Abilla v. Gobonseng
REVERSALFacts
The Antecedents: Respondent Carlos Ang Gobonseng, Jr. (Gobonseng) obtained a loan of P550,000.00 from petitioners Ronaldo P. Abilla and Geralda A. Dizon (Abilla), secured by a real estate mortgage over two parcels of land. Gobonseng defaulted, and his obligation increased to P700,000.00. He issued a postdated check for P690,000.00, which was dishonored. Gobonseng borrowed the titles to the mortgaged properties from Abilla to mortgage them for a loan from State Investment House, Inc. Despite the loan's approval, Gobonseng failed to pay Abilla. Consequently, Gobonseng executed a deed of absolute sale over seventeen lots in Dumaguete City in favor of Abilla and simultaneously executed an Option to Buy, allowing him to repurchase the lots within six months. Procedural History: Gobonseng failed to repurchase the lots within the stipulated period. Abilla filed an action for specific performance to compel Gobonseng to pay capital gains tax and registration expenses. The Regional Trial Court (RTC) ruled in favor of Abilla, declaring the Option to Buy void due to Gobonseng's failure to exercise it within the period. The Court of Appeals (CA) affirmed the RTC decision but declared the deed of sale and option to buy as a pacto de retro sale. This decision became final on February 8, 1999. On February 27, 1999, Gobonseng filed a motion to repurchase the lots with tender of payment, which was initially denied. However, the RTC later issued an order granting Gobonseng's motion for reconsideration, allowing him to repurchase the lots within thirty days from the finality of that order. The Petition: Abilla filed a petition for review, assailing the RTC's order that granted Gobonseng the right to repurchase. The Supreme Court initially reversed the RTC's order, denying Gobonseng the right to repurchase. Gobonseng filed a Motion for Reconsideration.
Issue(s)
Whether the third paragraph of Article 1606 of the Civil Code applies to the case, granting respondents the right to repurchase the lots, considering their belief about the nature of the transaction. Whether the Supreme Court erred in applying the case of Vda. de Macoy v. Court of Appeals to the instant case, and the proper period for repurchase.
Ruling
The Supreme Court set aside its Decision dated January 17, 2002, denied the petition, and ordered the petitioners to accept the payment tendered by respondents and to execute the necessary deed of sale conveying the subject lots to respondents. The Court ruled that the third paragraph of Article 1606 of the Civil Code is applicable, granting respondents the right to repurchase the lots.
Ratio Decidendi
On the applicability of Article 1606, third paragraph, of the Civil Code: The Court clarified that the third paragraph of Article 1606 of the Civil Code applies when the vendor a retro honestly and sincerely believed that the agreement was in reality a mortgage, founded on facts attendant upon the execution of the sale with pacto de retro. This belief must be honestly and sincerely entertained, not merely a pretense to resurrect an expired right. In this case, the peculiar factual background, including the initial loan and mortgage, the cancellation of the mortgage, and the execution of the deed of sale and option to buy after the loan became unsecured and the obligation remained unpaid, supported the respondent's belief that the transaction was intended as security for his indebtedness. Therefore, the respondent may avail of the provisions of Article 1606, third paragraph, and repurchase the lots. On the application of Vda. de Macoy v. Court of Appeals and the period to repurchase: While the Court initially applied Vda. de Macoy v. Court of Appeals to hold that Article 1606 does not apply when the parties intended a true sale, upon a careful review, the Court found that the circumstances of the present case align with the exception discussed in Vda. de Macoy itself. The Vda. de Macoy ruling emphasizes the importance of the bona fide intent of the vendor a retro. In the instant case, the respondent's consistent assertion that the transaction was an equitable mortgage, coupled with the factual antecedents, demonstrated his honest belief that the sale was merely for security. Thus, the Court found that the doctrine in Vda. de Macoy, when properly understood in light of the factual context, actually supports the application of Article 1606, third paragraph, in favor of the respondent. The Court corrected the trial court's error in fixing the repurchase period from the finality of its order. Pursuant to Article 1606, third paragraph, the thirty-day period for repurchase should be counted from the date of finality of the judgment declaring the transaction as a pacto de retro sale, which was February 8, 1999. The respondent's filing of the urgent motion to repurchase on February 27, 1999, was therefore timely.
Main Doctrine
The third paragraph of Article 1606 of the Civil Code, which allows a vendor a retro to repurchase within thirty days from the finality of a judgment declaring the contract a true sale with right to repurchase, applies when the vendor honestly and sincerely believed that the agreement was in reality a mortgage, founded on facts attendant upon the execution of the sale with pacto de retro.