Alcantara v. Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the ownership of one-half undivided portion of Lots 4399 and 4400. Private respondents claim ownership by virtue of a pacto de retro sale executed by Leona C. vda. de Alfonso on September 7, 1983, for P100,000.00, which Leona failed to redeem within the stipulated period. Petitioners, however, assert that Leona C. vda. de Alfonso had already transferred her share in these lots to them in 1975 through a Deed of Extra-Judicial Partition, and that the pacto de retro sale was merely an equitable mortgage. 2. Procedural History: The private respondents filed a civil case for specific performance against the petitioners. The Regional Trial Court (RTC) ruled in favor of the private respondents, declaring the pacto de retro sale as a real sale and the private respondents as one-half co-owners. The RTC ordered partition, reimbursement of one-half of the property's income, attorney's fees, and costs. The petitioners appealed to the Court of Appeals (CA), which affirmed the RTC's decision in part, deleting only the award for attorney's fees. The CA found the pacto de retro sale to be clear and unambiguous, rejecting the claim of equitable mortgage. 3. The Petition: The petitioners are seeking a reversal of the Court of Appeals' decision through a petition for review on certiorari. They argue that the CA erred in (a) upholding the pacto de retro sale over the earlier executed and registered Deed of Extrajudicial Partition, (b) not declaring the pacto de retro sale as a mere equitable mortgage, and (c) ordering them to reimburse one-half of the income from the property. The petitioners contend that the Deed of Extrajudicial Partition, being registered earlier, should prevail, and that the transaction was intended as a mortgage, not a sale.
Issue(s)
Whether the Pacto de Retro Sale prevails over the Deed of Extra-Judicial Partition. Whether the Pacto de Retro Sale is an equitable mortgage. Whether petitioners should be ordered to reimburse one-half of the income derived from the property.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals with a modification. The Court ruled that the Pacto de Retro Sale prevails over the Deed of Extra-Judicial Partition. The Court also held that the transaction was a genuine Pacto de Retro Sale and not an equitable mortgage. The award for reimbursement of one-half of the income was deleted for lack of basis, without prejudice to the application of Article 500 of the Civil Code at the appropriate time.
Ratio Decidendi
On the preference of the Pacto de Retro Sale over the Deed of Extra-Judicial Partition: The Court held that while the Deed of Extra-Judicial Partition was registered earlier, it did not constitute a valid conveyance of Leona C. vda. de Alfonso's share because the alleged deed of sale mentioned therein was never presented as evidence. Registration of a partition agreement that merely mentions a sale is not equivalent to the registration of the sale itself under the Torrens system. For ownership of registered land to be conveyed, the deed of conveyance must be registered, the transfer certificate of title surrendered, and registration fees paid. The petitioners failed to present the alleged deed of sale, rendering the registration of the partition agreement an idle ceremony concerning the transfer of ownership. The title TCT No. 19232 bore no annotation of the alleged sale in favor of the petitioners, but it did bear the annotation of the Pacto de Retro Sale in favor of the private respondents. Therefore, the Pacto de Retro Sale, having been properly registered and annotated on the title, prevails. On whether the Pacto de Retro Sale is an equitable mortgage: The Court affirmed the findings of both the RTC and the CA that the transaction was a genuine Pacto de Retro Sale and not an equitable mortgage. None of the circumstances enumerated under Article 1602 of the Civil Code, which give rise to the presumption of an equitable mortgage, were present. Specifically, the vendor-a-retro (Leona C. vda. de Alfonso) was never in possession of the property before, during, or after the sale. The purchase price was not grossly inadequate, no instrument extending the period of redemption was executed, the vendees-a-retro did not retain any part of the consideration, and the vendor-a-retro did not continue to pay realty taxes. The subsequent actions of the parties, such as the survey for subdivision and meetings to partition the property, indicated an understanding consistent with a sale with right to repurchase. On the reimbursement of income: The Court deleted the award for reimbursement of one-half of the income derived from the property. The Court noted that the private respondents themselves, in their Amended Complaint, prayed that the income be applied to the payment of back taxes. Furthermore, the decisions of both the trial court and the Court of Appeals mentioned no evidence presented regarding the actual income of the property. Therefore, the dispositive portion ordering reimbursement had no basis. However, the Court clarified that this deletion was without prejudice to the application of Article 500 of the Civil Code, which provides for a mutual accounting for benefits received and expenses made upon partition among co-owners.
Main Doctrine
A Pacto de Retro Sale, when properly executed and registered, prevails over a prior unregistered Deed of Extra-Judicial Partition that merely mentions an alleged sale, especially when the alleged sale instrument itself was not presented as evidence. Registration of a partition agreement does not, in itself, constitute registration of a sale mentioned therein for purposes of transferring ownership under the Torrens system.