Adorable v. Inacala
REITERATIONFacts
The Antecedents: Respondent Irinea Inacala was the registered owner of a parcel of land. On July 1, 1941, she executed a deed of sale (Exhibit B) in favor of Arcadio Mendoza for P420.00. Concurrently, Mendoza executed a private instrument (Exhibit C) granting Inacala the option to repurchase the lot within one year from the date of sale. Mendoza subsequently sold the property to spouses Eugenio and Margarita Ramos, who obtained a transfer certificate of title. Petitioners, all surnamed Adorable, later purchased the land from the Ramos spouses and secured their own transfer certificate of title. Procedural History: Inacala remained in possession of the land since the initial sale in 1941 and did not redeem it. It was only in 1951, when petitioners attempted to take physical possession through a lessee, that they became aware of Inacala's claim. The Petition: Petitioners appealed the decision of the Court of Appeals, which held the deed of sale to be a pacto de retro sale and allowed respondent Inacala to exercise the right of repurchase under the third paragraph of Article 1606 of the Civil Code of the Philippines.
Issue(s)
Whether the Court of Appeals erred in applying the third paragraph of Article 1606 of the Civil Code of the Philippines to the case. Whether the transaction between Inacala and Mendoza was a pacto de retro sale. Whether petitioners were purchasers in good faith.
Ruling
The decision of the Court of Appeals is reversed. Petitioners are declared owners of the land in controversy.
Ratio Decidendi
On the applicability of Article 1606 of the Civil Code: The Court held that the Court of Appeals erred in applying the third paragraph of Article 1606 of the new Civil Code. This provision pertains to situations where one party contests or denies that the true agreement is a sale with a right to repurchase. In the present case, the sale (Exhibit B) was expressly with the right to repurchase, as evidenced by Exhibit C, which granted respondent Inacala the right to redeem within one year. Since this stipulated period expired without redemption, the ownership was irrevocably acquired by the original purchaser, Arcadio Mendoza, in accordance with Article 1509 of the old Civil Code, which was in effect at the time of the transaction. The Court emphasized that the express stipulation in Exhibit C clearly defined the nature of the transaction as a sale with a right to repurchase, and the failure to exercise this right within the agreed period extinguished the right to redeem. On the nature of the transaction: The Court affirmed the Court of Appeals' finding that the transaction was indeed a pacto de retro sale, citing Exhibit C as conclusive evidence of this fact. Exhibit C explicitly granted respondent Inacala the option to repurchase the property within a specified period. This acknowledgment of the repurchase option by the parties themselves solidified the classification of the sale as one with a right to repurchase. On whether petitioners were purchasers in good faith: The Court found it unnecessary to discuss the contention that the petitioners were not purchasers in good faith, given its resolution of the primary issue regarding the expiration of the redemption period. The determination that ownership had irrevocably vested in the vendee due to the failure to redeem within the stipulated time rendered the subsequent good faith of the purchasers of secondary importance in establishing ownership.
Main Doctrine
Where a deed of sale with a right to repurchase is expressly stipulated, and the stipulated period for redemption expires without the vendor having exercised the right, the ownership of the property is irrevocably acquired by the vendee, pursuant to Article 1509 of the Civil Code of the Philippines (Old Civil Code).