation
and that it is about to be resold or the sale has already been perfected.
The testimonies of Ricardo Almendrala and Ariel Uypico on the intention of the Ngo spouses to sell
the subject property are far from convincing. Ricardo Almendrala testified that the subject property
was offered to his friend, Dr. Nabua
38
but he failed to present the latter in court to confirm and
corroborate his testimony thereon. As for Ariel Uypico, his statement on the intention of the Ngo
spouses to sell the subject property is vague and contains no specificities of individuals allegedly
interested in buying it. Thus, there is no clear proof that the subject property is about to be resold.
Moreover, it does not necessarily follow that the subject property cannot be used for any practical
purpose simply because the building design and plan did not allegedly meet the requirements of the
National Building Code on commercial buildings. In that case, all that needs to be done is to prepare a
building design and plan with due consideration of the space requirements or limitations imposed by
law.
In any event, the Ngo spouses have shown that 15.81 square meters of the subject property can be
used for the construction of the proposed building for their business needs.
39
They have shown that
they did not buy the subject property for speculation. They engaged the services of an architect to
draw a building design and plan thereon. The fact that the building design and plan were not yet
approved by the proper building official or the municipal engineer should not be taken against them
because they adequately explained that this was due to the pending litigation involving the subject
property.
40
Naturally, it would be a waste of their time, effort and money to submit the building
design and plan to the proper building official or the municipal engineer for approval and implement
the construction of the proposed building should a decision later on be rendered against them.
And as regards the alleged perjured testimonies of Wing On Ngo and Jaime Patalud, it is perfectly
within the discretion of the CA to accept portions of the testimony of a witness as it may deem
credible and reject those which it believes to be false. The maxim falsus in uno, falsus in omnibus is
not a strict legal maxim in our jurisprudence. It is neither a categorical test of credibility nor a positive
rule of universal application.
41
It has its own limitations, for when the mistaken statement is
consistent with good faith and is not conclusively indicative of a deliberate perversion, the believable
portion of the testimony should be admitted. Although a person may err in memory or in observation
in one or more respects, he may have told the truth as to other respects. Stated elsewise, the rule
deals only with the weight of evidence and should not be applied to portions of the testimony
corroborated by other evidence, particularly where the false portions could be innocent
mistakes.
42
There is no concrete evidence that Wing On Ngo or Jaime Patalud intended to pervert the
truth or prevaricated when they testified on the intention of the Ngo spouses to make use of the
subject property.
Needless to stress, the burden of proof in civil cases is on the plaintiff to establish his case by a
preponderance of evidence. If he claims a right granted or created by law, he must prove his claim by
competent evidence. He must rely on the strength of his own evidence and not on the weakness of
that of his opponent.
43
In this case, Almendrala spouses failed to show sufficient proof of their
entitlement to the right of pre-emption or redemption under Article 1622 of the Civil Code and,
therefore, have no enforceable legal right to speak of.
Having thus ruled that the Almendrala spouses have no right of pre-emption or redemption under
Article 1622 of the Civil Code, there is no need to delve on the applicability of Article 1623 of the
same Code since such provision involves the 30-day period, counted from written notice, to exercise
the right of pre-emption or redemption.
As to the contention of the Ngo spouses that the CA erred in refusing to grant their claim for damages
and attorneys fees, suffice it to say that the Court has held in a litany of cases
44
that parties who
have not appealed cannot obtain from the appellate court any affirmative reliefs other than those
granted, if any, in the decision of the lower tribunal. The appellees can advance only such arguments
as may be necessary to defeat the appellants claims or to uphold the appealed decision. They cannot
ask for a modification of the judgment in their favor in order to obtain other positive reliefs.
Thus, the findings of fact of the CA may be deemed as accepted by the Ngo spouses, considering that
they did not file any motion for reconsideration of the questioned decision, much less appeal
therefrom. The matter of the entitlement of the Ngo spouses to damages is not in question because
they did not appeal from the decision of the CA.
In view of the foregoing, the Court is convinced that the CA committed no reversible error in its
challenged Decision and Resolution.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated September 30,
1999 and Resolution dated March 9, 2000 of the Court of Appeals in CA-G.R. CV No. 56458
are AFFIRMED. Costs against petitioners.
SO ORDERED.




















SENEN B. AGUILAR,
Petitioner,



- versus -



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

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

ALEJANDRO C. SANGALANG,
Intervenor-Respondent.
G.R. No. 141613


Present:


PANGANIBAN, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
GARCIA, JJ.



Promulgated:

December 16, 2005

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

D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Assailed in this petition for review on certiorari are the Decision
[1]
and Resolution
[2]
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. 76351 decided 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 Paraaque 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 Virgilios
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 courts
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 P1,200.00 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, Paraaque 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 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 Courts 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 Senens 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 Senens
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.
Petitioners 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 complainants
rights, the complainant having had knowledge or notice of the defendants 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 Virgilios 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.













Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. C.A.-8677 September 29, 1948
GUILLERMO P. VILLASOR, plaintiff-appellant,
vs.
RODOLFO A. MEDEL, MARIANO MEDALLA, MILAGROS C. ARANETA, represented by her legal
guardian, Lorenzo L. Araneta and JOSE L. JUSTINIANI, defendants-appellees.
Guillermo P. Villasor, Jose T. Liboon and Amando B. Parreno for appellant.
Hilado and Hilado for appellee Medalla.
TUASON, J.:
This was an action of legal redemption brought under articles 1521 and 1522 of the Civil Code.
In so far as they are pertinent to this appeal, the facts may be condensed as follows: A large tract of
land situated in the municipality of Bacolod, Negros Occidental, and covered by several certificates of
title, formerly belonged as conjugal property to Guillermo Villasor and Basilisa Camento, man and
wife. Guillermo Villasor died on September 21, 1914, leaving as universal heirs his widow and five
children died intestate while a minor and her share of the land passed to her mother, Basilisa
Camento.
On July 15, 1921, Basilisa Camento, as judicial administratrix of her deceased husband's estate,
submitted to the court a project of partition, whereby 4/10 undivided part of the estate was alloted
to her four surviving children and 6/10 to herself. The partition was approved in due course.
On April 16, 1926, Basilisa Camento executed a deed of donation intervivos by which she gave all her
6/10 undivided share to her grandchildren in equal undivided shares. One of her grandchildren was
Guillermo P. Villasor, the present plaintiff, who, by virtue of the donation, became the owner of 3/20
undivided part of the estate. The donation was duly accepted by the legal guardian of the minors,
Jose C. Villasor, duly appointed by the court, but it was not registered until December 2, 1936.
Meanwhile, on July 1, 1931, Jose C. Villasor, as guardian and in behalf of three grandchildren of
Basilisa Camento named Remedios, Luis and Lilia Jurilla, and with the necessary permission of the
court, sold their shares to Mariano Medalla, appellee. The sale included the shares of Resurreccion
Villasor, one of the daughters of the original owners and the mother of the three minors just
mentioned and represented by Jose C. Villasor; and both Resureccion Villasor and her husband, Felipe
Jurilla, signed the deed of sale with their children's legal guardian. The total sale price was P22,000, of
which P12,000 pertained to the three minors' shares, according to the plaintiff's computation.
On March 11, 1939, the plaintiff, who had reached majority on the 6th of that month, "through his
attorneys addressed a registered special delivery letter to Mariano Medalla, formally offering him the
amount of P12,000 for the purchase" of the shares of the three minors surnamed Jurilla, but he made
no offer for Resureccion Villasor's share. Rodolfo A. Medel, Milagros C. Araneta and Jose J. Justiniani
bought the shares of other co-owners of the tract. Refusing at first to sell to the plaintiff, they were
made defendants with Medalla in the same case under separate causes of action, but the suit as to
them was settled in some form or other trial or appeal.
Mariano Medalla, by way of special defenses, alleged that by virtue of a final project of partition filed
and approved by the court in case No. 7612 on August 10, 1939, (after the present suit was instituted
but before it was tried), the portions of the estate now known as lots Nos. 832, 833, 836, had been
segregated and adjudicated to him (Medalla); (2) that the complaint did not state facts sufficient to
constitute a cause of action; and (3) that the plaintiff at the time of the sale of those portions to
Mariano Medalla on July 1, 1931, was not yet a co-owner of the hacienda, having become such only
on December 2, 1936, when for the first time he appeared as one of its registered owners. Medalla
maintained that the plaintiff became a co-owner, not from the date of the donation but from the
date of its registration. Under the third special defense, it was also alleged that Medalla, since July 1,
1931, had made important improvements on the portions of the hacienda purchased by him and had,
through his labor, efforts and sacrifices, obtained for those portions in a valuable sugar production
quota for all of which he had spent considerable sums of money.
The trial court overruled the above defenses except the second, which it sustained. Under the second
special defense, it was contended that the plaintiff's right of redemption, if ever he had any, had
expired. The defendant and appellee, not satisfied with the lower court's rejection of his other
defenses, reiterates them in this instance and urges that they be considered, to which the appellant
objects. Without passing on the legal validity of the appellant's objection, we shall take up only the
question on which the court below dismissed the suit. From our views formulated by the appellee.
Article 1524 of the Civil Code reads:
The right of legal redemption may not be exercised except within nine days, counted from the
inscription in the Registry, and, in the absence thereof, from the time the redemptioner shall
have had knowledge of the sale.
The right of redemption of co-owners excludes that of adjacent owners.
The provision of this article which fixes the period of nine days within which the right of legal
redemption may be exercised has not been repealed or modified by the Code of Civil Procedure of
the Rules of Court. The right of legal redemption and the right to commence actions are entirely of
different nature. The first is a substantive right which, in the absence of the article, would never exist;
the second restricts the period in which the cause of action may be asserted (Sempio vs. Del Rosario,
44 Phil., 1.).
There are other notable dissimilarities between legal redemption and legal action which challenge
any attempt to bring the former within the rule of the statute of limitations which suspends the
running of the period of prescription during minority. An action is addressed to a court of justice;
legal redemption partakes of a recission of contract and is addressed to one of the contracting parties
by the other. An action may be brought only by her sons not working under any disability; legal
redemption may, we believe, be exercised by a minor of sufficient discretion; at any rate, his natural
guardian or whoever has the minor in his custody may validly make the repurchase in his behalf.
(Guinto vs. Lim Bonfing, 48, Phil., 884, 887.) An action seeks to assert a fundamental, primary right of
which the plaintiff has been inflicted; legal redemption is in the nature of a mere privilege created by
law partly for reasons of public policy and partly for the benefit and convenience of the
redemptioner, to afford him a way out of what might be a disagreeable or inconvenient association
into which he has been thrust. (10 Manresa, 4th ed., 317.).
The law in prescribing certain contingencies as the starting point from which the nine-day period
should be counted, is to be presumed to exclude all others. Exclusio unious est exclusio alterius. The
starting point is registration or, in the absence of registration, knowledge of the conveyance by the
co-owners. It is logical to assume that if minority had been contemplated, the law would have so
expressly stated. This is specially true in a code which, unlike an ordinary statute, is framed with
meticulous care and thorough reflection. The role of minors in cases of legal redemption is too
conspicuous and perceptible to have been overlooked in the framing of article 1524. The onerous
position of the purchaser and considerations of public interest, we believe, forbade liberality as to
time in favor of redemptioners; hence the limitation of the causes of extension to those factors
(actual or constructive notice) without which the exercise of the right of redemption would not be
possible. The shortness of the period fixed in the above article is itself a safe index, in our opinion, of
its peremptoriness and inflexibility.
The policy of the law with regard to the period of conventional redemption (pacto de retro) furnishes
the key to the scope of article 1524 with reference to the period for legal redemption. It is to be
noted that legal redemption and conventional redemption are of the same nature. The provisions
governing both are to be found in the same Chapter VI entitled "Resolution of the Sale"; the same
Title IV entitled "Contract of Purchase or Sale"; and the same Book entitled "Obligations and
Contracts," all of the Civil Code. It is also to be noted that the law fixes the duration of conventional
redemption at four years, in default of an express agreement, and at ten years the maximum period
beyond which the parties themselves may not agree. (Article 1508.) Now, it would hardly be
contended that a period of grace might be claimed by a vendor with the right of repurchase or his
successor by reason of mental disability or non-age. Commenting on articles 1507 and 1509 of the
Code, Manresa says:
Ante todo debemos notar que la cuestion del plazo, durante al cual puede ejercitares el
derecho de retracto, esta unanimemente considerada como una cuestion de interes publico.
Ya Portalis observaba que no convenia a la propiedad el estar por mucho tiempo sujeta a
condiciones resolutorias de esta indole. Por esta razon, el sentido del Codigo es restrictivo y
limitativo, debiendo resolverse con este criterio, en nuestra opinion, las dudas que puedan
ocurrir, pues tal criterio es, sin duda, el que mejor concuerda con a el espiritu de lay ley (10
Manresa, 2nd ed., p. 302.).
Reasoning by analogy, the conclusion must be that the period of nine days within which the right of
legal redemption may be taken advantage of, counted from the date the redemptioner acquired
knowledge of the sale, is absolute. In fact, there is much stronger reason against relaxing the period
in favor of a legal redemptioner than in favor of a vendor with pacto de retro. In the latter
transaction, there is a contractual relation founded on valuable consideration, a contract by which
the party from whom the repurchase is sought has been benefited. The right of legal redemption is a
pure creature of the law, regulated by law, and woks only one way in favor of the redemptioner.
Not having parted with anything, the legal redemptioner can compelled to buy.
We do not believe that the framers of the Civil Code ever intended to countenance a situation so
unjust to one of the parties and prejudicial to social interest. The construction of article 1524 which
the plaintiff offers would keep the property in a state of indivision even if one of the co-owners
wanted to separate. This is contrary to the express policy of the law that "No co-owner shall be
obliged to remain a party to the community, but each may, at any time, demand partition of the thing
held in common." (Article 400, Civil Code.) It would be extremely unfair to the purchaser and
injurious to the public welfare to keep in a state of suspense, for possibly as long as 20 years or more,
what his co-owner might do when he becomes of age. While the uncertainty continued the purchaser
could not make any improvement on the property without running the risk of losing his investments
and the fruits of his labor.
The case of Wenceslao vs. Calimo, 46 Phil., 906, is obiter dictum in so far as it insinuates or states that
the period fixed in article 1524 does not run against minors. But even if that decision had value as a
precedent, it could not serve as a pattern upon which to base judgment for the plaintiff here. The
dictum stressed the fact that the minors in that case had no legal guardian. The present appellant not
only had such a guardian but it was this very guardian, Jose C. Villasor, who, as guardian of plaintiff's
cousin and former co-owners, sold the lots in question to the defendant-appellee. This guardian nor
only could have repurchased those lots for the plaintiff within nine days but could have sold them,
with the court's authority, directly to the plaintiff himself instead of to Medalla.
This brings home more eloquently than anything else can illustrate the injustice which a prolonged
period for legal redemption would entail. Here, the plaintiff would repurchase the lots nine years
after the defendant bought them, during which years, the latter claims, he has improved the
property. To the argument such as that advanced, that a purchaser does not have to improve the
property and need only reap its fruits, the answer is that not all lands are in a condition of full
productivity when purchased. Some require investments of capital and toil to bring them into a state
of usefulness.
The judgment of the lower court is affirmed with costs against the appellant.
Moran, C.J., Paras, Feria, Pablo, Perfecto and Bengzon, JJ., concur.



















EN BANC

[G.R. No. L-28317. March 31, 1971.]

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

German G. Vilgera, for Plaintiff-Appellant.

Reyes & Dy-Liacco for Defendants-Appellees
D E C I S I O N
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:
"This case was instituted by plaintiff to enable him to redeem the property sold by defendant Andres
Orcine to his codefendant Doroteo Esplana
"Originally plaintiffs 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:

"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 appellants 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:
"Limitado dicho derecho a las fincas rsticas, cuya cabida no exceda de una hect rea, es visto que el
espiritu del Cdigo 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 pblico,
porque la produccin aumenta, se atiende al inters privado del retrayente y no es de apreciar ningn
ostensible perjuicio para el vendedor ni para el comprador." (10 Manresa, Codigo Civil Espaol, 328.)
which reasoning was echoed by Justice Romualdez in Cortes v. Flores, 2 thus:
"Hallamos acertado este criterio. La intencin de la ley al conceder este retracto es proteger la
agricultura, haciendo que los terrenos agricolas pequeos se unan a sus colindantes bajo un solo
dueo para su mejor expletacin. Si el terreno colindante con el que se trata de retraer no es
agricola, entonces es vano el retracto, no responde al propsito de la lev.
"Est ajustada a este precepto dice el Tribunal Supremo de Espaa 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 appellants right of redemption,
it is obvious that since appellants 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:
"Said Article 1622 reads:
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 appellants 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
appellants evidence on these allegations. Hence, the first two assignments of error are well taken."
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 Websters 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, Websters
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.
















SECOND DIVISION
[G.R. No. 137677. May 31, 2000]
ADALIA B. FRANCISCO, petitioner, vs. ZENAIDA F. BOISER, respondent.
D E C I S I O N
MENDOZA, J.:
This is a petition for review of the decision of the Court of Appeals in CA-G.R. CV No. 55518 which
affirmed in toto the decision of the Regional Trial Court, Branch 122, Caloocan City, dismissing
petitioners complaint for redemption of property against respondent. Sdaad
The facts are as follows:
Petitioner Adalia B. Francisco and three of her sisters, Ester, Elizabeth and Adeluisa, were co-owners
of four parcels of registered lands
[1]
on which stands the Ten Commandments Building at 689 Rizal
Avenue Extension, Caloocan City. On August 6, 1979, they sold 1/5 of their undivided share in the
subject parcels of land to their mother, Adela Blas, for P10,000.00, thus making the latter a co-owner
of said real property to the extent of the share sold. Sdaamiso
On August 8, 1986, without the knowledge of the other co-owners, Adela Blas sold her 1/5 share for
P10,000.00 to respondent Zenaida Boiser who is another sister of petitioner.
On August 5, 1992, petitioner received summons, with a copy of the complaint in Civil Case No.
15510, filed by respondent demanding her share in the rentals being collected by petitioner from the
tenants of the building. Petitioner then informed respondent that she was exercising her right of
redemption as a co-owner of the subject property. On August 12, 1992, she deposited the amount of
P10,000.00 as redemption price with the Clerk of Court. This move to redeem the property was
interposed as a permissive counterclaim in Civil Case No. 15510. However, said case was dismissed
after respondent was declared non-suited with the result that petitioners counterclaim was likewise
dismissed. Scncm
On September 14, 1995, petitioner instituted Civil Case No. C-17055 before the Regional Trial Court in
Caloocan City. She alleged that the 30-day period for redemption under Art. 1623 of the Civil Code
had not begun to run against her since the vendor, Adela Blas, never informed her and the other
owners about the sale to respondent. She learned about the sale only on August 5, 1992, after she
received the summons in Civil Case No. 15510, together with the complaint. Ncmmis
Respondent, on the other hand, contended that petitioner knew about the sale as early as May 30,
1992, because, on that date, she wrote petitioner a letter
[2]
informing the latter about the sale, with a
demand that the rentals corresponding to her 1/5 share of the subject property be remitted to her.
Said letter was sent with a copy of the Deed of Sale
[3]
between respondent and Adela Blas. On the
same date, letters
[4]
were likewise sent by respondent to the tenants of the building, namely, Seiko
Service Center and Glitters Corporation, informing them of the sale and requesting that, thenceforth,
they pay 1/5 of the monthly rentals to respondent. That petitioner received these letters is proved by
the fact that on June 8, 1992, she wrote
[5]
the buildings tenants advising them to disregard
respondents request and continue paying full rentals directly to her. Ncm
On August 19, 1996, the trial court dismissed petitioners complaint for legal redemption. It ruled that
Art. 1623 does not prescribe any particular form of notifying co-owners about a sale of property
owned in common to enable them to exercise their right of legal redemption.
[6]
While no written
notice was given by the vendor, Adela Blas, to petitioner or the other owners, petitioner herself
admitted that she had received respondents letter of May 30, 1992 and was in fact furnished a copy
of the deed evidencing such sale.
[7]
The trial court considered the letter sent by respondent to
petitioner with a copy of the deed of sale as substantial compliance with the required written notice
under Art. 1623 of the New Civil Code.
[8]
Consequently, the 30-day period of redemption should be
counted not from August 5, 1992, when petitioner received summons in Civil Case No. 15510, but at
the latest, from June 8, 1992, the date petitioner wrote the tenants of the building advising them to
continue paying rentals in full to her. Petitioner failed to redeem the property within that period.
Petitioner brought the matter to the Court of Appeals, which, on October 26, 1998, affirmed the
decision of the Regional Trial Court. She moved for reconsideration, but her motion was denied by
the appellate court on February 16, 1999. Hence, this petition.
The sole issue presented in this appeal is whether the letter of May 30, 1992 sent by respondent to
petitioner notifying her of the sale on August 8, 1986 of Adela Blas 1/5 share of the property to
respondent, containing a copy of the deed evidencing such sale, can be considered sufficient as
compliance with the notice requirement of Art. 1623 for the purpose of legal redemption. The trial
court and the Court of Appeals relied on the ruling in Distrito v. Court of Appeals
[9]
that Art. 1623 does
not prescribe any particular form of written notice, nor any distinctive method for notifying the
redemptioner. They also invoked the rulings in De Conejero v. Court of Appeals
[10]
and Badillo v.
Ferrer
[11]
that furnishing the redemptioner with a copy of the deed of sale is equivalent to giving him
the written notice required by law. Oldmiso
On the other hand, petitioner points out that the cited cases are not relevant because the present
case does not concern the particular form in which notice must be given. Rather, the issue here is
whether a notice sent by the vendee may be given in lieu of that required to be given by the vendor
or prospective vendor.
[12]

Art. 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except within
thirty days from the notice in writing by the prospective vendor, or by the vendor, as
the case maybe. The deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given written notice
thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
In ruling that the notice given by the vendee was sufficient, the appellate court cited the case
of Etcuban v. Court of Appeals
[13]
in which it was held:
Petitioner contends that vendors (his co-heirs) should be the ones to give him written
notice and not the vendees (defendants or private respondent herein) citing the case
of Butte vs. Manuel Uy & Sons, Inc., 4 SCRA 526. Such contention is of no moment.
While it is true that written notice is required by the law (Art. 1623), it is equally true
that the same "Art. 1623 does not prescribe any particular form of notice, nor any
distinctive method for notifying the redemptioner." So long, therefore, as the latter is
informed in writing of the sale and the particulars thereof, the 30 days for redemption
start running, and the redemptioner has no real cause to complain. (De Conejero et al
v. Court of Appeals, et al., 16 SCRA 775). In the Conejero case, we ruled that the
furnishing of a copy of the disputed deed of sale to the redemptioner was equivalent
to the giving of written notice required by law in "a more authentic manner than any
other writing could have done," and that We cannot adopt a stand of having to
sacrifice substance to technicality. More so in the case at bar, where the vendors or
co-owners of petitioner stated under oath in the deeds of sale that notice of sale had
been given to prospective redemptioners in accordance with Art. 1623 of the Civil
Code. "A sworn statement or clause in a deed of sale to the effect that a written notice
of sale was given to possible redemptioners or co-owners might be used to determine
whether an offer to redeem was made on or out of time, or whether there was
substantial compliance with the requirement of said Art. 1623."
[14]

In Etcuban, notice to the co-owners of the sale of the share of one of them was given by the vendees
through their counterclaim in the action for legal redemption. Despite the apparent meaning of Art.
1623, it was held in that case that it was "of no moment" that the notice of sale was given not by the
vendor but by the vendees. "So long as the [co-owner] is informed in writing of the sale and the
particulars thereof, the 30 days for redemption start running, and the redemptioner has no cause to
complain," so it was held. The contrary doctrine of Butte v. Manuel Uy and Sons, Inc.
[15]
was thus
overruled sub silencio.
However, in the later case of Salatandol v. Retes,
[16]
decided a year after the Etcuban case, the Court
expressly affirmed the ruling in Butte that the notice required by Art. 1623 must be given by the
vendor. In Salatandol, the notice given to the redemptioner by the Register of Deeds of the province
where the subject land was situated was held to be insuffucient. Resolving the issue of whether such
notice was equivalent to the notice from the vendor required under Art. 1623, this Court stated:
The appeal is impressed with merit. In Butte vs. Manuel Uy and Sons, Inc., the Court
ruled that Art. 1623 of the Civil Code clearly and expressly prescribes that the thirty
(30) days for making the pre-emption or redemption are to be counted from notice in
writing by the vendor. The Court said:
" x x x The test of Article 1623 clearly and expressly prescribes that the thirty days for
making the redemption are to be counted from notice in writing by the vendor. Under
the old law (Civil Code of 1889, Art. 1524), it was immaterial who gave the notice; so
long as the redeeming co-owner learned of the alienation in favor of the stranger, the
redemption period began to run. It is thus apparent that the Philippine legislature in
Article 1623 deliberately selected a particular method of giving notice, and that
method must be deemed exclusive (39 Am. Jur., 237; Payne vs. State, 12 S.W. (2d)
(528). As ruled in Wampher vs. Lecompte, 150 Atl. 458 (affd. in 75 Law Ed. *U.S.+ 275)

Why these provisions were inserted in the statute we are not informed, but we
may assume until the contrary is shown, that a state of facts in respect thereto
existed, which warranted the legislature in so legislating.
"The reasons for requiring that the notice should be given by the seller, and not by the
buyer, are easily divined. The seller of an undivided interest is in the best position to
know who are his co-owners that under the law must be notified of the sale. Also, the
notice by the seller removes all doubts as to fact of the sale, its perfection, and its
validity, the notice being a reaffirmation thereof; so that that party notified need not
entertain doubt that the seller may still contest the alienation. This assurance would
not exist if the notice should be given by the buyer."
In the case at bar, the plaintiffs have not been furnished any written notice of sale or a
copy thereof by Eufemia Omole, the vendor. Said plaintiffs right to exercise the legal
right of preemption or redemption, given to a co-owner when any one of the other co-
owners sells his share in the thing owned in common to a third person, as provided for
in Article 1623 of the Civil Code, has not yet accrued.
There was thus a return to the doctrine laid down in Butte. That ruling is sound. In the first place,
reversion to the ruling in Butte is proper. Art. 1623 of the Civil Code is clear in requiring that the
written notification should come from the vendor or prospective vendor, not from any other person.
There is, therefore, no room for construction. Indeed, the principal difference between Art. 1524 of
the former Civil Code and Art. 1623 of the present one is that the former did not specify who must
give the notice, whereas the present one expressly says the notice must be given by the vendor.
Effect must be given to this change in statutory language. Manikan
In the second place, it makes sense to require that the notice required in Art. 1623 be given by the
vendor and by nobody else. As explained by this Court through Justice J.B.L. Reyes in Butte, the
vendor of an undivided interest is in the best position to know who are his co-owners who under the
law must be notified of the sale. It is likewise the notification from the seller, not from anyone else,
which can remove all doubts as to the fact of the sale, its perfection, and its validity, for in a contract
of sale, the seller is in the best position to confirm whether consent to the essential obligation of
selling the property and transferring ownership thereof to the vendee has been given. Maniks
Now, it is clear that by not immediately notifying the co-owner, a vendor can delay or even effectively
prevent the meaningful exercise of the right of redemption. In the present case, for instance, the sale
took place in 1986, but it was kept secret until 1992 when vendee (herein respondent) needed to
notify petitioner about the sale to demand 1/5 rentals from the property sold. Compared to serious
prejudice to petitioners right of legal redemption, the only adverse effect to vendor Adela Blas and
respondent-vendee is that the sale could not be registered. It is non-binding, only insofar as third
persons are concerned.
[17]
It is, therefore, unjust when the subject sale has already been established
before both lower courts and now, before this Court, to further delay petitioners exercise of her
right of legal redemption by requiring that notice be given by the vendor before petitioner can
exercise her right. For this reason, we rule that the receipt by petitioner of summons in Civil Case No.
15510 on August 5, 1992 constitutes actual knowledge on the basis of which petitioner may now
exercise her right of redemption within 30 days from finality of this decision. Manikx
Our ruling is not without precedent. In Alonzo v. Intermediate Appellate Court,
[18]
we dispensed with
the need for written notification considering that the redemptioners lived on the same lot on which
the purchaser lived and were thus deemed to have actual knowledge of the sales. We stated that the
30-day period of redemption started, not from the date of the sales in 1963 and 1964, but sometime
between those years and 1976, when the first complaint for redemption was actually filed. For 13
years, however, none of the co-heirs moved to redeem the property. We thus ruled that the right of
redemption had already been extinguished because the period for its exercise had already
expired. Nexold
In the present case, as previously discussed, receipt by petitioner of summons in Civil Case No. 15510
on August 5, 1992 amounted to actual knowledge of the sale from which the 30-day period of
redemption commenced to run. Petitioner had until September 4, 1992 within which to exercise her
right of legal redemption, but on August 12, 1992 she deposited the P10,000.00 redemption price. As
petitioners exercise of said right was timely, the same should be given effect. Miso
WHEREFORE, in view of the foregoing, the petition is GRANTED and the decision of the Court of
Appeals is REVERSED and the Regional Trial Court, Branch 122, Caloocan City is ordered to effect
petitioners exercise of her right of legal redemption in Civil Case No. C-17055. Sppedjo
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15752 December 29, 1962
RUPERTO SORIANO, ET AL., plaintiffs-appellees,
vs.
BASILIO BAUTISTA, ET AL., defendants.
BASILIO BAUTISTA and SOFIA DE ROSAS, defendants-appellants.
---------------------------------
G.R. No. L-17457 December 29, 1962
BASILIO BAUTISTA, ET AL., plaintiffs,
BASILIO BAUTISTA and SOFIA DE ROSAS, plaintiffs-appellants,
vs.
RUPERTO SORIANO, ET AL., defendants appellees.
Amado T. Garrovillas, Ananias C. Ona, Norberto A. Ferrera and Pedro N. Belmi for appellants Basilio
Bautista and Sofia de Rosas.
Javier and Javier for appellees Ruperto Soriano, et al.
MAKALINTAL, J.:
The judgment appealed from, rendered on March 10, 1959 by the Court of First Instance of Rizal,
after a joint trial of both cases mentioned in the caption, orders "the spouses Basilio Bautista and
Sofia de Rosas to execute a deed of sale covering the property in question in favor of Ruperto Soriano
and Olimpia de Jesus upon payment by the latter of P1,650.00 which is the balance of the price
agreed upon, that is P3,900.00, and the amount previously received by way of loan by the said
spouses from the said Ruperto Soriano and Olimpia de Jesus, to pay the sum of P500.00 by way of
attorney's fees, and to pay the costs.
Appellants Basilio Bautista and Sofia de Rosas have adopted in their appeal brief the following factual
findings of the trial court:
Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered owners of a parcel
of land, situated in the municipality of Teresa, province of Rizal, covered by Original Certificate
of Title No. 3905, of the Register of Deeds of Rizal and particularly described as follow:
A parcel of land (lot No. 4980) of the Cadastral Survey of Teresa; situated in the
municipality of Teresa; bounded on the NE. by Lot No. 5004; on the SE. by Lots Nos.
5003 and 4958; on the SW. by Lot 4949; and the W. and NW by a creek .... Containing
the area of THIRTY THOUSAND TWO HUNDRED TWENTY TWO (30,222) square meters,
more or less. Date of Survey, December 1913-June, 1914. (Full technical description
appears on Original Certificate of Title No. 3905.)lawphil.net
That, on May 30, 1956, the said spouses for and in consideration of the sum of P1,800, signed
a document entitled "Kasulatan Ng Sanglaan" in favor of Ruperto Soriano and Olimpia de
Jesus, under the following terms and conditions:
1. Na ang sanglaang ito ay magpapatuloy lamang hanggang dalawang (2) taon
pasimula sa araw na lagdaan ang kasunduang ito, at magpapalampas ng dalawang
panahong ani o ani agricola.
2. Na ang aanihin ng bukid na isinangla ay mapupunta sa pinagsanglaan bilang
pakinabang ng nabanggit na halagang inutang.
3. Na ang buwis sa pamahalaan ng lupang ito ay ang magbabayad ay ang Nagsangla o
mayari.
4. Na ang lupang nasanglang ito ay hindi na maaaring isangla pang muli sa ibang tao ng
walang pahintulot ang Unang Pinagsanglaan.
5. Na pinagkasunduan din dinatnan na sakaling magkaroon ng kakayahan ang
Pinagsanglaan ay maaaring bilhin ng patuluyan ng lupang nasanglang ito kahit anong
araw sa loob ng taning na dalawang taon ng sanglaan sa halagang Tatlong Libo at Siam
na Raan Piso (P3,900.00), salaping Pilipino na pinagkaisahan.
6. Na sakaling ang pagkakataon na ipinagkaloob ng Nagsangla sa sinundang talata ay
hindi maisagawa ng Pinagsanglaan sa Kawalan ng maibayad at gayon din naman ang
Nagsangla na hindi magbalik ang halagang inutang sa taning na panahon, ang sanglaan
ito ay lulutasin alinsunod sa itinatagubilin ng batas sa bagay-bagay ng sanglaan, na ito
ay ang tinatawag na (FORECLOSURE OF MORTGAGES, JUDICIAL OR EXTRA JUDICIAL).
Maaring makapili ng hakbang ang Pinagsanglaan, alinsunod sa batas o kaya naman ay
pagusapan ng dalawang parte ang mabuting paraan ng paglutas ng bagay na ito.
That simultaneously with the signing of the aforementioned deed, the spouses Basilio Bautista
and Sofia de Rosas transferred the possession of the said land to Ruperto Soriano and Olimpia
de Jesus who have been and are still in possess of the said property and have since that date
been and cultivating the said land and have enjoyed and are still enjoying the produce thereof
to the exclusion of all other persons. Sometimes after May 30, 1956, the spouses Basilio
Bautista and Sofia de Rosas received from Ruperto Soriano and Olimpia de Jesus, the sum of
P450.00 pursuant to the condition agreed upon in the aforementioned document for which
no receipt issued and which was returned by the spouses sometime on May 31, 1958. On May
13, 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses Bautista whose letter has
been marked Annex 'B' of the stipulation of facts informing the said spouses that his clients
Ruperto Soriano and Olimpia de Jesus have decided to buy the parcel of land in question
pursuant to paragraph 5 of the document in question, Annex "A".
The spouses inspite of the receipt of the letter refused comply with the demand contained
therein. On May 31, 1958, Ruperto Soriano and Olimpia de Jesus filed before this Court Civil
Case No. 5023, praying that plaintiffs be allowed to consign or deposit with the Clerk of Court
the sum of P1,650 as the balance of the purchase price of the parcel of land question and that
after due hearing, judgment be rendered considering the defendants to execute an absolute
deed of sale of said property in their favor, plus damages.
On June 9, 1958, spouses Basilio Bautista and Sofia Rosas filed a complaint against Ruperto
Soriano and Olimpia de Jesus marked as Annexed 'B' of the Stipulation of Facys, which case
after hearing was dismissed for lack of jurisdiction On August 5, 1959, the spouses Bautista
and De Rosas again filed a case in the Court of First Instance against Soriano and De Jesus
asking this Court to order the defendants to accept the payment of the principal obligation
and release the mortgage and to make an accounting of the harvest for the harvest seasons
(1956-1957). The two cases, were by agreement of the parties assigned to one branch so that
they can be tried jointly.
The principal issue in this case is whether, having seasonably advised appellants that they had
decided to be the land in question pursuant to paragraph 5 of the instrument of mortgage, appellees
are entitled to special performance consisting of the execution by appellants the corresponding deed
of sale. As translated, paragraph 5 states: "That it has likewise been agreed that if the financial
condition of the mortgagees will permit, they may purchase said land absolutely on any date within
the two-year term of this mortgage at the agreed price of P3,900.00."
Appellants contend that, being mortgagors, they can not be deprived of the right to redeem the
mortgaged property, because such right is inherent in and inseparable from this kind of contract. The
premise of the contention is not entirely accurate. While the transaction is undoubtedly a mortgage
and contains the customary stipulation concerning redemption, it carries the added special provision
aforequoted, which renders the mortgagors' right to redeem defeasible at the election of the
mortgagees. There is nothing illegal or immoral in this. It is simply an option to buy, sanctioned by
Article 1479 of the Civil Code, which states: "A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price."
In this case the mortgagor's promise to sell is supported by the same consideration as that of the
mortgage itself, which is distinct from that which would support the sale, an additional amount
having been agreed upon to make up the entire price of P3,900.00, should the option be exercised.
The mortgagors' promise was in the nature of a continuing offer, non-withdrawable during a period
of two years, which upon acceptance by the mortgagees gave rise to a perfected contract of purchase
and sale. Appellants cite the case of Iigo vs. Court of Appeals, L-5572, O.G. No. 11, 5281, where we
held that a stipulation in a contract of mortgage to sell the property to the mortgagee does not bind
the same but creates only a personal obligation on the part of the mortgagor. The citation instead of
sustaining appellant's position, confirms that of appellees, who are not here enforcing any real right
to the disputed land but are rather seeking to obtain specific performance of a personal obligation,
namely, the execution of a deed of sale for the price agreed upon, the corresponding amount to
cover which was duly deposited in court upon the filing of the complaint.
Reference is made in appellants' brief to the fact that they tendered the sum of P1,800.00 to redeem
mortgage before they filed their complaint in civil case No. 99 in the Justice of the Peace Court of
Morong, Rizal. That tender was ineffective for the purpose intended. In the first place it must have
been made after the option to purchase had been exercised by appellees (Civil Case No. 99 was filed
on June 9, 1958, only to be dismissed for lack of jurisdiction); and secondly, appellants' to redeem
could be defeated by appellees' preemptive right to purchase within the period of two years from
May 30, 1956. As already noted, such right was availed of appellants were accordingly notified by
letter dated May 13, 1958, which was received by them on the following May 22. Offer and
acceptance converged and gave to a perfected and binding contract of purchase and sale.
The judgment appealed from is affirmed, with costs.