Baluyot v. Venegas
REITERATIONFacts
The Antecedents: Plaintiffs are the heirs of Crisanto Baluyot, who sold a parcel of land to defendant Eulogio E. Venegas on July 24, 1951, for P4,000.00. The contract contained a stipulation that the vendor, his heirs, or successors-in-interest had the option and priority to repurchase the land for the same consideration at any time after the expiration of ten (10) years from October 1, 1951. Procedural History: On July 18, 1963, the plaintiffs filed an action to compel the defendant to reconvey the land, alleging that their previous offers to exercise the right to repurchase had been unavailing. The Court of First Instance of Bataan rendered judgment for the plaintiffs, ordering the defendant to execute a deed of conveyance upon payment of P4,000.00 and to pay attorney's fees. The Petition: The defendant appealed, arguing that the stipulation granting the option to repurchase was void and contrary to law, specifically Article 1606 of the Civil Code.
Issue(s)
Whether the stipulation granting the option to repurchase the land after the expiration of ten (10) years from the date of the contract is valid. Whether the defense of prescription of action may be pleaded for the first time on appeal.
Ruling
The judgment of the Court of First Instance is reversed, and the complaint is dismissed. The stipulation granting the option to repurchase after the expiration of ten years is declared void.
Ratio Decidendi
On the validity of the stipulation granting the option to repurchase: The Supreme Court held that the stipulation in the contract of sale with pacto de retro, which allowed the repurchase of the land only after the expiration of ten (10) years from October 1, 1951, is void and contrary to law. Article 1606 of the Civil Code provides that in the absence of an express agreement, the right of repurchase shall last four years from the date of the contract, and should there be an agreement, the period cannot exceed ten years from the date of the contract. In this case, the stipulation sought to allow repurchase only after the ten-year period had expired, effectively prohibiting its exercise within the legally permissible period. This contravenes the explicit limitation set by Article 1606, which aims to prevent the indefinite suspension of the vendor's right to repurchase. The Court emphasized that the law must control over the parties' intention when such intention is contrary to law. Therefore, the right to repurchase, under the law, could have been exercised at any time after the making of the contract and prior to the expiration of ten years. The stipulation here attempted to suppress the exercise of the right during the whole period when it might lawfully be exercised, rendering it illicit. On the plea of prescription of action: The Court clarified that the defense raised by the defendant is not a statute of limitation but a matter of substantive law concerning the validity of the period agreed upon for repurchase under Article 1606 of the Civil Code. As such, it does not require an affirmative plea in the answer to be applicable and can be raised at any stage of the proceedings, including on appeal.
Main Doctrine
A stipulation in a contract of sale with pacto de retro that suspends the exercise of the right to repurchase beyond the ten-year maximum period allowed by Article 1606 of the Civil Code is void and contrary to law. The law, not the parties' agreement, controls the period for repurchase.