Facundo v. Macapagal
REITERATIONFacts
The Antecedents: Macario Facundo alleged ownership of a parcel of land which he claimed to have mortgaged to Hermenegilda Macapagal for P23 for thirty years. He further alleged that the period had elapsed and Macapagal refused to return the land despite his tender of the sum. Macapagal, in turn, had mortgaged the land to Gregorio Crisostomo. Procedural History: Facundo filed a complaint seeking the return of the land. Crisostomo, after his demurrer was overruled, answered, claiming possession as absolute owner for over ten years under lawful title and in good faith, and that the action had prescribed. The Court of First Instance of Nueva Ecija rendered judgment ordering Crisostomo to restore possession to Facundo upon payment of P23 and to cancel the mortgage. Crisostomo's motion for a new trial was denied, and he appealed to the Supreme Court. The Appeal: The defendant-appellant, Gregorio Crisostomo, argued that the lower court erred in holding that the contract between Facundo and Pio de Guzman (Hermenegilda Macapagal's predecessor) was a mortgage and not a sale with right of repurchase. The appellant contended that the evidence showed the transaction was a sale with right of repurchase, and that Facundo's right to repurchase had prescribed.
Issue(s)
Whether the contract between Macario Facundo and Pio de Guzman was a mortgage or a sale with right of repurchase. Whether Macario Facundo's right to repurchase the land had prescribed.
Ruling
The Supreme Court reversed the judgment of the lower court. It held that the contract was a sale with right of repurchase and that the plaintiff's right to repurchase had prescribed. Consequently, the defendant-appellant, Gregorio Crisostomo, was absolved from the complaint.
Ratio Decidendi
On Issue 1: The Court found that the contract was a sale with right of repurchase, not a mortgage. This conclusion was based on the plaintiff's own sworn application for summary possessory information proceedings filed in 1895. In this application, Facundo stated that he acquired the land through purchase and that it was encumbered to Pio de Guzman under a contract of sale with right of repurchase for P23, with possession for twenty years. The Court emphasized that the language used in the application clearly indicated a sale with right of repurchase, and not a mortgage, especially since a mortgage, to be legally constituted, requires a public instrument and inscription in the registry, which were absent. The Court also noted that the sum of P23 was consistent with the amount Facundo sought to pay for redemption. On Issue 2: The Court ruled that Macario Facundo's right of action to redeem the land had prescribed. The contract was made in 1890, and there was no express stipulation regarding the period for repurchase. Under Article 1508 of the Civil Code, in the absence of a stipulated period, the vendor with right of repurchase could exercise that right within four years from the year the contract was made. Therefore, Facundo's right to repurchase expired in 1894. Since he did not exercise this right within the prescribed period, his right to redeem the land from Pio de Guzman and his successor, Hermenegilda Macapagal, prescribed. As a result, Pio de Guzman and his successor acquired absolute ownership by consolidation, allowing Hermenegilda Macapagal to freely dispose of the land through an absolute sale to Gregorio Crisostomo in 1903. Crisostomo had been in possession as owner in good faith and with lawful title since then, rendering Facundo's action improper.
Main Doctrine
The Supreme Court affirmed that a contract, even if referred to as a mortgage, will be considered a sale with right of repurchase if the evidence, particularly statements made in a sworn possessory information proceeding, clearly establishes that intent. The Court also reiterated that the right of repurchase, if not stipulated for a definite period, must be exercised within four years from the date of the contract, as provided by Article 1508 of the Civil Code. Failure to exercise this right within the prescribed period leads to the prescription of the action and the consolidation of absolute ownership in favor of the vendee.