Oviedo v. Garcia
REITERATIONFacts
The Antecedents: Juana A. Corpuz executed a pacto de retro sale on May 17, 1947, selling 8,607 square meters of Lot No. 4, Plan Psu-95433, to defendants Bartolome Garcia and Francisca Valdez. The period for repurchase was ten (10) years, which lapsed on May 7, 1957, without the right being exercised. The defendants have been in possession and paying land taxes on this portion since May 17, 1947. On January 26, 1949, Juana A. Corpuz and her husband, Eulogio Mangonon, mortgaged the entire Lot 4 (which included the portion sold a retro) to plaintiffs Faustino Oviedo and Patricia Mendoza to secure a P12,000.00 loan. This mortgage was registered on November 5, 1949. Due to non-payment, the mortgage was foreclosed, and the properties were sold at public auction on July 3, 1957, with the plaintiffs being the highest bidders. A certificate of sale was issued and registered on June 25, 1957, and confirmed by the court on October 24, 1957. A writ of possession was issued on November 21, 1957, and served on the defendants on November 27, 1957. The land in question was unregistered land at the time of these transactions. Procedural History: The Court of First Instance of Pangasinan rendered judgment in favor of the plaintiffs, ordering the defendants to vacate the 8,607 square meters and deliver possession thereof, declaring the plaintiffs lawful owners. The defendants appealed this decision. The Petition: The defendants-appellants assigned as their lone error that the lower court erred in concluding that the plaintiffs-appellees have a better right and valid title to the property in question as against the defendants-appellants.
Issue(s)
Whether the plaintiffs-appellees acquired a better right and valid title to the property in question as against the defendants-appellants. Whether the plaintiffs, as purchasers in a foreclosure sale of unregistered land, are bound by a prior pacto de retro sale of a portion of the mortgaged property, of which they had constructive knowledge.
Ruling
The decision of the Court of First Instance is reversed. The defendants-appellants are declared to have a better right and valid title to the portion of the land in question.
Ratio Decidendi
On the issue of whether the plaintiffs-appellees acquired a better right and valid title to the property in question as against the defendants-appellants: The Supreme Court held that the defendants-appellants acquired ownership of the 8,607 square meters by virtue of the pacto de retro sale, as the ten-year period for repurchase had lapsed without the vendor a retro exercising her right. The Court emphasized that by virtue of the pacto de retro sale, the vendees a retro automatically acquired ownership of the property, citing jurisprudence. The fact that the defendants were in possession and paying land taxes further solidified their claim. The Court noted that the lower court's decision could have been sustained had it not been stipulated that the defendants were in possession and paying taxes since May 17, 1947. On the issue of whether the plaintiffs, as purchasers in a foreclosure sale of unregistered land, are bound by a prior pacto de retro sale of a portion of the mortgaged property, of which they had constructive knowledge: The Supreme Court ruled that the plaintiffs, who were mortgagees of the entire Lot 4, were duty-bound to exercise diligence in connection with the mortgage transaction, especially since the lands were unregistered. Had they exercised such diligence, they would have discovered that a portion of Lot 4 had been previously sold a retro to the defendants. The Court reasoned that the plaintiffs were either cognizant of the defendants' possession and claim or accepted the mortgage on the whole lot with at least constructive knowledge of the prior sale a retro. Therefore, they must respect the rights of the defendants. The Court reiterated that the pacto de retro sale automatically vested ownership in the vendees a retro upon the expiration of the redemption period.
Main Doctrine
A vendee a retro who is in possession of the property and has been paying land taxes thereon, and whose vendor a retro failed to repurchase within the stipulated period, acquires ownership of the property. Purchasers of unregistered land are duty-bound to exercise diligence to discover the nature and extent of the rights of the mortgagors in the properties to be mortgaged.