Abilla v. Gobonseng
REITERATIONFacts
The Antecedents: Petitioner spouses Ronaldo P. Abilla and Gerald A. Dizon entered into a transaction with respondent spouses Carlos Ang Gobonseng, Jr. and Theresita Mimie Ong involving seventeen lots in Daro and Bantayan, Dumaguete City, covered by TCT Nos. 14321-14337. The parties executed a 'Deed of Sale' and an 'Option to Buy,' which respondents later claimed constituted a sale with right of repurchase (pacto de retro) but was actually an equitable mortgage for a P896,000.00 loan, with repurchase deadline on August 31, 1983. Petitioners incurred expenses of P171,483.40 for preparation, registration, bank payments, and capital gains tax, and deposited rentals from a house on one lot with Philippine National Bank. Respondents never consigned the alleged loan amount during the repurchase period, instead defending subsequent litigation by insisting on the mortgage theory. Procedural History: Petitioners filed Civil Case No. 8148 for specific performance, recovery of expenses, and damages before RTC Dumaguete City, Branch XLII. Trial court ruled in petitioners' favor on October 29, 1990, declaring no equitable mortgage or pacto de retro but a straight sale with option to buy until August 31, 1983, awarding expenses, damages, attorney's fees, and directing release of rentals. On appeal, CA modified on December 15, 1993, declaring it a pacto de retro sale, deleting attorney's fees but affirming the rest. Respondents' petition in G.R. No. 131358 was dismissed for late filing on February 11, 1998, with final denial on June 17, 1998, and second MR denied February 8, 1999. Respondents then filed urgent motion to repurchase in trial court on February 23, 1999, denied November 10, 1999; reraffled to Branch 41, which granted it on January 14, 2001. The Petition: Petitioners assail the RTC order, arguing respondents cannot invoke Article 1606(3) after consistently claiming equitable mortgage, lacking bona fides, and failing to raise the issue timely. Respondents counter that CA's pacto de retro declaration entitles them to repurchase within 30 days of finality, abandoning mortgage theory opportunistically.
Issue(s)
May vendors in a judicially declared pacto de retro sale exercise repurchase under Article 1606, third paragraph, Civil Code, after previously insisting the transaction was an equitable mortgage?
Ruling
The petition is GRANTED. The January 14, 2001 Order of RTC Dumaguete City, Branch 41, in Civil Case No. 8148, is REVERSED and SET ASIDE. Respondents are denied the right to repurchase the seventeen lots.
Ratio Decidendi
On the Issue: The third paragraph of Article 1606 applies only to vendors a retro acting in bona fides, with an honest belief founded on execution facts that the contract was a mortgage, not a true sale transferring ownership but merely securing a loan. Here, both trial court (initially) and CA unequivocally held the 'Deed of Sale' and 'Option to Buy' a pacto de retro sale, finding no Article 1602 circumstances for equitable mortgage, such as inadequate price or retention of possession. Respondents consistently defended as mortgage even post-CA decision, only shifting after failing to reverse via Supreme Court petition (G.R. No. 131358, dismissed for tardiness), evidencing bad faith rather than sincere doubt. In parallel Vda. de Macoy v. Court of Appeals (206 SCRA 244, 1992), the Court ruled the proviso inapplicable where no honest doubt exists, as allowing otherwise enables vendors to fraudulently reform contracts, nullify sales, and revive expired periods (here, post-August 1983). Adorable v. Inacala similarly denied relief where proofs showed clear pacto de retro intent. Respondents' failure to consign P896,000.00 by August 21, 1983, undermines good faith claim, as good faith mortgagors would tender principal to redeem. Thus, judicial declaration as pacto de retro does not trigger Article 1606(3) repurchase, preventing abuse of litigation to reward inconsistency and fraud.
Main Doctrine
The third paragraph of Article 1606 of the Civil Code, allowing repurchase within thirty days from final judgment declaring a contract a true sale with right to repurchase, applies only upon the bona fides of the vendor a retro, evidenced by an honest and sincere belief, founded on facts at execution, that the agreement was actually a mortgage securing a loan rather than transferring ownership. Absent such good faith, where the transaction is clearly a pacto de retro sale with no circumstances under Article 1602 suggesting an equitable mortgage, the provision cannot be invoked to revive an expired repurchase right. This prevents vendors from nullifying pacto de retro sales or resurrecting lapsed redemption periods by fraudulently litigating to reform the contract into a mortgage, which they knew was not. The Supreme Court in Vda. de Macoy v. Court of Appeals held that applying the proviso otherwise would reward bad faith and alter definite repurchase stipulations. In this case, respondents' consistent mortgage claim, lack of consignation during the original period, and post-judgment shift demonstrate no honest doubt, rendering Article 1606 inapplicable.