Saclolo v. Marquito
REITERATIONFacts
The Antecedents: The underlying dispute concerns a co-owned parcel of coconut land inherited by petitioners Maxima P. Saclolo and Teresita P. Ogatia from their father. Petitioners claimed they obtained loans from the respondents' father, using the land as collateral. Subsequent loans were also obtained by the petitioners, with their respective shares of the land used as security. The respondents, however, alleged that the initial transaction in 1984 was a sale with a right to repurchase, and they have been in possession of the property as owners since then, introducing improvements. Procedural History: Petitioners filed a Complaint for redemption of mortgaged properties before the Regional Trial Court (RTC), offering to deposit the amounts due. The RTC found the transaction to be an equitable mortgage but dismissed the complaint, ruling that the right to redeem had expired. Petitioners appealed to the Court of Appeals (CA), arguing that the prescriptive period for redemption did not apply to equitable mortgages. The CA initially agreed with the RTC's finding of an equitable mortgage but applied a different prescriptive period. Upon reconsideration, the CA reversed its ruling and agreed with the RTC that the right to redeem had lapsed, affirming the dismissal of the complaint. The Petition: This case is before the Supreme Court on a petition for review on certiorari under Rule 45 of the Rules of Court. Petitioners assail the CA's Decision and Resolution, arguing that the CA erred in ruling that their action to redeem the property had prescribed. They contend that since the transaction was determined to be an equitable mortgage, the prescriptive periods under Article 1606 of the Civil Code for sales with a right to repurchase do not apply. Instead, they argue that the ten-year prescriptive period under Article 1144 for mortgage actions should govern, and their action was filed within this period.
Issue(s)
Whether the action to redeem the subject property has prescribed, considering the nature of the transaction as an equitable mortgage rather than a sale with right to repurchase. Whether the prescriptive period for an equitable mortgage is governed by Article 1606 or Article 1144 of the Civil Code, and when the cause of action for redemption accrued.
Ruling
The Supreme Court granted the petition, reversed the CA's decision, and remanded the case to the RTC for further proceedings. The Court held that the action had not prescribed and that the property should be returned to the petitioners upon full satisfaction of the outstanding loan amount.
Ratio Decidendi
On the Issue of Prescription and Applicable Law: The Court held that the prescriptive period for an action to redeem property under an equitable mortgage is ten (10) years from the accrual of the cause of action, as provided under Article 1144 of the Civil Code, and not the four-year period under Article 1606, which specifically applies to sales with a right to repurchase. The RTC and CA erred in applying Article 1606 to the case, as both lower courts had already established that the true transaction was an equitable mortgage, not a sale with a right to repurchase. An equitable mortgage is a mere accessory contract to secure a principal obligation, which is the loan, and the ownership and possession are retained by the mortgagor. The Court emphasized that the parties' true intention, as determined by the lower courts, was to secure a debt, not to effect a sale with a right to repurchase. The subsequent loans extended by respondents, using the same land as security, further demonstrated their recognition of the subsisting equitable mortgage and the petitioners' continued ownership for nineteen (19) years. On the Issue of Accrual of Cause of Action and Prevention of Pactum Commissorium: The cause of action for redemption accrued in 2004 when respondents refused petitioners' offer to pay and extinguish the loan, manifesting their intent not to comply with the agreement. Therefore, the filing of the complaint in 2005 was well within the ten-year prescriptive period. The Court reiterated that provisions on equitable mortgages are designed to prevent the circumvention of usury laws and pactum commissorium, and that allowing appropriation without foreclosure would be tantamount to pactum commissorium. Respondents are entitled to collect the loan and interest, and to foreclose the mortgage if payment is not made, but not to appropriate the property without due process. The case was remanded to the RTC to determine the outstanding loan amount, applicable interest, and to fix a period for payment, after which the property should be returned to the petitioners upon full satisfaction.
Main Doctrine
The prescriptive period for an action to redeem property under an equitable mortgage is ten (10) years from the accrual of the cause of action, not the four-year period for redemption under Article 1606 of the Civil Code, which applies only to sales with a right to repurchase. The cause of action accrues when the mortgagee manifests an intention not to comply with the true agreement.