Zubiri v. Quijano
REITERATIONFacts
The Antecedents: Petitioner Feliza Zubiri entered into a contract dated May 15, 1934, with respondent Lucio Quijano, purporting to be a two-year pacto de retro sale of three parcels of land for P700. Procedural History: The Court of Appeals held that the contract was an equitable mortgage, ordering petitioner to pay respondent P700 within three months, with legal interest from November 15, 1937. It further ordered that in default of payment, the land be sold at public auction. The Petition: Petitioner appealed, contending that the Court of Appeals erred in ordering the sale of the land because the contract, not being registered under the Land Registration Act, could not operate as a mortgage justifying foreclosure. Petitioner also alleged that the Court of Appeals erred in not finding that she had paid usurious interest to the respondent.
Issue(s)
Whether an unregistered pacto de retro sale, construed as an equitable mortgage, can justify foreclosure. Whether the petitioner paid usurious interest to the respondent.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals with modification, ordering that the petitioner should be sentenced to pay interest only from the date the Supreme Court's decision becomes final. The costs were against the petitioner.
Ratio Decidendi
On the issue of foreclosure of an unregistered pacto de retro sale construed as an equitable mortgage: The Court held that the contention of the petitioner has no merit. The contract, which was a pacto de retro sale, was correctly held to be an equitable mortgage. From its very nature, the lien created by an equitable mortgage should not be defeated by requiring compliance with the formalities necessary for a voluntary real estate mortgage, as long as the land remains in the hands of the petitioner and the rights of innocent third parties are not affected. The Court cited the case of Correa vs. Mateo and Icasiano (55 Phil., 79), where an unrecorded pacto de retro sale was construed as an equitable mortgage, and the plaintiff was granted the right to foreclose the mortgage within sixty days after final judgment for failure to pay the amount due. On the issue of usurious interest: The Court accepted the pronouncements of the Court of Appeals that the petitioner's claim of usurious interest was insostenible. These pronouncements were conclusions of fact, and the Supreme Court, not being authorized to re-examine the evidence, must accept them for the purposes of the appeal. Therefore, the Court found no error in the Court of Appeals' decision regarding the absence of usurious interest.
Main Doctrine
An unrecorded pacto de retro sale, when construed as an equitable mortgage, can be foreclosed despite non-compliance with formalities of a voluntary real estate mortgage, provided the land remains in the possession of the mortgagor and the rights of innocent third parties are not prejudiced.