Villarica v. Court of Appeals

G.R. No. L-19196, 29 November 1968, 26 SCRA 189

FACTS:

On May 19, 1951, the spouses Angel Villarica and Nieves Palma Gil de Villarica sold to the spouses Gaudencio Consunji and Juliana Monteverde a lot containing an area of 1,174 sq. meters, situated in the poblacion of the City of Davao, for the price of P35,000. The instrument of absolute sale dated May 19, 1951 in the form of a deed poll, drafted by Counselor Juan B. Espolong who had been appointed by the Villaricas as their agent to sell the lot, was acknowledged on May 25, 1951, before the same Juan B. Espolong who was also a Notary Public. The public instrument of absolute sale and the vendors’ TCT No. 2786 were delivered to the vendees. On the same day, May 25, 1951, the spouses Consunji executed another public instrument, “, whereby they granted the spouses Villarica an option to buy the same property within the period of one year for the price of P37,750. In July, same year, the spouses Consunji registered the absolute deed of sale, in the names of the spouses Villarica was cancelled and a new TCT No. 3147 was issued in the names of the spouses Consunji.

In February, 1953, the spouses Consunji sold the lot to Jovito S. Francisco for the price of P47,000 by means of a public instrument of sale “. This public instrument of sale was registered in view of which TCT No. 3147 in the names of the spouse Consunji was cancelled and a new TCT in the name of Jovito S. Francisco was issued.

On April 14, 1953, the spouses Villarica brought an action in the Court of First Instance of Davao against the spouses Consunji and Jovito S. Francisco for the reformation of the instrument of absolute sale, into an equitable mortgage as a security for a usurious loan of P28,000 alleging that such was the real intention of the parties. Defendants answered that the deed of absolute sale expressed the real intention of the parties and they also alleged a counterclaim for sums of money borrowed by the plaintiffs from the Consunjis which were then due and demandable. After trial, the Court of First Instance of Davao rendered its decision holding that the instrument of absolute sale, was really intended as an equitable mortgage.

ISSUE:

Whether or not the instrument to be reformed was an equitable mortgage?

RULING:

No. The transaction was not an equitable mortgage.

The vendors did not remain in possession of the land sold as lessees or otherwise. On their request in order to help them in the expenses of their children in Manila, the vendors were merely allowed by the vendees to collect the monthly rents of P300 for five months up to October, 1951, on the understanding that the amounts so collected would be charged against them. But thereafter the vendees were the ones who collected the monthly rents from the tenants. It follows that the vendors did not remain in possession of the land as lessees or otherwise.

(3) In Exh. “D” the Consunjis as new owners of the lot granted the Villaricas an option to buy the property within the period of one year from May 25, 1951 for the price of P37,750. Said option to buy is different and distinct from the right of repurchase which must be reserved by the vendor, by stipulation to that effect, in the contract of sale. This is clear from Article 1601 of the Civil Code, which provides:

Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulation which may have been agreed upon.

The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. Hence, Exhibits “B” and “D” cannot be considered as evidencing a contract of sale with pacto de retro. Since Exh. “D” did not evidence a right to repurchase but an option to buy, the extension of the period of one year for the exercise of the option by one month does not fall under No. 3, of Article 1602 of the Civil Code, which provides that: 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.

*Case digest by Claudette Anne G. Sayson, JD – 4, Andres Bonifacio College, SY 2019 – 2020

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