Badayos v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Clara Badayos executed a Deed of Sale With The Right to Repurchase over her undivided half portion of a lot for P7,400.00, stipulating that the vendor has the right to repurchase the property 'after two (2) years from and after the execution of this contract for the same amount.' Two years after the execution of the contract (March 9, 1973), private respondents filed an action to consolidate ownership, alleging that the petitioner failed to repurchase the property within the stipulated period. Procedural History: In her Answer, the petitioner alleged the document was an equitable mortgage and that she had secured an extension for repurchase, later filing a manifestation that she had consigned P7,400.00 with the Clerk of Court, rendering the case moot. The trial court initially ordered her to file an amended answer and eventually dismissed the complaint, ruling that the petitioner had exercised her right to repurchase within the period stipulated and that even if the right had elapsed, she still had 30 days from final judgment under Article 1606 of the Civil Code. The Court of Appeals reversed the trial court's decision, holding that the petitioner lost her right to redeem as she failed to do so within two years from March 9, 1973, and that her consignation was made after she incurred delay, ruling the action for consolidation of ownership was tenable. The Petition: The petitioner filed a petition for review on certiorari, arguing that she did not abandon her theory of equitable mortgage but merely alleged alternative defenses. She contended that even if the contract was a true sale with right to repurchase, she still had time to exercise her right, and the dismissal by the trial court was justified as the case became moot. She also argued that the Court of Appeals erred in declaring private respondents as lawful owners without a trial on the merits.
Issue(s)
Whether the petitioner was able to repurchase the property in question within the period stipulated in the deed of sale with right to repurchase. Whether the Court of Appeals erred in reversing the trial court's order of dismissal and declaring the private respondents as lawful owners; specifically, concerning the duration of the repurchase period and the necessity of consignation.
Ruling
The petition is GRANTED. The challenged decision of the Court of Appeals is SET ASIDE, and the Order of the trial court dismissing the complaint is REINSTATED and AFFIRMED.
Ratio Decidendi
On the period to repurchase: The stipulation that the vendor has the right to repurchase 'after two (2) years from and after the execution of this contract' must be interpreted literally. This means the right to repurchase could only be exercised after March 9, 1975, not within the two-year period from March 9, 1973. The Court of Appeals erred in holding that the repurchase had to be made within the two-year period. The literal interpretation of the contract is binding when the terms are clear and leave no doubt upon the intention of the contracting parties. The Supreme Court reiterated the rule that the literal meaning of stipulations shall control if they are clear and unambiguous. On the duration of the repurchase period and the consignation of the repurchase price: While the parties agreed on a period during which the right to repurchase could not be exercised (the first two years), they did not specify the period within which it could be exercised thereafter. In such cases, Article 1606 of the Civil Code applies. This article states that the right of repurchase, in the absence of an express agreement, shall last four years from the date of the contract. However, if there is an agreement suspending the right, the period shall be counted from the time such right could be exercised, but not exceeding ten years from the execution of the contract. Therefore, the period to repurchase was four years from March 9, 1975, or until March 9, 1979. The petitioner consigned the repurchase price of P7,400.00 on August 11, 1975. This date falls within the extended period for repurchase (until March 9, 1979). Therefore, the consignation operated as a valid offer or tender of the redemption price. The Court emphasized that consignation was not strictly necessary because the relationship between the petitioner and private respondents regarding the right of redemption was not one of debtor-creditor. The petitioner was exercising a right, not discharging an obligation, and thus a mere tender of payment was sufficient to preserve the right of a vendor a retro.
Main Doctrine
The stipulation in a pacto de retro sale that the vendor has the right to repurchase 'after two (2) years from and after the execution of the contract' means the repurchase can only be exercised after the two-year period has elapsed, not within it. The period to repurchase, in the absence of a specified duration beyond the initial suspension, is governed by Article 1606 of the Civil Code, which allows four years from the date the right to repurchase can be exercised, not exceeding ten years from the execution of the contract. A mere tender of payment is sufficient to preserve the right of a vendor a retro, as consignation is not necessary when the relationship is not one of debtor-creditor but the exercise of a right.