Balatero v. Intermediate Appellate Court
REITERATIONFacts
1. The Antecedents: The Director of Lands initiated cadastral proceedings for 1419 lots in Iligan City. Petitioners Florencio Balatero and the heirs of Josefa Badelles sought adjudication of Lot Numbers 433-A and 433-B. Private respondent Juan Veloso also claimed Lot No. 433. Lot No. 817 was identified by cadastral surveyors for the widening of a national street and was admitted to be part of the public domain. Josefa Iglupas inherited Lot No. 433 from her parents. After her brother Alejo Iglupas died, his widow Tomasa Ronda and son Severo sold the lot to Josefa Iglupas and her husband Juan Badelles in 1918 for P111.00. Josefa and her family occupied the lot and built a house. Josefa Iglupas executed a "Pacto de Retro Sale" (Exh. "B") on June 9, 1930, selling Lot No. 433 to Juan Veloso for P68.00, with a reservation to repurchase within four months. This loan was allegedly paid in 1947. On April 30, 1954, Josefa Iglupas and her children sold a portion of the lot (Lot 433-A) to Florencio Balatero. The lot was later resurveyed and subdivided into Lot 433-A (98 sq. meters) for Balatero and Lot 433-B (118 sq. meters) for the Heirs of Josefa Badelles. Josefa Iglupas and her heirs consistently possessed the property, declared it in her name, and paid taxes. Balatero also declared his portion in his name and paid taxes. 2. Procedural History: The Court of First Instance of Lanao del Norte adjudicated Lot 433-A to Florencio Balatero and Lot 433-B to the Heirs of Josefa Badelles, declaring Lot 817 as property of the State. The Intermediate Appellate Court reversed this decision, adjudicating the whole of Lot No. 433 (both 433-A and 433-B) to Juan Veloso. Petitioners' motion for reconsideration was denied. 3. The Petition: Petitioners seek review of the appellate court's decision, arguing that the appellate court erred in holding the "Pacto de Retro Sale" as a genuine sale and not an equitable mortgage, in disregarding petitioners' possession and claim by prescription, and in nullifying the sale to Balatero.
Issue(s)
Whether the "Pacto de Retro Sale" executed in 1930 between Josefa Iglupas and Juan Veloso should be considered an equitable mortgage, and whether Article 1602 of the New Civil Code applies retroactively. Whether the petitioners acquired ownership of Lot No. 433 through acquisitive prescription. Whether the sale of Lot 433-A to Florencio Balatero was valid, considering the nature of the transaction between Josefa Iglupas and Juan Veloso.
Ruling
The petition is GRANTED. The decision of the Intermediate Appellate Court is REVERSED and SET ASIDE. The decision of the Court of First Instance of Lanao del Norte is REINSTATED.
Ratio Decidendi
On the nature of the "Pacto de Retro Sale" and the applicability of Article 1602: The Court held that the "Pacto de Retro Sale" executed in 1930 between Josefa Iglupas and Juan Veloso should be considered an equitable mortgage. The Intermediate Appellate Court erred in declining to apply Article 1602 of the New Civil Code on the ground that it was a new provision not found in the Old Civil Code. The Supreme Court reiterated its ruling in Santos v. Duata that Article 1602, being remedial in nature, may be applied retroactively to cases arising prior to the effectivity of the New Civil Code. The Court found circumstances indicating an equitable mortgage: (1) Josefa Iglupas remained in possession of the property after the execution of the contract, contrary to the nature of a sale; (2) the consideration of P68.00 in 1930 was unusually inadequate, especially since Josefa Iglupas had purchased the same property in 1918 for P111.00, and property values generally appreciate over time; and (3) Josefa Iglupas continued to pay taxes, mortgage the property, and exercise acts of ownership. On acquisitive prescription: The Court found that the petitioners, through Josefa Iglupas and her heirs, had been in open, adverse, continuous, peaceful, and uninterrupted possession of the property under a claim of ownership since 1918. This possession, spanning over 40 years by the time of the trial, was sufficient to acquire ownership by prescription under Article 41 of the Code of Civil Procedure and Article 1137 of the Civil Code. The affidavit executed by Juan Veloso in 1934 to consolidate his ownership was deemed of no consequence as his purported title was an equitable mortgage, not a sale, and thus he never had actual possession or control that could ripen into ownership. On the validity of the sale to Florencio Balatero: The Court affirmed the trial court's finding that Florencio Balatero acquired a registerable title over Lot No. 433-A through his purchase from Josefa Iglupas. Since the transaction between Josefa Iglupas and Juan Veloso was determined to be an equitable mortgage, Josefa Iglupas retained the right to sell portions of the property. Balatero's purchase was made in good faith for value, and his claim was recognized by the trial court. The appellate court's reversal of this finding was deemed reversible error.
Main Doctrine
A contract denominated as a Pacto de Retro Sale, executed in 1930, can be presumed to be an equitable mortgage under Article 1602 of the New Civil Code, even if the provision was not present in the Old Civil Code, as it is remedial in nature and can be applied retroactively. The presence of any of the circumstances enumerated in Article 1602, such as unusually inadequate price or the vendor remaining in possession, is sufficient to establish the presumption of an equitable mortgage.