G.R. No. 171250 July 4, 2007
222871 currently in the names of the
SPS. CARLOS AND EULALIA RAYMUNDO and SPS.
ANGELITO AND JOCELYN BUENAOBRA, Petitioners,
vs.
SPS. DOMINADOR and ROSALIA
BANDONG, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45
of the Revised Rules of Court, filed by petitioners
Spouses Carlos and Eulalia Raymundo and Spouses
Angelito and Jocelyn Buenaobra seeking the reversal
and setting aside of the Decision 1 of the Court of
Appeals dated 26 September 2005 and its
Resolution2 dated 24 January 2006 in CA-G.R. CV No.
59557. The Court of Appeals, in its assailed Decision and
Resolution, reversed the Decision3 of the Regional Trial
Court (RTC) dated 28 January 1998, in Civil Case No. C-
14980, declaring the Deed of Sale executed by
respondent Dominador Bandong (Dominador) in favor of
petitioner Eulalia Raymundo (Eulalia) as valid and
binding. The dispositive portion of the asailed Court of
Appeals Decision reads:
WHEREFORE, premises considered, we hereby GRANT
the appeal. The January 28, 1998 decision of the RTC,
Branch 126, Caloocan City is hereby REVERSED and SET
ASIDE and a new one entered:
1. ANNULLING the Deed of Absolute Sale dated
February 3, 1989 as a deed of sale, and
considering it instead as a real estate mortgage
of the disputed property to secure the payment
of the ₱70,000.00 the plaintiffs-appellants
spouses Bandong owe the defendants-appellees
spouses Raymundo. The spouses Bandong are
given one (1) year from the finality of this
Decision within which to pay the ₱70,000.00
owed to the spouses Raymundo, at 12%
interest per annum computed from July 17,
1991 until its full payment.
2. ANNULLING the Deed of Absolute Sale dated
September 25, 1990, between the spouses
Raymundo as vendors and the spouses
Buenaobra as vendees.
3. ORDERING the Register of Deeds of Caloocan
City to issue a new Transfer Certificate of Title
covering Lot 18, Block 2 of the subdivision plan
PSD 16599, a portion of Lot 1073 of the
Cadastral Survey of Caloocan, in the names of
the spouses Dominador and Rosalia Bandong,
after the cancellation pursuant to this Decision
of TCT No.
spouses Angelito and Jocelyn Buenaobra; and
FURTHER ORDERING the said Register of Deeds
to annotate in the new Transfer Certificate of
Title in the names of the spouses Bandong a
real estate mortgage in favor of the spouses
Carlos and Eulalia Raymundo reflecting the
terms of this Decision.
4. AWARDING – moral damages in the amount
of ₱50,000.00; exemplary damages of
₱20,000.00; and attorney’s fees and expenses of
litigation of ₱20,000.00, plus ₱500.00 per
proven appearance of the plaintiffs-appellants’
counsel in court – all solidarily payable by the
spouses Carlos and Eulalia Raymundo and the
spouses Angelito and Jocelyn Buenaobra, to the
spouses Dominador and Rosalia Bandong.
5. ORDERING the payment of the costs of the
suit, payable by the spouses Carlos and Eulalia
Raymundo and the spouses Angelito and Jocelyn
Buenaobra.4
The factual and procedural backdrop of this case are as
follows:
Eulalia was engaged in the business of buying and
selling large cattle from different provinces within the
Philippines. For this purpose, she employed "biyaheros"
whose primary task involved the procuring of large cattle
with the financial capital provided by Eulalia and
delivering the procured cattle to her for further disposal.
In order to secure the financial capital she advanced for
the "biyaheros," Eulalia required them to surrender the
Transfer Certificates of Title (TCTs) of their properties
and to execute the corresponding Deeds of Sale in her
favor.
Dominador had been working for Eulalia as one of her
biyaheros for three decades. Considering his long years
of service without any previous derogatory record,
Eulalia no longer required Dominador to post any
security in the performance of his duties.5
However, in 1989, Eulalia found that Dominador
incurred shortage in his cattle procurement operation in
the amount of ₱70,000.00. Dominador and his wife
Rosalia Bandong (Rosalia) then executed a Deed of
Sale6 in favor of Eulalia on 3 February 1989, covering a
parcel of land with an area of 96 square meters, more or
less, located at Caloocan City and registered under TCT
No. 1421 (subject property), in the name of the Spouses
Bandong. On the strength of the aforesaid deed, the
subject property was registered in the names of Eulalia
and her husband Carlos Raymundo (Carlos). The subject
property was thereafter sold by the Spouses Raymundo
to Eulalia’s grandniece and herein co-petitioner, Jocelyn
Buenaobra (Jocelyn). Thus, the subject property came
to be registered in the name of Jocelyn and her husband
Angelito Buenaobra (Angelito).
After the TCT of the subject property was transferred to
their names, the Spouses Buenaobra instituted before
the Metropolitan Trial Court (MeTC) of Caloocan City, an
action for ejectment against the Spouses Bandong,
docketed as Civil Case No. 20053, seeking the
eviction of the latter from the subject property, which
the Spouses Bandong opposed on the ground that they
are the rightful owners and possessors thereof. The
MeTC ruled in favor of the Spouses Buenaobra which, on
appeal, was affirmed in toto by the RTC 7 and
subsequently, by the Court of Appeals.8 Finally, when
the case was raised on appeal before us in G.R. No.
109422, we issued a Resolution9 dated 12 July 1993,
finding that no substantial arguments were raised
therein to warrant the reversal of the appealed decision.
To assert their right to the subject property, the Spouses
Bandong instituted an action for annulment of sale
before the RTC against Eulalia and Jocelyn on the
ground that their consent to the sale of the subject
property was vitiated by Eulalia after they were served
by Jocelyn’s counsel with the demand to vacate. This
was docketed as Civil Case No. C-14980. The Spouses
Bandong alleged that there was no sale intended but
only equitable mortgage for the purpose of securing the
shortage incurred by Dominador in the amount of
₱70,000 while employed as "biyahero" by Eulalia.
Eulalia countered that Dominador received from her a
significant sum of money, either as cash advances for
the purpose of procuring large cattle or as personal loan,
and when he could no longer pay his obligations, the
Spouses Bandong voluntarily ceded the subject property
to her by executing the corresponding deed of sale in
her favor. Indeed, the Spouses Bandong personally
appeared before the Notary Public and manifested that
the deed was their own voluntary act and deed.
For her part, Jocelyn maintained that she was a buyer in
good faith and for value for she personally inquired from
the Register of Deeds of the presence of any liens and
encumbrances on the TCT of the subject property and
found that the same was completely free therefrom.
While she admitted that she had previous notice that
Dominador and a certain Lourdes Santos (Lourdes) were
in possession of the subject property, Jocelyn claimed
that the said possessors already acknowledged her
ownership thereof and even asked for time to vacate. In
the end, though, they refused to leave the premises.
On 28 June 1998, the RTC rendered a Decision 10 in Civil
Case No. C-14980 in favor of Eulalia and Jocelyn by
declaring that the Deed of Sale between Dominador and
Eulalia was valid and binding and, consequently, the
subsequent sale between Eulalia and Jocelyn was also
lawful absent any showing that Jocelyn was a buyer in
bad faith. The dispositive portion of the said decision
reads:
WHEREFORE, judgment is hereby rendered DISMISSING
the complaint filed by the [Spouses Bandong] and
ordering said [Spouses Bandong] to pay [herein
petitioners] spouses Raymundo and Buenaobra the
amount of ₱50,000 and ₱30,000, respectively, as
attorney’s fees and costs of the suit.
On appeal in CA-G.R. SP No. 59557, the Court of
Appeals reversed the RTC Decision and found that the
transaction entered into by Dominador and Eulalia was
not one of sale but an equitable mortgage considering
that the purchase price was grossly inadequate and the
Spouses Bandong remained as possessors of the subject
property after Eulalia’s alleged purchase thereof. The
appellate court likewise charged Jocelyn with knowledge
that the Spouses Raymundo were not the absolute
owners of the subject property negating the
presumption that she was an innocent purchaser for
value.
The Court of Appeals found the Motion for
Reconsideration filed by petitioners unmeritorious and
denied the same in its Resolution 11 dated 24 January
2006.
Hence, this instant Petition for Review on Certiorari filed
by the petitioners assailing the Decision dated 26
September 2005 and the Resolution dated 24 January
2006 rendered by the Court of Appeals. For the
resolution of this Court are the following issues:
I.
WHETHER OR NOT THE DEED OF SALE
BETWEEN DOMINADOR AND EULALIA IS VALID
AND BINDING.
II.
WHETHER OR NOT JOCELYN IS A BUYER IN
GOOD FAITH.
In arguing that the sale between Dominador and Eulalia
is valid, petitioners posit that gross inadequacy of the
price is not sufficient to invalidate the sale, and granting
arguendo that insufficient consideration may void a sale,
it has not been proven that the consideration of sale
between Dominador and Eulalia was grossly inadequate.
Elaborating, petitioners maintain that the amount of
₱110,000.00 (which they claimed they have given to
Dominador), or even the sum of ₱70,000.00 (which
respondents admitted receiving), was a substantial
consideration, sufficient to support a sale contract. Mere
inadequacy of the price is not sufficient to invalidate a
sale; the price must be grossly inadequate or utterly
shocking to the conscience in order to avoid a contract
of sale.
Petitioners further aver that the alleged market value of
the subject property as submitted by the appraiser, one
of respondents’ witnesses, would not serve as an
objective basis in determining the actual value of the
subject property, much less the supposed amount of its
purchase price, in the absence of any logical and valid
basis for its determination.
Finally, petitioners contend that so long as the contract
was voluntarily entered into by the parties and in the
absence of a clear showing that their consent thereto
was vitiated by fraud, mistake, violence or undue
influence, such as in the case at bar, the said contract
should be upheld.
We do not agree.
An equitable mortgage is one that - although lacking in
some formality, forms and words, or other requisites
demanded by a statute - nevertheless reveals the
intention of the parties to charge a real property as
security for a debt and contains nothing impossible or
contrary to law.12
The instances when a contract - regardless of its
nomenclature - may be presumed to be an equitable
mortgage are enumerated in the Civil Code as follows:
Art. 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to
repurchase is unusually inadequate;
(2) When the vendor remains in possession as
lessee or otherwise;
(3) When upon or after the expiration of the
right to repurchase another instrument
extending the period of redemption or granting
a new period is executed;
(4) When the purchaser retains for himself a
part of the purchase price;
(5) When the vendor binds himself to pay the
taxes on the thing sold.
(6) In any other case where it may be fairly
inferred that the real intention of the parties is
that the transaction shall secure the payment of
a debt or the performance of any other
obligation.
Art. 1604. The provisions of Article 1602 shall also apply
to a contract purporting to be an absolute sale.
For Articles 1602 and 1604 to apply, two requisites must
concur: one, the parties entered into a contract
denominated as a contract of sale; and two, their
intention was to secure an existing debt by way of an
equitable mortgage.13
There is no question that Dominador and Eulalia entered
into a contract of sale as evidenced by the document
denominated as Deed of Sale14 signed by them. As to
whether the parties intended to transfer ownership of
the subject property or merely to constitute a security
for an existing debt is an issue that needs to be
addressed by this Court.
In resolving this kind of controversy, the doctrine
in Reyes v. Court of Appeals15 directs us to give utmost
consideration to the intention of the parties in light of
the relative situation of each and the circumstances
surrounding the execution of the contract, thus:
In determining whether a deed absolute in form is a
mortgage, the court is not limited to the written
memorials of the transaction. The decisive factor in
evaluating such agreement is the intention of the
parties, as shown not necessarily by the
terminology used in the contract but by all the
surrounding circumstances, such as the relative
situation of the parties at that time, the attitude
acts, conduct, declarations of the parties, the
negotiations between them leading to the deed, and
generally, all pertinent facts having a tendency to fix and
determine the real nature of their design and
understanding. x x x16 (Emphasis supplied.)
By applying the aforestated principle to the case at bar,
we are constrained to rule that in executing the said
Deed of Sale, Dominador and Eulalia never intended the
transfer of ownership of the subject property but to
burden the same with an encumbrance to secure the
indebtedness incurred by Dominador on the occasion of
his employment with Eulalia.
By Eulalia’s own admission,17 it was her customary
business practice to require her biyaheros to deliver to
her the titles to their real properties and to execute in
her favor the corresponding deeds of sale over the said
properties as security for the money she provided for
their cattle procurement task, and since Dominador
worked for Eulalia’s business for years, he was allowed
to advance the money without any security.
Significantly, it was only after he incurred a shortage
that the sale contract was executed.
We are not inclined to believe the contention of the
petitioners that Dominador ceded his property to Eulalia
as payment for his obligation for it is contrary to human
experience that a person would easily part with his
property after sustaining a debt. Rather, he would first
look for means to settle his obligation, and the selling of
a property on which the house that shelters him and his
family stands, would be his last resort. The only
reasonable conclusion that may be derived from
Dominador’s act of executing a Deed of Sale in favor of
Eulalia is that the latter required him to do so in order to
ensure that he will subsequently pay his obligation to
her.
This conclusion is in accord with the doctrine we
enunciated in Aguirre v. Court of Appeals,18 that:
The explicit provision of Article 1602 that any of
those circumstances would suffice to construe a
contract of sale to be one of equitable mortgage
is in consonance with the rule that the law favors
the least transmission of property rights. To stress,
the existence of any one of the conditions under Article
1602, not a concurrence, or an overwhelming number of
such circumstances, suffices to give rise to the
presumption that the contract is an equitable mortgage.
While we agree in the petitioners’ insistence that
inadequacy of the price is not sufficient to nullify the
contract of sale, their persistence is, however,
misplaced. It is worthy to note that the factual
circumstances attendant in the case at bar call not for
the application of the legal and jurisprudential principles
on annulment of contract per se, but more aptly, of the
provisions of Articles 1602 and 1604 of the Civil Code on
the construction of the contract of sale as an equitable
mortgage.
Consequently, the agreement between Dominador and
Eulalia was not avoided in its entirety so as to prevent it
from producing any legal effect at all. Instead, we
construe that said transaction is an equitable mortgage,
thereby merely altering the relationship of the parties
from seller and buyer, to mortgagor and mortgagee,
while the subject property is not transferred but
subjected to a lien in favor of the latter.
Moreover, granting that the purchase price is adequate,
the fact that respondents remain in possession of the
subject property after its supposed sale is sufficient to
support our finding that the contract is one of equitable
mortgage and not of sale. To reiterate, the existence
of any one of the conditions under Article 1602,
not a concurrence, or an overwhelming number of
such circumstances, suffices to give rise to the
presumption that the contract is an equitable
mortgage.19
Having threshed the issue that there was no sale
in favor of Eulalia but an equitable mortgage
leads us to an inevitable conclusion that she has
no right to subsequently transfer ownership of
the subject property, in consonance with the
principle that nobody can dispose of what he does
not have.20 One of the exceptions21 to this rule,
however, can be found in Article 1506 of the Civil
Code, wherein the seller has voidable title to a
property but his title has not yet been nullified at
the time of the sale, and the subsequent buyer of
the property was in good faith.
An innocent purchaser for value is one who buys the
property of another, without notice that some other
person has a right or interest in the property, for which
a full and fair price is paid by the buyer at the time of
the purchase or before receipt of any notice of claims or
interest of some other person in the property.22
Petitioners are harping on the contention that Jocelyn
was an innocent purchaser for value. Invoking the
indefeasibility of a Torrens title, they assert that there is
nothing in the subject property’s TCT that should arouse
Jocelyn’s suspicion as to put her on guard that there is a
defect in Eulalia’s title.
Again, we are not persuaded. The burden of proving the
purchaser’s good faith lies in the one who asserts the
same. In discharging the burden, it is not enough to
invoke the ordinary presumption of good
faith.23 In Arrofo v. Quiño,24 we have elucidated that:
[A] person dealing with registered land, [is not required]
to inquire further that what the Torrens title on its face
indicates. This rule, however, is not absolute but admits
of exceptions.
Thus, while it is true x x x that a person dealing
with registered lands need not go beyond the
certificate of title, it is likewise a well-settled rule
that a purchaser or mortgagee cannot close his
eyes to facts which should put a reasonable man
on his guard, and then claim that he acted in
good faith under the belief that there was no
defect in the title of the vendor or mortgagor. His
mere refusal to face up to the fact that such defect
exists, or his willful closing of his eyes to the possibility
of the existence of a defect in the vendor’s or
mortgagor’s title, will not make him an innocent
purchaser for value, if it afterwards develops that the
title was in fact defective, and it appears that he had
such notice of the defect as would have led to its
discovery had he acted with the measure of precaution
which may be required of a prudent man in a like
situation.
In the present case, we are not convinced by the
petitioners’ incessant assertion that Jocelyn is an
innocent purchaser for value. To begin with, she is a
grandniece of Eulalia and resides in the same locality
where the latter lives and conducts her principal
business. It is therefore impossible for her not to acquire
knowledge of her grand aunt’s business practice of
requiring her biyaheros to surrender the titles to their
properties and to sign the corresponding deeds of sale
over said properties in her favor, as security. This alone
should have put Jocelyn on guard for any possible
abuses that Eulalia may commit with the titles and the
deeds of sale in her possession.
The glaring lack of good faith of Jocelyn is more
apparent in her own admission that she was aware that
Dominador and a certain Lourdes were in possession of
the subject property. A buyer of real property that is in
the possession of a person other than the seller must be
wary. A buyer who does not investigate the rights of the
one in possession can hardly be regarded as a buyer in
good faith.25 Jocelyn’s self-serving statement that she
personally talked to Dominador and Lourdes about her
acquisition of the subject property and intention to take
possession of the same, and that Dominador and
Lourdes even pleaded for time to vacate the subject
property cannot be given credence in light of the prompt
filing by the Spouses Bandong of an action for the
annulment of the sale contract between Dominador and
Eulalia after they received the demand to vacate from
Jocelyn’s lawyer.
the property in question, so that neither the claim of
juridical possession nor an averment of ownership can
outrightly prevent the court from taking cognizance of
the case.28 In ejectment cases, all the court may do is to
resolve who is entitled to its possession although, in
doing so, it may make a determination of who is the
owner of the property in order to resolve the issue of
possession. But such determination of ownership is not
clothed with finality. Neither will it affect ownership of
the property or constitute a binding and conclusive
adjudication on the merits with respect to the issue of
ownership.29
WHEREFORE, IN VIEW OF THE FOREGOING, the
instant Petition is DENIED. The Decision dated 26
September 2005, and the Resolution dated 24 January
2006, rendered by the Court of Appeals in CA-G.R. SP
No. 59957, are hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.

In the last analysis, good faith, or the lack of it, is a

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

Petitioners question further the belated filing by the

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

Finally, we agree with the Court of Appeals that the

ejectment case which had been litigated to finality by
the Spouses Buenaobra and the respondents need not
alter our conclusion in the present case. Well entrenched
is the doctrine that in ejectment cases, the sole question
for resolution is the physical or material possession of
[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.
SYLLABUS
1. CIVIL LAW; CIVIL CODE; SPECIAL CONTRACTS;
SALE; EXTINGUISHMENT; LEGAL REDEMPTION;
ADJOINING URBAN LAND. — This Court has already
emphasized inprevious cases, that an owner of urban
land may not redeem an adjoining urban property where
he does not allege in his complaint, much less prove at
the trial, that the latter is so small and so situated that a
major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought
merely for speculation It is evident that the purpose of
the new Civil Code in allowing redemption of adjoining
urban land is to discourage speculation in real estate
and the consequent aggravation of the housing
problems in centers of population.
2. ID.; ID.; ID.; ID.; ID.; ID.; ART. 1622 NOT
APPLICABLE IN CASE AT BAR — Considering that the
land which appellant seeks to redeem is 4,452 square
meters in area, which is far from being "so small and so
situated that a major portion thereof cannot be used for
any practical purpose" for quite the contrary, it has been
made a subdivision, and also that it cannot be said that
appellee Esplana bought the same "merely for
speculation", since in less than eight months, from
March 27, 1965 when he bought it, to December 7, 1965
when the present complaint was filed, he had developed
the same into a subdivision for re-sale, which shows that
he must have had that definite purpose in mind in
buying the same, it is Our holding that appellant cannot
invoke Article 1622 of the Civil Code, We cannot hold
that such purpose is speculative.
3. STATUTORY CONSTRUCTION; "URBAN" LAND
DEFINED CASE AT BAR. — It is clear to Us that the term
urban in Art 1622 does not necessarily refer to the
nature of the land itself sought to be redeemed nor to
the purpose to which it is somehow devoted, but to the
character of the community or vicinity in which it is
found. In this sense, even if the land is somehow
dedicated to agriculture, it is still urban, in
contemplation of this law, if it is located within the
center of population or the more or less populated
portion of a city or town. In the case at bar, in view of
the facts that: (1) the land of appellant is a school site
and (2) the one in question has been filled with earth,
developed and subdivided into small lots for residential
purposes, it is quite safe to conclude that both lands are
in the population section of the town and are
accordingly urban.
DECISION
BARREDO, J.:
Appeal from the decision of the Court of First Instance
of Camarines Sur dismissing its civil Case No. 6043 — an
action filed therein by herein appellant Santiago Ortega,
owner of a parcel of land in Iriga, Camarines Sur
occupied and used as school site by the Saint Anthony
Academy, against herein appellees Andres Orcine and
Doroteo Esplana, for the purpose of enforcing an alleged
right of legal redemption under Article 1622 of the Civil
Code over an adjoining 4,452-square-meter parcel of
land.
The appealed decision is one practically on the pleadings
as may be gleaned from the following pertinent portions
thereof:jgc:chanrobles.com.ph
"This case was instituted by plaintiff to enable him to
redeem the property sold by defendant Andres Orcine to
his codefendant Doroteo Esplana.
"Originally plaintiff’s complaint was based on Art. 1621,
New Civil Code. Motion to dismiss was timely presented
by the defendants, opposed by the plaintiff, and this
Court resolving said motion to dismiss, issued an order
dated March 3, 1966, which, among others, stated as
follows:chanrob1es virtual 1aw library
x x x
‘From the aforesaid decision it is indeed clear that the
right of legal redemption can be availed of only by
adjoining owner if the two adjacent lands are both rural.
The absence, however, of an allegation to that effect in
the complaint will only amount to a vagueness or
uncertainty of the complaint which will entitle the
defendant to ask for a bill of particulars but not to an
outright dismissal of the case.
‘. . . The best that the plaintiff can do is to file a
complaint against the defendant vendor to compel the
latter to notify him in writing of the sale of his land.’
"It was because of that order that on March 8, 1966,
defendants filed their motion for Bill of Particulars or
Motion for Clarification (p. 20, Records), and this Court
in its order dated April 21, 1966, ordered the plaintiff.
‘To be specific in his pleading as to whether or his land
which adjoins that upon which he wishes to exercise the
legal right of redemption is also rural, within 10 days
from receipt of this order.’ (p. 27, Records)
"Plaintiff obviously in obedience to the above order of
Court, presented on April 28, 1966, an Amended
Complaint (pp. 28-32, Records) — the most notable
change in it is that plaintiff seeks now to exercise his
alleged right of legal redemption under Article 1622,
(Objection to Motion to Dismiss Amended Complaint, pp.
39-40, Records) instead of Article 1621, New Civil Code,
as was his intention in the original complaint.
"Defendant presented again a motion to dismiss the
amended complaint on exactly the same grounds as the
former motion to dismiss, which likewise, was denied by
this Court in its order dated June 21, 1966 (pp. 45-46,
Records). Motion for reconsideration was equally denied
by order of this Court dated July 25, 1966 (p. 52,
Records).
"All the above proceedings were had under then
presiding Judge Jose Surtida of this Court, and all the
resolutions above adverted to were made by him.
"A pre-trial was had in the case. This time under a
different Judge — Judge de la Cruz. In the order of this
Court dated December 8, 1966, Judge de la Cruz gave
the defendants ten days to file a motion to dismiss —
which the defendants did on December 15, 1966, and
was just a reiteration of the reasons and arguments
urged on this Court in the previous motions to dismiss,
and was also denied by this Court per order dated
January 4, 1967 (p. 1, records).
"Such was the situation of this case when the
undersigned presiding Judge of this Court took over.
"This Court believes that based on the pleadings
submitted in this case by both parties, the case can be
decided on the merits. The parties and their respective
counsels felt the same, that is why they agreed to have
the case set for Oral arguments before this Court and
after such argument, the same shall be submitted for
decision, and no other proceedings shall be taken on the
case. (order dated July 13, 1967, pp. 83-84, Records)
"There is no dispute that the land sold to the defendant
Esplana on March 27, 1965, for P10,000.00 by his co-
defendant Orcine was a ricefield, an agricultural land
(rural); that after the same was sold, defendant Esplana
had it filled with earth and then had it subdivided into
small lots for residential purposes. The land has then
ceased to be rural, and is now urban land. Likewise, the
land owned by the plaintiff is adjacent to the land in
question, not separated by a creek, drain, ravines, road
and apparent servitude for the benefit of other estates,
was formerly an agricultural land (rural) but at the time
of the sale made by Orcine to Esplana on March 27,
1965, the same was already urban, and in fact, was and
is being used and occupied as school site of St. Anthony
Academy, a private school."cralaw virtua1aw library
Reversal of the dismissal is now sought by appellant
upon the claim that:jgc:chanrobles.com.ph
"I. THE LOWER COURT ERRED IN HOLDING THAT
DESPITE THE CONVERSION BY APPELLEE DOROTEO
ESPLANA OF THE LAND IN QUESTION FROM RURAL TO
URBAN LAND APPELLANT IS NOT ENTITLED TO THE
RIGHT OF REDEMPTION OR PRE-EMPTION UNDER
ARTICLE 1622 OF THE CIVIL CODE.
"II. THE LOWER COURT ERRED IN HOLDING THAT
APPELLEE DOROTEO ESPLANA DID NOT PURCHASE THE
LAND IN QUESTION FOR SPECULATIVE PURPOSE.
"III. THE LOWER COURT ERRED IN HOLDING THAT
APPELLANT IS NOT ENTITLED TO WRITTEN NOTICE AS
PROVIDED FOR UNDER ARTICLE 1623 OF THE NEW
CIVIL CODE."cralaw virtua1aw library
The provisions of law involved by appellant read as
follows:jgc:chanrobles.com.ph
"ART. 1622. Whenever a piece of urban land which is so
small and so situated that a major portion thereof
cannot be used for any practical purpose within a
reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of any
adjoining land has a right of pre-emption at a
reasonable price.
"If the re-sale has been perfected, the owner of the
adjoining land shall have a right of redemption, also at a
reasonable price.
"When two or more owners of adjoining lands wish to
exercise the right of pre-emption or redemption, the
owner whose intended use of the land in question
appears best justified shall be preferred."cralaw
virtua1aw library
Appellant contends under his first assignment of error
that under Article 1622, above-quoted, he has the right
of legal redemption over the land in question, since, it is
not disputed that he is the owner of the urban property
adjoining said land on the North and the latter had
already been converted into urban land by appellee
Esplana at the time he (appellant) exercised his light,
hence the lower court erred in holding that he is not
entitled to such right on the ground, stated by His
Honor, that the time of the sale of the said land by
Orcine to Esplana on March 27, 1965, the land sought to
be redeemed and his land were not of the same kind —
that of appellant being urban land while that of
appellees rural. In essence, the position of appellant is
that what governs for purposes of the redemption
provided for in the law is the nature or character of the
adjoining land at the time redemption is actually sought
and not at the time of its sale to the person from whom
redemption is asked.
We believe it is idle to rule in this case on appellant’s
contention. The legal issue he raises involves many
aspects which do not appear to have been dealt with by
the parties whether in their pleadings here or in the
court below and without which it is not possible to
resolve properly the point in question. Indeed, even the
question alone of what is rural and what is urban land is
itself one that is not easy to resolve. Even under Article
1523 of the Spanish Civil Code which, incidentally,
referred to rural land only, the Spanish authorities
preferred to make the needed classification only on a
case to case basis. 1 This, notwithstanding that it was
clear to them that the reason underlying the provision is
to encourage better development and utilization of
agricultural lands. According to
Manresa:jgc:chanrobles.com.ph
"Limitado dicho derecho a las fincas rústicas, cuya
cabida no exceda de una hect rea, es visto que el
espiritu del Código no es otro que favorecer el desarrollo
de la propiedad territorial y de los intereses de la
agricultura. Una finca, cuya cabida no excede de una
hect rea, no produce, por regla general, lo suficiente
para mantener a una familia: su cultivo teniendo que
transportar por entre heredades ajenas los instrumentos
de labranza, no se hace en condiciones economicas; lo
mismo puede decirse de la saca y transporte de los
frutos. Todas estas dificultades desaparecen, si al
venderse la finca, la compra un propietario que tenga
tierras colindantes: se favorece de este modo el inters
público, porque la producción aumenta, se atiende al
inters privado del retrayente y no es de apreciar ningún
ostensible perjuicio para el vendedor ni para el
comprador." (10 Manresa, Codigo Civil Español, 328.)
which reasoning was echoed by Justice Romualdez in
Cortes v. Flores, 2 thus:jgc:chanrobles.com.ph
"Hallamos acertado este criterio. La intención de la ley al
conceder este retracto es proteger la agricultura,
haciendo que los terrenos agricolas pequeños se unan a
sus colindantes bajo un solo dueño para su mejor
expletación. Si el terreno colindante con el que se trata
de retraer no es agricola, entonces es vano el retracto,
no responde al propósito de la lev.
"‘Est ajustada a este precepto’ dice el Tribunal Supremo
de España en su fallo de 12 de marzo de 1902, ‘la
sentencia que desestima la demanda de retracto.
cuando las dos o una sola de las fincas, son urbanas.’"
On the assumption then that the land in question is rural
or that in legal contemplation it continued to be such
even after it was developed, for purposes of determining
appellant’s right of redemption, it is obvious that since
appellant’s land is admittedly urban, the redemption
sought cannot be allowed because it would not be in line
with the above-discussed purposes of redemption of
rural land contemplated in Article 1621 of the present
Civil Code. Incidentally, this provision which is
substantially Article 1523 of the Spanish Civil Code
above-mentioned, was the one firstly invoked by
appellant in the trial court. Hence, the above ruling in
Cortes v. Flores is applicable to this case.
On the other hand, even on the assumption that the
land in controversy is urban, still Article 1622 of the
present Civil Code which is not invoked by appellant
does not support his case. This Court has already
emphasized in previous cases, 3 that an owner of urban
land may not redeem an adjoining urban property where
he does not allege in his complaint, much less prove at
the trial, that the latter is so small and so situated that a
major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought
merely for speculation. In Soriente v. Court of Appeals, 4
We held:jgc:chanrobles.com.ph
"Said Article 1622 reads:chanrob1es virtual 1aw library
‘Whenever a piece of urban land which is so small and
so situated that a major portion thereof cannot be used
for any practical purpose within a reasonable time,
having been bought merely for speculation, is about to
be re-sold, the owner of any adjoining land has a right
of pre-emption at a reasonable price. (Emphasis
supplied.)
"This provision is not in point. It has been neither
proved nor alleged, either that the land purchased by
appellant from Lamberto Reyes ‘is so small and so
situated that a major portion thereof cannot be used for
any practical purpose,’ or that it has ‘been bought
merely for speculation,’ or, even, that it ‘is about to be
resold.’ Besides, it is alleged in appellant’s answer ‘that
the land sought to be redeemed by plaintiff is . . .
sufficiently big in area and so situated that the major
portion or the whole thereof can serve comfortably as
workshop and storage of machineries and equipments
which defendant is putting up in the exercise and
furtherance of his profession as professional mechanical
engineer and associate electrical engineer;’ that ‘in fact
a portion of said lot is actually used for residential
purposes . . .;’ and ‘that defendant has no intention now
or in the future to dispose of or sell the property subject
matter of the present action to any person . . ..’ What is
more, appellee does not context appellant’s evidence on
these allegations. Hence, the first two assignments of
error are well taken."cralaw virtua1aw library
It may be mentioned here that the right of redemption
of adjoining urban land did not exist in the Spanish Civil
Code, which confined itself to the redemption of rural to purchase or sell with the expectation of profiting by
lands. It was introduced here only by the new Civil anticipated, but conjectural, fluctuations in price; often
Code. Whereas, as already observed, the objective of in a somewhat depreciative sense, to engage in
the right of redemption of adjoining rural land under the harardous business transaction for the chance of an
old code, as adopted in the new Civil Code, is to unusually large profit; as to speculate in coffee, in sugar
encourage the maximum development and utilization of or in bank stock." (2nd Edition p. 2417, Webster’s
agricultural lands, it is evident that the purpose of the International Dictionary.)
new Civil Code in allowing redemption of adjoining urban
land is to discourage speculation in real estate and the Consequently, all of appellants’ assignments of error
consequent aggravation of the housing problems in must be as they are hereby overruled.
centers of population. As a matter of fact, having in view
this legislative purpose, We are of the opinion that WHEREFORE, the decision appealed from is affirmed,
whatever difficulty may exist in determining if a land is with costs against Appellant.
rural for the proper application of Article 1621, as
previously noted to be the view of Spanish authorities,
no such problem arises in regard to the urban lands
contemplated in Article 1622 of the Code. It is clear to
Us that the term urban in this provision does not
necessarily refer to the nature of the land itself sought
to be redeemed nor to the purpose to which it is
somehow devoted, but to the character of the
community or vicinity in which it is found. In this sense,
even if the land is somehow dedicated to agriculture, it
is still urban, in contemplation of this law, if it is located
within the center of population or the more or less
populated portion of a city or town. 5

In the case at bar, appellant himself submits that the

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

Now, considering that the land which appellant seeks to

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

"To enter into a business transaction or venture from

which the profits or return are conjectural because the
undertaking is outside of the ordinary course of business
G.R. No. 159755 June 18, 2009
GRACE GOSIENGFIAO GUILLEN, deceased EMMA
GOSIENGFIAO GALAOS, represented by her
daughter EMELYN GALAOS-MELARION, deceased
FRANCISCO GOSIENGFIAO, JR., represented by his
widow EDELWISA GOSIENGFIAO, JACINTO
GOSIENGFIAO, and absentees ESTER GOSIENGFIAO
BITONIO, NORMA GOSIENGFIAO, and PINKY BUENO
PEDROSO, represented by their attorney-in-
fact JACINTO GOSIENGFIAO, Petitioners,
vs.
THE COURT OF APPEALS, HON. JIMMY HENRY F.
LUCZON, JR., in his capacity as Presiding Judge of
the Regional Trial Court, Branch I, Tuguegarao,
Cagayan, LEONARDO MARIANO, AVELINA TIGUE,
LAZARO MARIANO, MERCEDES SAN PEDRO,
DIONISIA M. AQUINO, and JOSE N.T.
AQUINO, Respondents.
DECISION
BRION, J.:
At issue in this petition is the timeliness of the exercise of
the right of legal redemption that this Court has recognized
in a final and executory decision.
The petitioners, heirs of Francisco Gosiengfiao (petitioner-
heirs), assail in this Rule 45 petition for review on certiorari
the January 17, 2003 decision and September 9, 2003
resolution of the Court of Appeals (CA) in CA-G.R. CV No.
63093.1 The assailed CA decision ruled that the thirty-day
period for the exercise of the right of legal redemption
should be counted, not from the notice of sale by the
vendor but, from the finality of the judgment of this Court.
BACKGROUND FACTS
I. G.R. No. 101522 - Mariano v. Court of Appeals
The previous case where we recognized the petitioner-
heirs’ right of legal redemption is Mariano v. CA.2 To quote,
by way of background, the factual antecedents that
Mariano recognized:
It appears on record that the decedent Francisco
Gosiengfiao is the registered owner of a residential lot
located at Ugac Sur, Tuguegarao, Cagayan, particularly
described as follows, to wit:
The eastern portion of Lot 1351, Tuguegarao Cadastre, and
after its segregation now designated as Lot 1351-A, Plan
PSD-67391, with an area of 1,346 square meters.
and covered by Transfer Certificate of Title (TCT) No. T-
2416 recorded in the Register of Deeds of Cagayan.
The lot in question was mortgaged by the decedent to the
Rural Bank of Tuguegarao (designated as mortgagee bank,
for brevity) on several occasions before the last, being on
March 9, 1956 and January 29, 1958.
On August 15, 1958, Francisco Gosiengfiao died intestate
survived by his heirs, namely: Third-Party Defendants: wife
Antonia and Children Amparo, Carlos, Severino and herein
plaintiffs-appellants Grace, Emma, Ester, Francisco, Jr.,
Norma, Lina (represented by daughter Pinky Rose), and
Jacinto.
The loan being unpaid, the lot in dispute was foreclosed by
the mortgagee bank, and in the foreclosure sale held on
December 27, 1963, the same was awarded to the
mortgagee bank as the highest bidder.
On February 7, 1964, third-party defendant Amparo
Gosiengfiao-Ibarra redeemed the property by paying the
amount of ₱1,347.89 and the balance of ₱423.35 was paid
on December 28, 1964 to the mortgagee bank.
On September 10, 1965, Antonia Gosiengfiao on her behalf
and that of her minor children Emma, Lina, Norma,
together with Carlos and Severino, executed a "Deed of
Assignment of the Right of Redemption" in favor of Amparo
G. Ibarra appearing in the notarial register of Pedro
(Laggui) as Doc. No. 257, Page No. 6, Book No. 8, Series of
1965.
On August 15, 1966, Amparo Gosiengfiao sold the entire
property to defendant Leonardo Mariano who subsequently
established residence on the lot subject of this controversy.
It appears in the Deed of Sale dated August 15, 1966 that
Amparo, Antonia, Carlos and Severino were signatories
thereto.
Sometime in 1982, plaintiff-appellant Grace Gosiengfiao
learned of the sale of said property by the third-party
defendants. She went to the Barangay Captain and asked
for a confrontation with defendants Leonardo and Avelina
Mariano to present her claim to the said property.
On November 27, 1982, no settlement having been reached
by the parties, the Barangay Captain issued a certificate to
file action.
On December 8, 1982, defendant Leonardo Mariano sold
the same property to his children Lazaro F. Mariano and
Dionicia M. Aquino as evidenced by a Deed of Sale
notarized by Hilarion L. Aquino as Doc. No. 143, Page No.
19, Book No. V, Series of 1982.
On December 21, 1982, plaintiffs Grace Gosiengfiao, et al.
[herein petitioner-heirs] filed a complaint for "recovery of
possession and legal redemption with damages" against
defendants Leonardo and Avelina Mariano [herein
respondent-buyers]. Plaintiffs alleged in their complaint that
as co-heirs and co-owners of the lot in question, they have
the right to recover their respective shares in the said
property as they did not sell the same, and the right of
redemption with regard to the shares of other co-owners
sold to the defendants.
Defendants in their answer alleged that the plaintiffs has
[sic] no cause of action against them as the money used to
redeem the lot in question was solely from the personal
funds of third-party defendant Amparo Gosiengfiao-Ibarra,
who consequently became the sole owner of the said
property and thus validly sold the entire property to the
defendants, and the fact that defendants had already sold
the said property to their children, Lazaro Mariano and
Dionicia M. Aquino. Defendants further contend that even
granting that the plaintiffs are co-owners with the third-
party defendants, their right of redemption had already
been barred by the Statute of Limitations under Article
1144 of the Civil Code, if not by laches.
On September 16, 1986, the trial court dismissed the
complaint before it, as "only Amparo redeemed the
property from the bank" using her money and solely in her
behalf so that the petitioner-heirs had lost all their rights to
the property.3 The trial court explained that what
Gosiengfiao’s heirs inherited from him was only the right to
redeem the property, as it was then already owned by the
bank. By redeeming the property herself, Amparo became
the sole owner of the property, and the lot ceased to be a
part of Gosiengfiao’s estate.
On May 13, 1991, the CA reversed the trial court’s decision,
declaring the petitioner-heirs "co-owners of the property
who may redeem the portions sold" to the respondent-
buyers. The CA denied the respondent-buyers’ motion for
reconsideration;4 thus, they came to this Court to question
the CA’s rulings.
Our Decision, promulgated on May 28, 1993, affirmed the
appellate court decision.5 It stated in its penultimate
paragraph and in its dispositive portion that:
Premises considered, respondents have not lost their right
to redeem, for in the absence of a written notification of
the sale by the vendors, the 30-day period has not begun
to run.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED. Costs against petitioners.
Aside from this express declaration, the Court explained
that, as the property was mortgaged by the decedent, co-
ownership existed among his heirs during the period given
by law to redeem the foreclosed property. Redemption of
the whole property by co-owner Amparo did not vest in her
the sole ownership over the property, as the redemption
inured to the benefit of all co-owners; redemption will not
put an end to co-ownership, as it is not a mode of
terminating a co-ownership. The Court also
distinguished6 between Articles 10887 and 16208 of the Civil
Code and ruled as inapplicable the doctrine that "the giving
of a copy of the deed of sale to the co-heirs as equivalent
to a notice."9 On July 12, 1993, this Court denied the
respondent-buyers’ motion for reconsideration. The entry of
judgment was made on August 2, 1993.
II. Execution of the Mariano Decision
(G.R. No. 101522) By the Lower Court
a. The Incidents
On April 26, 1994, the petitioner-heirs, as winning parties,
filed a motion for the execution of our Decision in G.R. No.
101522, which motion the trial court granted on May 11,
1994.10 The next day, the clerk of court issued a writ of
execution and a notice to vacate.11 The respondent-buyers
moved for a reconsideration of the May 11, 1994 order and
prayed for the nullification of the notice to vacate, arguing
that the dispositive portion of the decision to be executed
merely declared and recognized the petitioner-heirs as co-
owners of the lot and did not authorize the sheriff to
remove their houses from the land. They argued they can
remain in possession of the property as co-owners because
the judgment did not divest them of possession.12 The
sheriff later informed the trial court that copies of the
notice to vacate and the writ of execution were served on,
but were not signed by, the respondent-buyers. After the
expiration of the 45-day period to vacate, the sheriff went
back to check if the respondent-buyers had complied. They
had not.
On March 31, 1995, the petitioner-heirs filed a notice of
redemption with the court of origin, duly served on the
respondent-buyers, for the shares of Amparo, Antonia,
Carlos, and Severino, and tendered the redemption price of
₱53,760.13 On April 18, 1995, the sheriff issued a certificate
of redemption after the first and second buyers refused to
sign the notice and accept the tender, and after the
aggrieved heirs deposited the redemption money with the
court.14 On the same date, the sheriff issued a return of
service informing the court that on March 31, 1995, the
redemption money was tendered to, but was not accepted
by, Engr. Jose Aquino who received, but did not sign, the
notice of redemption.15
From 1994 to 1995, the respondent-buyers filed four
motions: a motion for reconsideration of the May 11, 1994
order granting the motion for the issuance of a writ of
execution;16 a motion to ascertain the redemptive shares of
third-party defendants;17 a motion to declare the petitioner-
heirs to have lost their right of legal redemption;18 and a
motion to expunge from the records the petitioner-heirs’
notice of redemption.19
b. The Judge Beltran Rulings
On December 4, 1995, the trial court, through Judge
Orlando Beltran,20 issued an order (1) recalling the writ of
execution for "incorrectly" quoting the dispositive portion of
the CA decision and nullifying the notice to vacate; (2)
denying the motion to ascertain third-party defendants’
shares, as Amparo’s redemption inured to the benefit of her
co-heirs, thus, each of the 10 heirs has 1/10 equal share of
the lot; (3) denying the third motion as no written notice of
the sale has been served on the petitioner-heirs by the
vendor or by the vendee; and (4) denying the last motion
for lack of legal and factual basis.21 The trial court
thereafter denied the respondent-buyers’ motion for
reconsideration that followed.22
On May 30, 1996, the court denied their motion to nullify
the certificate of redemption and cancellation of the
certificate at the back of TCT No. T-2416; the respondent-
buyers moved to reconsider this denial on July 9, 1996. 23
On June 11, 1996, the respondent-buyers filed an omnibus
motion for reconsideration, arguing that the December 4,
1995 order is contrary to law, jurisprudence, and the
decisions of the CA and this Court on this case.24
On July 15, 1996, the respondent-buyers again filed a
motion for reconsideration of the May 30, 1996 order
denying their motion to nullify the certificate of redemption
and to order its cancellation at the back of TCT No. T-2416,
which move the petitioner-heirs opposed. They argued that
the decision of this Court was not self-executing, and the
sheriff had no power to do anything without a court
sanction. They also argued that it was untrue that the basis
of the April 18, 1995 certificate of redemption was the May
31, 1991 decision of the CA, as affirmed by this Court,
because the certificate was "inexistent" when those
decisions were promulgated.
c. The Judge Luczon Rulings
On September 26, 1997, the trial court, through Judge
Jimmy Henry F. Luczon, Jr.,25 issued an order granting the
respondent-buyers’ omnibus motion for reconsideration of
the December 4, 1995 order, declaring the petitioner-heirs
to have lost their right of redemption, and nullifying the
notice and the certificate of redemption.26 Noting the
absence of a written notice of sale or manifestation
received by the petitioner-heirs, the trial court deemed as
notice of sale this Court’s decision which became final and
executory on August 2, 1993. The trial court considered
September 1, 1993 as the last day of the redemption
period, and, consequently, declared that the notice and the
certificate of redemption were filed late.
The trial court denied the petitioner-heirs’ motion for
reconsideration of the September 26, 1997 order, ruling
that the introduction of the deed of sale as the parties’
evidence in the trial and higher courts was sufficient to give
the petitioner-heirs written notice of the sale; and that the
Civil Code does not require any particular form of written
notice or distinctive method for written notification of
redemption.
III. The Assailed Court of Appeals Decision
The petitioner-heirs thereupon went to the CA on a petition
for certiorari to question the lower court’s orders. (They
had earlier filed an Appeal Ad Cautelam which the CA
consolidated with the petition for certiorari.)27 As grounds,
they cited the lower court’s lack of jurisdiction since the
motions ruled upon were really initiatory pleadings based
on causes of action independent of, although related to,
Civil Case No. 3129, and that no certificate of non-forum
shopping was attached, nor any docket fees paid. They also
claimed that the respondent-buyers’ motion was a
prohibited second motion for reconsideration that the lower
court could not rule upon, and one that was filed beyond
the 15-day period of appeal.28 Finally, they faulted the
lower court for ignoring the law of the case, as established
in Mariano.
The respondent-buyers questioned the petition on
technicalities, but focused on the issue of whether the final
and executory decision of this Court in Mariano was
effectively a written notice of sale to the heirs; they
continued to maintain that the redemption period should
run from the finality of our Decision, and, thus, had already
lapsed.
The CA followed the respondent-buyers’ lead and likewise
focused on the effect of our Decision on the petitioner-
heirs’ redemption of the disputed co-owned property. To
quote the appellate court:
The pivot of inquiry here is: whether or not the final and
executory Decision of the Supreme Court constitutes
written notice to plaintiffs-appellants [herein petitioner-
heirs].
xxx
It is undisputed that the Highest Magistrate’s Decision in
G.R. 101522 had become final and executory on 02 August
1993 and that it was only on 26 April 1994 or after the
lapse of more than eight (8) months from the finality of the
said Decision that plaintiffs-appellants filed a Motion for
Execution.
The Entry of Judgment of G.R. 101522 states as follows,
thus:
This is to certify that on May 26, 1993 a decision rendered
in the above-entitled case was filed in this Office, the
dispositive portion of which reads as follows:
Premises considered, respondents have not lost their right
to redeem, for in the absence of a written certification of
the sale by the vendors, the 30-day period has not even
begun to run.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED. Costs against the petitioners.
SO ORDERED.
and that the same has, on August 2, 1993 become final
and executory and is hereby recorded in the book of Entries
of Judgment.
As it is an established procedure in court that when an
entry of judgment was issued, it means that the contending
parties were already properly notified of the same either
through the parties themselves or through their respective
counsels.
Thus, the very existence of the Supreme Court’s Entry of
Judgment negates plaintiffs-appellants’ claim that no notice
of what [sic] nature was received by them insofar as G.R.
101522 was concerned.
Concomitantly, the Court concurs with the argument of
respondents-appellees [herein respondent-buyers] that the
thirty (30) days grace period within which to redeem the
contested property should be counted from 02 August
1993.
As they failed to redeem the same in accordance with the
instruction of the High Court, plaintiffs-appellants lost all
the rights and privileges granted to them by the Supreme
Court in G.R. 101522.
From the foregoing facts, it is clear that plaintiffs-appellants
had slept from their rights and their failure to exercise the
same within the period allowed by the High Court is
deemed a waiver on their part.
All told, the Court holds and so rules that the court a quo
erred not in reversing itself.
To summarize, the appellate court ruled that (1) because
an entry of judgment had been made, the Mariano Decision
is deemed to have been served on the petitioner-heirs; (2)
based on this premise, the appellate court held that the 30-
day redemption period should run from August 2, 1993 (the
date of the entry of judgment); and (3) for the petitioner-
heirs’ failure to redeem within that period, they "lost all the
rights and privileges granted to them by the Supreme Court
in G.R. No. 101522."
THE PETITION
Faced with the CA’s ruling and the denial of their motion for
reconsideration, the petitioner-heirs filed the present
petition with this Court. They argue in this petition and in
their memorandum that the January 17, 2003 decision of
the CA is erroneous for the reasons outlined below.
First. They clarify that their theory that the Decision of this
Court is not the written notice required by law was not
anchored on lack of notice of that decision, but on Article
1623 of the Civil Code: the written notice should be given
by the vendor, not by this Court by virtue of a final
decision. The CA erred and abused its discretion in
concluding that they lost their right of redemption under
this Court’s Decision because the start of the redemption
period is not reckoned from the date of the finality of that
decision; the Decision is not the source of their right to
redeem.
Second. They posit a redemption period is not a
prescriptive period, and the lower courts erred in
considering the 30-day period as an extinctive prescriptive
period because legal redemption under Article 1623 does
not prescribe. The period has not even begun to run. Their
use of the services of the sheriff to exercise their right of
redemption through a motion for execution was approved
by this Court as a method of redemption.
In their Comment, the respondent-buyers stress that the
main issue in this petition is whether the petitioner-heirs’
right of legal redemption, as recognized in G.R. No.
101522, had been lost. The "non-reviewable" findings of
facts of the trial and appellate courts that plaintiffs
exercised their right of redemption late, and that the
decision in G.R. No. 101522 had already become final, bind
this Court.
In their Reply to Comment, the petitioner-heirs argue that
the 30-day redemption period under Article 1623 cannot be
reckoned from the date of finality of this Court’s Decision in
G.R. No. 101522 because it is not and cannot be a "notice"
in writing by the vendor; this Court is not the vendor and a
written notice by the vendor is mandatory for the 30-day
redemption period to run. The Decision negates the notion
that it serves as a "notice," because it clearly states that
the period of redemption had not begun to run. Having
previously exercised the right of redemption, the execution
was nothing more than the implementation of what had
been the final ruling of this Court.lavvphil.net
In their memorandum, the respondent-buyers maintain that
the petitioner-heirs’ "time-barred" right to redeem the
property was not cured by the notice of redemption and by
their "late" tender of the redemption money; since the
petitioner-heirs were exercising their right of legal
redemption by virtue of the Decisions of this Court and the
CA, it was incumbent upon them to effectuate the steps of
redemption seasonably. The "belated" notice of redemption
and tender of payment of redemption price were not bona
fide, as they were not made within the required period.
THE COURT’S RULING
The parties’ positions all focus, and rightly so, on the main
issue: when did the 30-day period to redeem the subject
property start? This is a question of law, not of fact, as the
respondent-buyers erroneously claim; thus, the lower
courts’ findings cannot bind this Court.
The appellate court unfortunately failed to appreciate the
breadth and significance of this issue, simply ruling on the
case based on the implications of an entry of judgment.
Because of this myopic view, it completely missed the
thrust and substance of the Mariano Decision.
We grant the petition and hold – pursuant to the Mariano
Decision and based on the subsequent pleaded
developments – that the petitioner-heirs have effectively
exercised their right of redemption and are now the owners
of the redeemed property pursuant to the Sheriff’s
Certificate of Redemption.
A significant aspect of Mariano that the CA failed to
appreciate is our confirmation of the ruling that a written
notice must be served by the vendor.29 We ruled as follows:
The requirement of a written notice has long been settled
as early as in the case of Castillo v. Samonte (106 Phil.
1023 [1960]) where this Court quoted the ruling in Hernaez
v. Hernaez (32 Phil. 214), thus:
Both the letter and spirit of the New Civil Code argue
against any attempt to widen the scope of the notice
specified in Article 1088 by including therein any other kind
of notice, such as verbal or by registration. If the intention
of the law had been to include verbal notice or any other
means of information as sufficient to give the effect of this
notice, then there would have been no necessity or reasons
to specify in Article 1088 of the New Civil Code that the said
notice be made in writing for, under the old law, a verbal
notice or information was sufficient.
xxx
The ruling in Castillo v. Samonte, supra, was reiterated in
the case of Garcia v. Calaliman (G.R. No. 26855, April 17,
1989, 172 SCRA 201) where We also discussed the reason
for the requirement of the written notice. We said:
Consistent with aforesaid ruling, in the interpretation of a
related provision (Article 1623 of the New Civil Code) this
Court had stressed that written notice is indispensable,
actual knowledge of the sale acquired in some other
manners by the redemptioner, notwithstanding. He or she
is still entitled to written notice, as exacted by the code to
remove all uncertainty as to the sale, its terms and its
validity, and to quiet any doubt that the alienation is not
definitive. The law not having provided for any alternative,
the method of notifications remains exclusive, though the
Code does not prescribe any particular form of written
notice nor any distinctive method for written notification of
redemption (Conejero et al. v. Court of Appeals et al., 16
SCRA 775 [1966]; Etcuban v. Court of Appeals, 148 SCRA
507 [1987]; Cabrera v. Villanueva, G.R. No. 75069, April
15, 1988).
We also made the factual finding that:
The records of the present petition, however, show no
written notice of the sale being given whatsoever to private
respondents [petitioner-heirs]. Although, petitioners allege
that sometime on October 31, 1982 private respondent,
Grace Gosiengfiao was given a copy of the questioned deed
of sale and shown a copy of the document at the Office of
the Barangay Captain sometime November 18, 1982, this
was not supported by the evidence presented. x x x
From these premises, we ruled that "[P]etitioner-heirs have
not lost their right to redeem, for in the absence of a
written notification of the sale by the vendors, the 30-day
period has not even begun to run." These premises and
conclusion leave no doubt about the thrust of Mariano: The
right of the petitioner-heirs to exercise their right of legal
redemption exists, and the running of the period for its
exercise has not even been triggered because they have
not been notified in writing of the fact of sale. This is what
our Decision held, as the penultimate paragraph and the
dispositive portion clearly state. This is the law of the case
that should guide all other proceedings on the case,
particularly its execution.30 For the Luczon ruling and the
CA to miss or misinterpret the clear ruling in Mariano – the
Decision subject of the execution – is a gross and patent
legal error that cannot but lead to the reversal of their
decisions.
In light of this conclusion, we see no need to discuss the
other presented issues. We hold that the computation of
the 30-day period to exercise the legal right of redemption
did not start to run from the finality of the Mariano
Decision, and that the petitioner-heirs seasonably filed, via
a writ of execution, their notice of redemption, although
they applied for the issuance of the writ some eight (8)
months after the finality of the Decision. In seeking the
execution of a final and executory decision of this Court,
what controls is Section 11, Rule 51,31 in relation to Section
2, Rule 56,32 of the Rules of Court. Before the trial court
executing the decision, Section 6, Rule 39,33 on the
question of timeliness of the execution, governs. Eight (8)
months after the finality of the judgment to be executed is
still a seasonable time for execution by motion pursuant to
this provision. The writ, notice of redemption, and the
tender of payment were all duly served, so that it was
legally in order for the Sheriff to issue a Certificate of
Redemption when the respondent-buyers failed to comply
with the writ and to accept the notice and the tender of
payment.
WHEREFORE, in light of the foregoing, we hereby GRANT
the petition and, accordingly, REVERSE and SET
ASIDE the January 17, 2003 decision and September 9,
2003 resolution of the Court of Appeals in CA-G.R. CV No.
63093. The petitioner-heirs’ exercise of their right of
redemption of co-heirs Amparo G. Ibarra, Antonio C.
Gosiengfiao, Carlos Gosiengfiao, and Severino Gosiengfiao’s
shares over Lot 1351-A, Plan Psd-67391, covered by
Transfer Certificate of Title No. T-2416, and located in Ugac
Sur, Tuguegarao, Cagayan, in view of their March 31, 1995
Notice of Redemption and the April 18, 1995 Certificate of
Redemption issued by the Sheriff of the Regional Trial
Court, Branch IV, Tuguegarao, Cagayan, is hereby declared
VALID and LEGAL.
Costs against the respondents.
SO ORDERED.
G.R. No. 141613 December 16, 2005
SENEN B. AGUILAR, Petitioner,
vs.
VIRGILIO B. AGUILAR and ANGEL B.
AGUILAR, Respondents,
x-----------------------------------------------x
ALEJANDRO C. SANGALANG,
Intervenor-Respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Assailed in this petition for review on certiorari are the
Decision1 and Resolution2 of the Court of Appeals, dated
June 11, 1999 and January 11, 2000, respectively, in CA-
G.R. CV No. 55750.
The parties in this case are brothers, except Alejandro
Sangalang, herein intervenor-respondent. As will be
subsequently discussed, this is the second time that the
brothers Aguilar seek the intervention of this Court
regarding the same facts and the same subject matter. The
first was in Aguilar v. Court of Appeals, G.R. No.
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 Parañaque City, Metro Manila for the
benefit of their father, Maximiano Aguilar (now deceased).
The brothers wanted their father to enjoy his retirement in
a quiet neighborhood. On February 23, 1970, they
executed a written agreement stipulating that their shares
in the house and lot would be equal; and that Senen would
live with their father on condition that he would pay the
Social Security System (SSS) the remaining loan obligation
of the former owners.
In 1974, their father died. Virgilio then demanded that
Senen vacate the house and that the property be sold, the
proceeds to be divided between them. Senen refused to
comply with Virgilio’s demand.
On January 12, 1979, Virgilio filed a complaint with the
Court of First Instance (now Regional Trial Court) of Rizal
at Pasay City for specific performance. Virgilio prayed that
Senen be compelled to sell the property so that the
proceeds could be divided between them.
However, during the pre-trial, neither Senen nor his counsel
appeared. Thus, Senen was declared as in default by the
trial court and Virgilio was allowed to present his evidence
ex-parte.
On July 26, 1979, the trial court rendered its Decision,
declaring the brothers co-owners of the house and lot and
are entitled to equal shares; and ordering that the property
be sold, the proceeds to be divided equally between them.
The trial court also ordered Senen to vacate the property
and to pay Virgilio rentals with interests corresponding to
the period from January 1975 until he leaves the premises.
On appeal, docketed as CA-G.R. CV No. 03933, the Court of
Appeals reversed the trial court’s Decision.
Virgilio then filed with this Court a petition for review
on certiorari, docketed as G.R. No. 76351.
On October 29, 1993, this Court rendered its Decision, the
dispositive portion of which reads:
"WHEREFORE, the petition is GRANTED. The assailed
Decision of the Court of Appeals dated 16 October 1986 is
REVERSED and SET ASIDE. The decision of the trial court in
Civil Case No. 6912-P dated 26 July 1971 is REINSTATED,
with the modification that respondent Senen B. Aguilar is
ordered to vacate the premises in question within ninety
(90) days from receipt of this decision, and to pay
petitioner Virgilio B. Aguilar, a monthly rental of ₱1,200.00
with interest at the legal rate from the time he received the
decision of the trial court directing him to vacate until he
effectively leaves the premises.
The trial court is further directed to take immediate steps to
implement this decision, conformably with Art. 498 of the
Civil Code and the Rules of Court. This decision is final and
executory.
SO ORDERED."
On March 27, 1995, Senen filed with the Regional Trial
Court, Branch 260, Parañaque City, an action for legal
redemption against Virgilio and another brother, Angel,
docketed as Civil Case No. 95-039. In his complaint, Senen
alleged that while he knows that Virgilio sold his ½ share of
the property to Angel in January 1989, however, he
(Senen) was not furnished any written notice of the sale.
Consequently, as a co-owner, he has the right to redeem
the property.
Meanwhile, on November 27, 1995, pursuant to this Court’s
Decision in G.R. No. 76351, the property was sold at public
auction to Alejandro C. Sangalang, intervenor-respondent
herein. Virgilio then received his share of the proceeds as
well as the rental payments due from Senen.
By then, Virgilio had moved to California, USA. It was only
on January 25, 1997 that he was served, through the
Philippine Consulate in San Francisco, a copy of Senen’s
complaint in Civil Case No. 95-039.
On February 24, 1997, Virgilio filed a motion to dismiss the
complaint for lack of cause of action and forum shopping.
In an Order dated June 27, 1997, the trial court dismissed
Civil Case No. 05-039 on the ground of laches, holding that
Senen incurred a delay of seven (7) years before asserting
his right to redeem the property in question.
On appeal, the Court of Appeals affirmed the assailed Order
of the trial court.
Hence, the instant petition for review on certiorari.
The sole issue for our resolution is whether the Court of
Appeals erred in holding that Senen’s complaint for legal
redemption in Civil Case No. 05-039 is barred by laches.
Legal redemption (retracto legal de comuneros) is a
privilege created by law, partly by reason of public policy
and partly for the benefit of the redemptioner to afford him
a way out of a disagreeable or inconvenient association into
which he has been thrust.4
With respect to redemption by co-owners, in case the share
of a co-owner is sold to a third person, the governing law is
Article 1620 of the Civil Code which provides:
"ART. 1620. A co-owner of a thing may exercise the right of
redemption in case the shares of all the other co-owners or
of any of them are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay
only a reasonable rate.
Should two or more co-owners desire to exercise the right
of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in
common."
The purpose behind Article 1620 is to provide a method for
terminating the co-ownership and consolidating the
dominion in one sole owner.5
Article 1623 of the same Code also provides:
"ART. 1623. The right of legal pre-emption or redemption
shall not be exercised except within thirty days from the
notice in writing by the prospective vendee, or by the
vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied
by an affidavit of the vendee that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of
adjoining owners."
From the above provisions, the following are the requisites
for the exercise of legal redemption: (1) There must be a
co-ownership; (2) one of the co-owners sold his right to a
stranger; (3) the sale was made before the partition of the
co-owned property; (4) the right of redemption must be
exercised by one or more co-owners within a period of
thirty days to be counted from the time that he or they
were notified in writing by the vendee or by the co-owner
vendor; and (5) the vendee must be reimbursed for the
price of the sale.
In this case, the sale took place in January 1989. Petitioner
admits that he has actual knowledge of the sale. However,
he only asserted his right to redeem the property in March
1995 by filing the instant complaint. Both the trial court and
the Appellate Court ruled that this was seven (7) years late.
Petitioner, however, now contends that there being no
written notice to him of the sale by the vendee or vendor,
the thirty-day redemption period has not prescribed.
Petitioner’s contention lacks merit. The old rule is that a
written notice of the sale by the vendor to his co-owners is
indispensable for the latter to exercise their retracto legal
de comuneros.6 More recently, however, we have relaxed
the written notice requirement. Thus, in Si v. Court of
Appeals,7 we ruled that a co-owner with actual notice of the
sale is not entitled to a written notice for such would be
superfluous. The law does not demand what is
unnecessary.
Laches is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which could or
should have been done earlier through the exercise of due
diligence.8 Otherwise stated, laches is the negligence or
omission to assert a right within a reasonable time
warranting a presumption that the party entitled to assert it
has either abandoned or declined to assert it.9 Its elements
are: (1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation for which
the complaint seeks a remedy; (2) delay in asserting the
complainant’s rights, the complainant having had
knowledge or notice of the defendant’s conduct as having
been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the
complainant would assert the right in which he bases his
suit; and (4) injury or prejudice to the defendant in the
event, relief is accorded to the complainant, or the suit is
not held barred.10
Petitioner has actual knowledge of the sale of Virgilio’s
share to Angel in 1989. As provided by Article 1623, he has
thirty days from such actual knowledge within which to
exercise his right to redeem the property. Inexplicably,
petitioner did not take any action. He waited for seven (7)
years before filing his complaint. Definitely, such an
unexplained delay is tantamount to laches. To be sure, to
uphold his right would unduly cause injury to respondent-
intervenor, a purchaser in good faith and for value.
Moreover, by the time Senen filed Civil Case No. 95-039 for
legal redemption, his right was no longer available to him.
We have held that after a property has been subdivided
and distributed among the co-owners, the community has
terminated and there is no reason to sustain any right of
pre-emption or redemption.11
WHEREFORE, the petition is DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. CV No. 55750
are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 149756 February 11, 2005
MYRNA RAMOS, petitioner,
vs.
SUSANA S. SARAO and JONAS
RAMOS, respondents.
DECISION
PANGANIBAN, J.:
Although the parties in the instant case denominated
their contract as a "DEED OF SALE UNDER PACTO DE
RETRO," the "sellers" have continued to possess and to
reside at the subject house and lot up to the present.
This evident factual circumstance was plainly overlooked
by the trial and the appellate courts, thereby justifying a
review of this case. This overlooked fact clearly shows
that the petitioner intended merely to secure a loan, not
to sell the property. Thus, the contract should be
deemed an equitable mortgage.
The Case
Before us is a Petition for Review1 under Rule 45 of the
Rules of Court, assailing the August 31, 2001
Decision2 of the Court of Appeals (CA) in CA-GR CV No.
50095, which disposed as follows:
"WHEREFORE, the instant appeal is DISMISSED for
lack of merit. The decision dated January 19, 1995 of
the Regional Trial Court, Branch 145, Makati City
is AFFIRMEDin toto."3
The Facts
On February 21, 1991, Spouses Jonas Ramos and Myrna
Ramos executed a contract over their conjugal house
and lot in favor of Susana S. Sarao for and in
consideration of ₱1,310,430.4 Entitled "DEED OF SALE
UNDER PACTO DE RETRO," the contract, inter alia,
granted the Ramos spouses the option to repurchase the
property within six months from February 21, 1991, for
₱1,310,430 plus an interest of 4.5 percent a month. 5 It
was further agreed that should the spouses fail to pay
the monthly interest or to exercise the right to
repurchase within the stipulated period, the conveyance
would be deemed an absolute sale.6
On July 30, 1991, Myrna Ramos tendered to Sarao the
amount of ₱1,633,034.20 in the form of two manager’s
checks, which the latter refused to accept for being
allegedly insufficient.7 On August 8, 1991, Myrna filed a
Complaint for the redemption of the property and moral
damages plus attorney’s fees.8 The suit was docketed as
Civil Case No. 91-2188 and raffled to Branch 145 of the
Regional Trial Court (RTC) of Makati City. On August 13,
1991, she deposited with the RTC two checks that Sarao
refused to accept.9
On December 21, 1991, Sarao filed against the Ramos
spouses a Petition "for consolidation of ownership
in pacto de retro sale" docketed as Civil Case No. 91-
3434 and raffled to Branch 61 of the RTC of Makati
City.10 Civil Case Nos. 91-2188 and 91-3434 were later
consolidated and jointly tried before Branch 145 of the
said Makati RTC.11
The two lower courts narrated the trial in this manner:
"x x x Myrna [Ramos] testified as follows: On February
21, 1991, she and her husband borrowed from Sarao
the amount of ₱1,234,000.00, payable within six (6)
months, with an interest thereon at 4.5% compounded
monthly from said date until August 21, 1991, in order
for them to pay [the] mortgage on their house. For and
in consideration of the said amount, they executed a
deed of sale under a [pacto de retro] in favor of Sarao
over their conjugal house and lot registered under TCT
No. 151784 of the Registry of Deeds of Makati (Exhibit
A). She further claimed that Sarao will keep the torrens
title until the lapse of the 6-month period, in which case
she will redeem [the] subject property and the torrens
title covering it. When asked why it was the amount of
₱1,310,430 instead of the aforestated amount which
appeared in the deed, she explained that upon signing
of the deed in question, the sum of ₱20,000.00
representing attorney’s fees was added, and its total
amount was multiplied with 4.5% interest rate, so that
they could pay in advance the compounded interest. She
also stated that although the market value of the subject
property as of February 1991 [was] calculated to [be]
more or less ₱10 million, it was offered [for] only
₱1,310,430.00 for the reason that they intended nothing
but to redeem the same. In May 1991, she wrote a
letter to Atty. Mario Aguinaldo requesting him to give a
computation of the loan obligation, and [expressed] her
intention to redeem the subject property, but she
received no reply to her letter. Instead, she, through her
husband, secured directly from Sarao a handwritten
computation of their loan obligation, the total of which
amount[ed] to ₱1,562,712.14. Later, she sent several
letters to Sarao, [furnishing] Atty. Aguinaldo with copies,
asking them for the updated computation of their loan
obligation as of July 1991, but [no reply was again
received]. During the hearing of February 17, 1992, she
admitted receiving a letter dated July 23, 1991 from
Atty. Aguinaldo which show[ed] the computation of their
loan obligation [totaling] to ₱2,911,579.22 (Exhs. 6, 6-
A). On July 30, 1991, she claimed that she offered the
redemption price in the form of two (2) manager’s
checks amounting to ₱1,633,034.20 (Exhs. H-1 & H-2)
to Atty. Aguinaldo, but the latter refused to accept them
because they [were] not enough to pay the loan
obligation. Having refused acceptance of the said checks
covering the redemption price, on August 13, 1991 she
came to Court to consign the checks (Exhs. L-4 and L-
5). Subsequently, she proceeded to the Register of
Deeds to cause the annotation of lis pendens on TCT
No. 151784 (Exh. B-1-A). Hence, she filed the x x x civil
case against Sarao.
"On the other hand, Sarao testified as follows: On
February 21, 1991, spouses Ramos together with a
certain Linda Tolentino and her husband, Nestor
Tolentino approached her and offered transaction
involv[ing a] sale of property[. S]he consulted her
lawyer, Atty. Aguinaldo, and on the same date a
corresponding deed of sale under pacto de retro was
executed and signed (Exh. 1 ). Later on, she sent,
through her lawyer, a demand letter dated June 10,
1991 (Exh. 6) in view of Myrna’s failure to pay the
monthly interest of 4.5% as agreed upon under the
deed[. O]n June 14, 1991 Jonas replied to said demand
letter (Exh. 8); in the reply Jonas admitted that he no
longer ha[d] the capacity to redeem the property and to
pay the interest. In view of the said reply of Jonas,
[Sarao] filed the corresponding consolidation
proceedings. She [further claimed] that before filing said
action she incurred expenses including payment of real
estate taxes in arrears, x x x transfer tax and capital
[gains] tax, and [expenses] for [the] consolidated
proceedings, for which these expenses were accordingly
receipted (Exhs. 6, 6-1 to 6-0). She also presented a
modified computation of the expenses she had incurred
in connection with the execution of the subject deed
(Exh. 9). She also testified that Myrna did not tender
payment of the correct and sufficient price for said real
property within the 6-month period as stipulated in the
contract, despite her having been shown the
computation of the loan obligation, inclusive of capital
gains tax, real estate tax, transfer tax and other
expenses. She admitted though that Myrna has tendered
payment amounting to ₱1,633,034.20 in the form of two
manager’s checks, but these were refused acceptance
for being insufficient. She also claimed that several
letters (Exhs. 2, 4 and 5) were sent to Myrna and her
lawyer, informing them of the computation of the loan
obligation inclusive of said expenses. Finally, she denied
the allegations made in the complaint that she allied
herself with Jonas, and claimed that she ha[d] no
knowledge about said allegation."12
After trial, the RTC dismissed the Complaint and granted
the prayer of Sarao to consolidate the title of the
property in her favor.13 Aggrieved, Myrna elevated the
case to the CA.
Ruling of the Court of Appeals
The appellate court sustained the RTC’s finding that the
disputed contract was a bonafide pacto de retro sale,
not a mortgage to secure a loan. 14 It ruled that Myrna
Ramos had failed to exercise the right of repurchase, as
the consignation of the two manager’s checks was
deemed invalid. She allegedly failed (1) to deposit the
correct repurchase price and (2) to comply with the
required notice of consignation.15
Hence, this Petition.16
The Issues
Petitioner raises the following issues for our
consideration:
"1. Whether or not the honorable appellate court erred
in ruling the subject Deed of Sale under Pacto de Retro
was, and is in reality and under the law an equitable
mortgage;
"2. Whether or not the honorable appellate court erred
in affirming the ruling of the court a quo that there was
no valid tender of payment of the redemption price
neither [sic] a valid consignation in the instant case; and
"3. Whether or not [the] honorable appellate court erred
in affirming the ruling of the court a quo denying the
claim of petitioner for damages and attorney’s fees." 17
The Court’s Ruling
The Petition is meritorious in regard to Issues 1 and 2.
First Issue:
A Pacto de Retro Sale
or an Equitable Mortgage?
Respondent Sarao avers that the herein Petition should
have been dismissed outright, because petitioner (1)
failed to show proof that she had served a copy of it to
the Court of Appeals and (2) raised questions of fact
that were not proper issues in a petition under Rule 45
of the Rules of Court.18 This Court, however, disregarded
the first ground; otherwise, substantial injustice would
have been inflicted on petitioner. Since the Court of
Appeals is not a party here, failure to serve it a copy of
the Petition would not violate any right of respondent.
Service to the CA is indeed mentioned in the Rules, but
only to inform it of the pendency of the appeal before
this Court.
As regards Item 2, there are exceptions to the general
rule barring a review of questions of fact. 19 The Court
reviewed the factual findings in the present case,
because the CA had manifestly overlooked certain
relevant and undisputed facts which, after being
considered, justified a different conclusion.20
Pacto de Retro Sale Distinguished
from Equitable Mortgage
The pivotal issue in the instant case is whether the
parties intended the contract to be a bona fide pacto de
retro sale or an equitable mortgage.
In a pacto de retro, ownership of the property sold is
immediately transferred to the vendee a retro, subject
only to the repurchase by the vendor a retro within the
stipulated period.21 The vendor a retro’s failure to
exercise the right of repurchase within the agreed time
vests upon the vendee a retro, by operation of law,
absolute title to the property.22 Such title is not impaired
even if the vendee a retro fails to consolidate title under
Article 1607 of the Civil Code.23
On the other hand, an equitable mortgage is a contract
that -- although lacking the formality, the form or words,
or other requisites demanded by a statute --
nevertheless reveals the intention of the parties to
burden a piece or pieces of real property as security for
a debt.24 The essential requisites of such a contract are
as follows: (1) the parties enter into what appears to be
a contract of sale, but (2) their intention is to secure an
existing debt by way of a mortgage.25 The nonpayment
of the debt when due gives the mortgagee the right to
foreclose the mortgage, sell the property, and apply the
proceeds of the sale to the satisfaction of the loan
obligation.26
This Court has consistently decreed that the
nomenclature used by the contracting parties to describe
a contract does not determine its nature.27 The decisive
factor is their intention -- as shown by their conduct,
words, actions and deeds -- prior to, during, and after
executing the agreement.28 This juristic principle is
supported by the following provision of law:
Article 1371. In order to judge the intention of the
contracting parties, their contemporaneous and
subsequent acts shall be principally considered. 29
Even if a contract is denominated as a pacto de retro,
the owner of the property may still disprove it by means
of parol evidence,30 provided that the nature of the
agreement is placed in issue by the pleadings filed with
the trial court.31
There is no single conclusive test to determine whether
a deed absolute on its face is really a simple loan
accommodation secured by a mortgage.32 However, the
law enumerates several instances that show when a
contract is presumed to be an equitable mortgage, as
follows:
Article 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on
the thing sold;
(6) In any other case where it may be fairly inferred that
the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance
of any other obligation.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be
subject to the usury laws.33
Furthermore, a contract purporting to be a pacto de
retro is construed as an equitable mortgage when the
terms of the document and the surrounding
circumstances so require.34 The law discourages the use
of a pacto de retro, because this scheme is frequently
used to circumvent a contract known as a pactum
commissorium. The Court has frequently noted that
a pacto de retro is used to conceal a contract of loan
secured by a mortgage.35 Such construction is consistent
with the doctrine that the law favors the least
transmission of rights.36
Equitable Mortgage Presumed
to be Favored by Law
Jurisprudence has consistently declared that the
presence of even just one of the circumstances set forth
in the forgoing Civil Code provision suffices to convert a
contract to an equitable mortgage.37 Article 1602
specifically states that the equitable presumption applies
to any of the cases therein enumerated.
In the present factual milieu, the vendor retained
possession of the property allegedly sold. 38 Petitioner
and her children continued to use it as their residence,
even after Jonas Ramos had abandoned them. 39 In fact,
it remained as her address for the service of court
orders and copies of Respondent Sarao’s pleadings.40
The presumption of equitable mortgage imposes a
burden on Sarao to present clear evidence to rebut it.
Corollary to this principle, the favored party need not
introduce proof to establish such presumption; the party
challenging it must overthrow it, lest it persist. 41 To
overturn that prima facie fact that operated against her,
Sarao needed to adduce substantial and credible
evidence to prove that the contract was a bona
fide pacto de retro. This evidentiary burden she
miserably failed to discharge.
Contrary to Sarao’s bare assertions, a meticulous review
of the evidence reveals that the alleged contract was
executed merely as security for a loan.
The July 23, 1991 letter of Respondent Sarao’s lawyer
had required petitioner to pay a computed amount --
under the heading "House and Lot Loan" 42 -- to enable
the latter to repurchase the property. In effect,
respondent would resell the property to petitioner, once
the latter’s loan obligation would have been paid. This
explicit requirement was a clear indication that the
property was to be used as security for a loan.
The loan obligation was clear from Sarao’s evidence as
found by the trial court, which we quote:
"x x x [Sarao] also testified that Myrna did not tender
payment of the correct and sufficient price for said real
property within the 6-month period as stipulated in the
contract, despite her having been shown the
computation of the loan obligation, inclusive of capital
gains tax, real estate tax, transfer tax and other
expenses. She admitted though that Myrna has tendered
payment amounting to ₱1,633,034.20 in the form of two
manager’s checks, but these were refused acceptance
for being insufficient. She also claimed that several
letters (Exhs. 2, 4 and 5) were sent to Myrna and her
lawyer, informing them of the computation of the loan
obligation inclusive of said expenses. x x x."43
Respondent herself stressed that the pacto de retro had
been entered into on the very same day that the
property was to be foreclosed by a commercial
bank.44 Such circumstance proves that the spouses direly
needed funds to avert a foreclosure sale. Had they
intended to sell the property just to realize some profit,
as Sarao suggests,45 they would not have retained
possession of the house and continued to live there.
Clearly, the spouses had entered into the alleged pacto
de retro sale to secure a loan obligation, not to transfer
ownership of the property.
Sarao contends that Jonas Ramos admitted in his June
14, 1991 letter to her lawyer that the contract was
a pacto de retro.46 That letter, however, cannot override
the finding that the pacto de retro was executed merely
as security for a loan obligation. Moreover, on May 17,
1991, prior to the transmittal of the letter, petitioner had
already sent a letter to Sarao’s lawyer expressing the
former’s desire to settle the mortgage on the
property.47 Considering that she had already
denominated the transaction with Sarao as a mortgage,
petitioner cannot be prejudiced by her husband’s alleged
admission, especially at a time when they were already
estranged.48
Inasmuch as the contract between the parties was an
equitable mortgage, Respondent Sarao’s remedy was to
recover the loan amount from petitioner by filing an
action for the amount due or by foreclosing the
property.49
Second Issue:
Propriety of Tender of
Payment and Consignation
Tender of payment is the manifestation by debtors of
their desire to comply with or to pay their obligation.50 If
the creditor refuses the tender of payment without just
cause, the debtors are discharged from the obligation by
the consignation of the sum due. 51 Consignation is made
by depositing the proper amount to the judicial
authority, before whom the tender of payment and the
announcement of the consignation shall be proved.52 All
interested parties are to be notified of the
consignation.53 Compliance with these requisites is
mandatory.54
The trial and the appellate courts held that there was no
valid consignation, because petitioner had failed to offer
the correct amount and to provide ample consignation
notice to Sarao.55 This conclusion is incorrect.
Note that the principal loan was ₱1,310,430 plus 4.5 per
cent monthly interest compounded for six months.
Expressing her desire to pay in the fifth month,
petitioner averred that the total amount due was
₱1,633,034.19, based on the computation of Sarao
herself.56 The amount of ₱2,911,579.22 that the latter
demanded from her to settle the loan obligation was
plainly exorbitant, since this sum included other items
not covered by the agreement. The property had been
used solely as secure ty for the ₱1,310,430 loan; it was
therefore improper to include in that amount payments
for gasoline and miscellaneous expenses, taxes,
attorney’s fees, and other alleged loans. When Sarao
unjustly refused the tender of payment in the amount of
₱1,633,034.20, petitioner correctly filed suit and
consigned the amount in order to be released from the
latter’s obligation.
The two lower courts cited Article 1257 of the Civil Code
to justify their ruling that petitioner had failed to notify
Respondent Sarao of the consignation. This provision of
law states that the obligor may be released, provided
the consignation is first announced to the parties
interested in the fulfillment of the obligation.
The facts show that the notice requirement was
complied with. In her August 1, 1991 letter, petitioner
said that should the respondent fail to accept payment,
the former would consign the amount.57 This statement
was an unequivocal announcement of consignation.
Concededly, sending to the creditor a tender of payment
and notice of consignation -- which was precisely what
petitioner did -- may be done in the same act.58
Because petitioners’ consignation of the amount of
₱1,633,034.20 was valid, it produced the effect of
payment.59 "The consignation, however, has
retroactive effect, and the payment is deemed to have
been made at the time of the deposit of the thing in
court or when it was placed at the disposal of the
judicial authority."60 "The rationale for consignation is to
avoid making the performance of an obligation more
onerous to the debtor by reason of causes not imputable
to him."61
Third Issue:
Moral Damages and Attorney’s Fees
Petitioner seeks moral damages in the amount of
₱500,000 for alleged sleepless nights and anxiety over
being homeless.62 Her bare assertions are insufficient to
prove the legal basis for granting any award under
Article 2219 of the Civil Code.63 Verily, an award of moral
damages is uncalled for, considering that it was
Respondent Sarao’s accommodation that settled the
earlier obligation of the spouses with the commercial
bank and allowed them to retain ownership of the
property.
Neither have attorney’s fees been shown to be
proper.64 As a general rule, in the absence of a
contractual or statutory liability therefor, sound public
policy frowns on penalizing the right to litigate. 65 This
policy applies especially to the present case, because
there is a need to determine whether the disputed
contract was a pacto de retro sale or an equitable
mortgage.
Other Matters
In a belated Manifestation filed on October 19, 2004,
Sarao declared that she was the "owner of the one-half
share of Jonas Ramos in the conjugal property," because
of his alleged failure to file a timely appeal with the
CA.66 Such declaration of ownership has no basis in law,
considering that the present suit being pursued by
petitioner pertains to a mortgage covering the whole
property.
Besides, it is basic that defenses and issues not raised
below cannot be considered on appeal.67
The Court, however, observes that Respondent Sarao
paid real property taxes amounting to ₱67,567.10 to halt
the auction sale scheduled for October 8, 2004, by the
City of Muntinlupa.68 Her payment was made in good
faith and benefited petitioner. Accordingly, Sarao should
be reimbursed; otherwise, petitioner would be unjustly
enriched,69 under Article 2175 of the Civil Code which
provides:
Art. 2175. Any person who is constrained to pay the
a taxes of another shall be entitled to reimbursement from
the latter.
WHEREFORE, the Petition is partly GRANTED and the
assailed Decision SET ASIDE. Judgment is hereby
rendered:
(1) DECLARING (a) the disputed contract as an
equitable mortgage, (b) petitioner’s loan to Respondent
Sarao to be in the amount of ₱1,633,034.19 as of July
30, 1991; and (c) the mortgage on the property --
covered by TCT No. 151784 in the name of the Ramos
spouses and issued by the Register of Deeds of Makati
City --as discharged
(2) ORDERING the RTC to release to Sarao the
consigned amount of ₱1,633,034.19
(3) COMMANDING Respondent Sarao to return to
petitioner the owner’s copy of TCT No. 151784 in the
name of the Ramos spouses and issued by the Register
of Deeds of Makati City
(4) DIRECTING the Register of Deeds of Makati City to
cancel Entry No. 24057, the annotation appearing on
TCT No. 151784
(5) ORDERING petitioner to pay Sarao in the amount
of ₱67,567.10 as reimbursement for real property taxes
No pronouncement as to costs.
SO ORDERED.