Heirs of Tabora v. Court of Appeals
REITERATIONFacts
1. The Antecedents: Dominga Tabora Vda. de Macoy owned a rice land evidenced by TCT No. T-7520. On December 28, 1970, she executed a document titled "Pabilihang Mabibili-Muli" (sale with right to repurchase) in favor of Jesus F. Redillas and Anatalia Elon for P6,000.00, with a repurchase period between December 29, 1973, and December 29, 1975. Dominga died in February 1972, leaving heirs who are the petitioners. Private respondents alleged failure to repurchase and executed an Affidavit of Consolidation of Ownership on May 31, 1977, subsequently filing a petition for Recording of Consolidation of Ownership before the Regional Trial Court (RTC) of Daet, Camarines Norte, docketed as Civil Case No. 2933. 2. Procedural History: The RTC declared the petitioners in default for failing to file an answer and rendered judgment on February 1, 1978, ordering the consolidation of ownership and registration of title in favor of the private respondents. TCT No. T-7520 was cancelled, and TCT No. T-14665 was issued in the name of Jesus F. Redillas. On October 4, 1978, petitioners filed a petition for relief from judgment, alleging improper service of summons and that the document was an equitable mortgage or antichresis, not a pacto de retro sale. The RTC set aside its previous order and decision, granting a new trial. After trial, the RTC rendered judgment on July 16, 1986, in favor of the petitioners, declaring the document an equitable mortgage and ordering the cancellation of TCT No. T-14665 and restoration of TCT No. T-7520. Private respondents appealed to the Court of Appeals (CA), which reversed the RTC decision on September 4, 1990, ordering the consolidation of ownership in favor of the private respondents and the cancellation of TCT No. T-7520. The CA denied the motion for reconsideration on October 17, 1990. 3. The Petition: The petitioners filed a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse the decision of the Court of Appeals. They argue that the CA erred in setting aside their petition for relief from judgment and in holding that the transaction was a pacto de retro sale. Petitioners contend that the service of summons was invalid, rendering the initial RTC decision void, and that their petition for relief should have been treated as an action for annulment of judgment. They also assert that even if it were a pacto de retro sale, they validly exercised their right to repurchase, citing inadequate consideration and the continued payment of real estate taxes by the original owner. Private respondents counter that the summons was validly served, Article 1606 of the Civil Code is inapplicable, and the transaction was a genuine pacto de retro sale with adequate consideration.
Issue(s)
Whether the Court of Appeals erred in setting aside the petition for relief from judgment filed by the petitioners. Whether the transaction between Dominga Tabora Vda. de Macoy and Jesus F. Redillas was a pacto de retro sale or an equitable mortgage. Whether the petitioners validly exercised their right to repurchase the property.
Ruling
The petition is denied. The decision of the Court of Appeals dated September 4, 1990, and its resolution dated October 17, 1990, are affirmed. Consolidation of ownership in favor of private respondents is granted.
Ratio Decidendi
On the validity of the petition for relief and the RTC's setting aside of its default judgment: The Supreme Court affirmed the trial court's finding that no valid service of summons was effected on most of the petitioners. Service of summons is crucial for a court to acquire jurisdiction over a person's person, and without it or a valid waiver, any subsequent trial and judgment are void for lack of due process. Although the petition for relief was filed beyond the reglementary period, the Court treated it as an action for annulment of judgment because it aimed to nullify the decision based on lack of jurisdiction. An action to declare the nullity of a void judgment does not prescribe, thus, the trial court correctly set aside its previous decision. On whether the transaction was a pacto de retro sale or an equitable mortgage: The Supreme Court held that the document was a genuine sale with right to repurchase (pacto de retro). It found no evidence to support the presumption of an equitable mortgage under Article 1602 of the Civil Code. The price was not unusually inadequate, the vendor did not remain in possession as lessee or otherwise, no subsequent instrument extended the redemption period, the purchaser did not retain part of the purchase price, and the vendor did not bind herself to pay taxes. On the contrary, evidence showed the private respondent paid real estate taxes for the years 1974-1977. The Court emphasized that the contract is the law between the parties and its words, being clear and understandable, leave no room for construction. On the exercise of the right to repurchase: The Supreme Court ruled that the petitioners could not avail themselves of the third paragraph of Article 1606 of the Civil Code, which allows repurchase within 30 days from final judgment declaring the contract a true sale with right to repurchase. Citing Felicen, Sr. v. Orias, the Court explained that the application of this provision is predicated on the bona fide belief of the vendor a retro that the agreement was a mortgage, not a sale. In this case, there were no circumstances that could reasonably generate honest doubt as to the parties' intention that the transaction was a sale with a right to repurchase. Allowing repurchase under such circumstances would alter or modify the stipulated redemption period and resurrect an expired right, potentially serving as a tool for fraud and bad faith. Therefore, the stipulated redemption period had long expired, and the right to repurchase was extinguished.
Main Doctrine
A void judgment, rendered without valid service of summons, never acquires finality and can be attacked anytime, even beyond the reglementary period for a petition for relief from judgment, by treating such petition as an action for annulment of judgment. The application of Article 1606, paragraph 3 of the Civil Code, allowing repurchase within 30 days from final judgment declaring the contract a true sale with right to repurchase, is predicated on the bona fide belief of the vendor a retro that the agreement was a mortgage, not a sale.