Vallangca v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners are the heirs of Ana Billena, who inherited an undivided one-half interest in a parcel of land originally registered in the name of "Heirs of Esteban Billena" and later covered by Transfer Certificate of Title (TCT) No. 1005 in the names of Maximiniana Crisostomo and Ana Billena. In 1944, Ana Billena, allegedly to cover burial expenses for her deceased husband, mortgaged the land to her cousin, Nazario Rabanes, for P800.00 in Japanese war notes. This land was already mortgaged to the Philippine National Bank (PNB). In 1946, Rabanes presented a document to Ana Billena, who was illiterate, claiming it was a mortgage contract. She signed it. Later, she learned it was a deed of absolute sale. She and her son Benjamin attempted to redeem the land by tendering P800.00 in legal currency, but Rabanes refused, stating it was no longer redeemable. Procedural History: In 1971, Rabanes filed an injunction suit against Ana Billena and her sons. The trial court advised that injunction was not the proper cause of action. In 1972, Rabanes filed a second complaint for "Recovery of Possession." The injunction suit was dismissed. The Court of First Instance ruled in favor of Rabanes, declaring him the rightful owner and ordering petitioners to vacate. The Court of Appeals affirmed this decision. The Petition: Petitioners appealed to the Supreme Court, arguing that the dismissal of the injunction case barred the recovery of possession due to res judicata. They also contended that the action had prescribed and that the sale was invalid due to inadequate price and the inability of Ana Billena to sell her co-owner's share without proper adjudication. The Supreme Court, however, found that the deed of sale was an equitable mortgage and that petitioners had the right to repurchase the property.
Issue(s)
Whether the dismissal of the injunction suit bars the subsequent action for recovery of possession based on res judicata. Whether the action for recovery of possession had prescribed. Whether the deed of absolute sale executed by Ana Billena in favor of Nazario Rabanes was a genuine sale or an equitable mortgage. Whether the sale of land acquired under a free patent is subject to a right of repurchase by the heirs.
Ruling
The Supreme Court REVERSED and SET ASIDE the decision of the Court of Appeals. Petitioners were granted the right to redeem the property upon returning P800.00 to the private respondents, with 12% interest per annum from January 1, 1962, until fully paid.
Ratio Decidendi
On the issue of res judicata: The Supreme Court held that the defense of res judicata was unavailing. While the dismissal of the injunction suit had become final before the defense was set up in the second action, the injunction suit was merely an ancillary action and not a main action. A writ of injunction presupposes the pendency of a principal action, and since there was no main action when the injunction suit was filed, it was correctly dismissed. Consequently, there could be no prior judgment on the merits that would result in res judicata. On the issue of prescription: The Supreme Court affirmed the Court of Appeals' ruling that the action for recovery of possession was timely filed. The Court of Appeals found that Rabanes was dispossessed in 1962, and the action was filed in 1972, approximately ten years later. This falls within the thirty-year prescriptive period for real actions over immovables under Article 1141 of the Civil Code. On the issue of whether the deed of sale was an equitable mortgage: The Supreme Court concluded differently from the lower courts, finding the deed of sale to be an equitable mortgage. This conclusion was based on two factors: (1) the gross inadequacy of the price (P800.00 in Japanese war notes, or about 30% of the assessed value of P2,620.00), which is a ground for presumption of equitable mortgage under Article 1602 of the Civil Code; and (2) the continuous physical possession of the property by the petitioners (Ana Billena and her sons) for almost nine years from 1962 until the injunction case was filed in 1971, despite Rabanes' claim of dispossession in 1962. The Court noted that even if Rabanes had possession through tenants from 1946 to 1962, the subsequent possession by petitioners for nine years without Rabanes taking action further supported the equitable mortgage theory. On the issue of the right to repurchase land acquired under free patent: The Supreme Court emphasized that lands acquired under free patent are subject to specific restrictions under Act No. 2874 (now Commonwealth Act No. 141). Section 117 of Act No. 2874 mandates that such conveyances are subject to repurchase by the applicant, his widow, or legal heirs for a period of five years from the date of conveyance. In this case, the free patent was issued on December 5, 1936. Assuming the sale occurred in 1946, it was after the initial five-year prohibition on alienation. However, it was still subject to the right of repurchase by Ana Billena or her heirs within five years from February 2, 1946. The Court found that Ana Billena exercised this right in 1946 by tendering the P800.00 to Rabanes, which act, according to Peralta v. Alipio, is sufficient to exercise the right to repurchase. Therefore, Rabanes' title remained revocable and unconsolidated.
Main Doctrine
A deed of sale, absolute in form, may be presumed to be an equitable mortgage under Articles 1602 and 1604 of the Civil Code if there is gross inadequacy of price or if the vendor remains in possession. Furthermore, lands acquired under free patent are subject to a right of repurchase by the heirs within five years from the date of conveyance, even if not stipulated in the deed of sale.