Fernandez v. Suplido
REITERATIONFacts
The Antecedents: Plaintiffs Fernando Fernandez and Natividad Sumatra filed an action to recover possession of a lot, alleging it was sold to them on November 11, 1946, by Jose Suplido, Virgilio Suplido, and Expectacion Suplido for P1,500.00, with a right to repurchase within two years. The defendants, Virgilio Suplido and Expectacion Suplido, claimed the transaction was a loan of P900.00 with usurious interest, secured by a mortgage. Procedural History: The Court of First Instance of Iloilo ruled in favor of the plaintiffs, upholding the validity of the pacto de retro sale. This decision was affirmed by the Court of Appeals on February 18, 1952. The Petition: On March 19, 1952, defendants deposited P1,545.00 with the clerk of court, covering the repurchase price plus costs, and prayed for a deed of resale, invoking Article 1606 of the new Civil Code. The Court of First Instance denied the motion, deeming its decision and that of the Court of Appeals final and that Article 1606 was inapplicable due to plaintiffs acquiring a vested right. Defendants appealed this denial.
Issue(s)
Whether the pendency of a civil action questioning the nature of a pacto de retro sale tolls the conventional period for redemption.
Ruling
The Supreme Court reversed the order of the Court of First Instance, ordering the plaintiffs to execute a deed reconveying the land to the defendants upon delivery of the deposited amount, and directing the Register of Deeds to cancel the notice of lis pendens.
Ratio Decidendi
On Issue 1: The Supreme Court held that the pendency of an action brought in good faith relating to the validity of a sale with pacto de retro tolls the term for the right of redemption. The Court reasoned that once the plaintiffs filed the action for possession in 1947, the defendants could not fairly be expected to exercise their right of redemption because they were actively claiming the transaction was an equitable mortgage rather than a sale. Citing the precedent in Ong Chua v. Carr (53 Phil. 975), the Court established that the litigation itself acts as a suspension of the redemption period to prevent an unjust loss of property rights while the legal character of the transaction is being determined. Consequently, the two-year period stipulated in the 1946 contract was suspended from the filing of the case on January 22, 1947, and only began to run again after the Court of Appeals' decision became final in 1952. Since the defendants made their deposit on March 14, 1952—less than thirty days after the appellate decision—their exercise of the right of redemption was timely as it occurred well within the remaining balance of the original two-year term. The Court further noted that the defendants did not act in bad faith by waiting for the judicial outcome, as they were entitled to a definitive ruling on whether the contract was a sale or a mortgage before being compelled to repurchase.
Main Doctrine
The pendency of an action brought in good faith and relating to the validity of a sale with pacto de retro tolls the term for the right of redemption, and the period for redemption commences to run only after the decision in said action becomes final.