GR L 16202; (November, 1920)

EN BANC

G.R. No. L-16202; November 5, 1920

COSME MANALO, ET AL., plaintiffs-appellees,

vs.
MANUEL GUECO, defendant-appellant.

Araneta & Zaragoza for appellant.
Ramon Diokno for appellees.

JOHNSON, J.:

On July 10, 1917, the Director of Lands, acting under the provisions of Act No. 2259, presented in the Court of First Instance of the Province of Pampanga a petition for the settlement and adjudication of the titles to several parcels of land in the municipality of Magalang, of the said province (cadastral case No. 5, R. G. No. 16202). ¹On the 12th day of December, 1917, Cosme Manalo and others brought an action in the same court against Manuel Gueco to recover the possession, as owners, of a certain parcel of land, particularly described in paragraph 1 of the complaint (civil cause No. 1643 [Manalo vs. Gueco], R. G. No. 16203). ²The particular parcel of land involved in the latter action being also involved in the said cadastral case between the same parties as claimants, the two causes were, by stipulation, consolidated and tried together.

There is no dispute as to the identity of the land here in question (lot No. 369-A; stipulation, fols. 280-281, rec.). Said land formerly belonged to one Hilario Manalo. Upon his death, it passed pro indiviso to his heirs, Cosme Manalo and others (the appellees herein).

On May 19, 1894, the appellees executed a private instrument, the pertinent part of which is as follows:

We, Don Monico Lacsamana and Don Cosme Manalo, . . . , hereby declare that the parcel of land which we have inherited from Don Hilario Manalo, deceased, has been redeemed by us. . . . , from Señor Capitan Don Angel de Lisa and his wife Doña Teresa Dizon, for the sum of two thousand one hundred ninety-three pesos, two reales and ocho cuartos, lawful and current money for which it was mortgages; and we have sold it with the right to repurchase to Doña Manuela Samson y Quiambao, widow, resident also of Conception, for the same sum of two thousand one hundred ninety-three pesos, two reales and ocho cuartos, lawful money, which we have wholly received and for which reason the possession, ownership, and usufruct of the land as well as all the title papers of fifty-two leaves have been delivered to her, and she may do whatever she likes with them; and in case of suit concerning this land, we bind our ourselves to defend her rights at our expense; but our agreement is that in case we should be able to repurchase the land within the customary period, those of us not having the whole amount to contribute the sum which they may be able to bring, we may do so, it being understood, however, that we cannot redeem the land until after two years have passed from this date. (Exhibit B-43.)

After the execution of the foregoing document some of the heirs above referred to, individually, at various times, obtained from the said Manuela Samson various sums as “increase of the price of the land sold with a right to repurchase to the said Samson.” (See Exhibits B-44 to B-56, inclusive); so that by the 29th day of July, 1897, the said heirs had obtained from the said Manuela Samson, altogether the sum of P3,728.

On the last mentioned date (July 28, 1897) Manuela Samson, by means of a notarial document (Exhibit C) sold the land in question to the appellant herein Manuel Gueco, for the said sum of P3,728, “it being understood to be without prejudice to the right which the heirs of Don Hilario Manalo have in said property, which heirs may acquire its ownership provided they repay to Don Manuel Gueco y Castro the sum of P3,728, for which said land was sold by them and by reason of which sum Don Manuel Gueco y Castro was subrogated in all the rights and actions which belonged to Doña Manuela Samson, and provided that said heirs of Don Hilario Manalo should make use of the right or redemption within the period stipulated with Doña Manuela Samson for the repurchase.”

Such was the manner by which the defendant-appellant came to be the possessor of the land in question.

The plaintiffs alleged that in the year 1909, as well as in subsequent years, they offered to redeem the land in question from the defendant, tendering to him the sum of P3,813 (the total amount they had obtained from him), but that the latter refused to accept the same and to return the possession of the land in question to them. The defendant denies that the plaintiff’s ever made any such offer to repurchase said land until the year 1917. The record shows that the original complaint in the action (R. G. No. 16203) was not presented until 12th day of December, 1917. The record also shows that the attorney for the plaintiffs made formal offers, in writing, to redeem the land in question from the defendant on April 16, 1918, and September 7, 1918 (fol. 283.)

The theory of the plaintiffs is, that the defendant holds the land in question merely as a guaranty for the payment of their debt to him. The theory of the defendant is, that he had purchased the said land under a pacto de retro and that, since the plaintiffs-vendors did not repurchase the same within the period prescribed by law, the title thereto had become consolidated in him and, therefore, he is the absolute owner thereof.

The lower court was of the opinion that: “While there exist documents which apparently indicate that the land was sold with the right to repurchase to the different creditors above-mentioned, all the circumstance surrounding the case show that the transaction between the parties was merely a contract of loan with the land as a guaranty,” and rendered a judgment declaring the plaintiffs to be the owners of the land in question upon payment by them to the defendant of the sum of P3,825, and order that said land be registered in their name, with costs against the defendant. From that judgment the defendant appealed to this court. The plaintiffs also appealed from said judgment insofar as the same did not require the defendant to pay to them the value of the produce of the land in question from the date of the complaint. Said appeal of the plaintiffs was perfected separately from the present appeal of the defendant. (See Manalo vs. Gueco, R. G. No. 15701 ³ and see also separate opinion.)

The only question presented by the present appeal is whether or not the contract (Exhibit B-43, above quoted) entered into between the plaintiffs and Manuela Samson, to whose rights the present defendant was subsequently subrogated (Exhibit C), was really a sale with pacto de retro or merely a loan with a guaranty of the land in question.

During the trial of the cause all of the documents referring to the land in question (Exhibits B-1 to B-56, inclusive) were offered as evidence by both parties, “there being reserved of course to the plaintiff the right to prove that that part where it says “sale with the right to repurchase” was intended to be understood merely as a “loan with a guaranty.” (Folio 218.)

The only proof adduced by the plaintiffs in support of their contention that where the phrase “venta con pacto de retro” was used, “ prestamo con garantia” was meant, consist of the testimony of Manuela Samson and that of the plaintiff Cosme Manalo. Manuela Samson testified in this regard as follows:

Q. Señor, what was the real agreement between you and some of the heirs of Manalo with respect to the land in question? ? A. They sold the land to me with the right to repurchase.

Q. Was there any agreement between you that the land would irrevocably pass to you if it should not be redeemed at any determined or indefinite time? ? A. Yes, sir. We have agreed that the land shall irrevocably pass. We have agreed that they could not redeem the land within two years, and that after that period the Manalo heirs could redeem it.

Q. Within what time? ? A. At any time. (Folio 290.) Cross-examination:

Q. When you transferred your rights to the land to the defendant, did you inform him of the agreement between you and the Manalo heirs? ? A. Yes, sir. I informed Manuel Gueco of the agreement between me and the Manalo heirs. (Folio 291.)

Q. When you transferred the land to the defendant, did you enter into a contract of sale with pacto de retro? ? A. I don’t understand that which you say is pacto de retro, but the heirs of Manalo could redeem. (Folio 293.)lawph!l.net

The plaintiff, Cosme Manalo, testified on this point as follows:

Q. What was the real agreement between you and Manuela Samson with respect to the land in question? ? A. I borrowed money from her in the sum of more than two thousand pesos.

Q. For what? ? A. I offered my land as a guaranty.

x x x x x x x x x

Q. At what time of the year would the redemption be made if there was any agreement as to this point? ? A. We agreed that when we had the money we would pay the sum we have taken from them and they would return the land. (Folio 297.)

It will be noted from the foregoing that Manuela Samson, a witness called by the plaintiffs, affirmed the contents of Exhibits B-43 and C to the effect that the plaintiffs had sold to her the land in question with a right to redeem the same at any time after two years. The only proof, then, in support of the plaintiff’s contention is the assertion of the plaintiff Cosme Manalo that he had borrowed more than P2,000 from Manuela Samson and offered the land in question as a guaranty.

That uncorroborated assertion of the plaintiff Cosme Manalo, an interested witness, in our opinion, is not sufficient to justify the court in declaring that the transaction between the parties was a mere loan with guaranty, in the face of the express declarations of the said Cosme Manalo and his other coheirs in the various documents presented in this case as evidence to the effect that they had sold the land in question to Manuela Samson, with pacto de retro.

We are not unmindful of the fact that sales with pacto de retro are not favored, and that the court will not construe an instrument to be one of sale con pacto de retro, with the stringent and onerous effects which follow, unless the terms of the document and the surrounding circumstances require it. (Padilla vs. Linsanga, 19., Phil., 65, 68; Olino vs. Medina, 13 Phil., 379.) In consonance with this doctrine, we have also decided that “parol evidence is competent and admissible in support of allegations that an instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the title with a mere right repurchase under specified conditions reserved to the vendor, was in truth and in fact given merely as security for the repayment of a loan.” (Cuyugan vs. Santos, 34 Phil., 100; Rodriquez vs. Pamintuan and De Jesus, 37 Phil., 876; Cuyugan vs. Santos, 39 Phil., 970.)

In the present case, however, the terms of the contract entered into between the parties clearly show that the transfer of the land in question by the plaintiffs to the defendant was in the nature of a sale with pacto de retro and the plaintiffs have shown no circumstances whatever which would justify us in construing the said contract to be a mere loan with guaranty.

In every case in which we have construed a contract to be a mortgage or a loan with guaranty instead of a sale with pacto de retro, we have done so either because the terms of such contract are ambiguous (i. e., capable of being interpreted either as a loan with guaranty or a sale with pacto de retro), or because the circumstances surrounding the execution or the performance of the contract were incompatible or inconsistent with the theory that said contract was one of purchase and sale. (See Olino vs. Medina, 13 Phil., 379.) In the case of Padilla vs. Linsangan (19 Phil., 65, 66), the term employed in the contract to indicate the nature of the conveyance of land was “ pledged” instead of “sold.” In the case of Manlangit vs. Sanchez Dy Puico (34 Phil., 325), while the obligor used the terms “sell and transfer with a right to repurchase,” yet in said contract he described himself as a “debtor,” the obligee as a “creditor,” and the contract as a “mortgage.” In the case of Rodriguez vs. Pamintuan and De Jesus (37 Phil., 876), the person who executed the instrument purporting on its face to be a deed of sale of certain parcels of land, had merely acted under a power of attorney from the owner of said land, “authorizing him to borrow money in such amount and upon such terms and conditions as he might deem proper, and to secure payment of the loan by a mortgage” on said land. In the case of Villa vs. Santiago (38 Phil., 157, 161), although a contract purporting to be a deed of sale was executed, the supposed vendor remained in possession of the land and invested the money he had obtained from the supposed vendee in making improvements thereon; the value of the land was more than P10,000, whereas the money borrowed was only P2,300; and there were other circumstances connected with the conduct of the plaintiff (the supposed vendee) which justified the court in holding that the transaction was a mere loan. In the case of Cuyugan vs. Santos (39 Phil., 970), the purchaser accepted partial payments from the vendor, and such acceptance of partial payments “is absolutely incompatible with the idea of irrevocability of the title of the ownership of the purchaser at the expiration of the term stipulated in the original contract for the exercise of the right of repurchase.”

In the present case no indicia or circumstances analogous to those enumerated in the foregoing cases appear from the record before us. The only circumstance pointed out by the lower court in its decision, as incompatible with the theory of purchase and sale, is the alleged disproportion of the price to the value of the land in question. The money obtained by the plaintiffs from the defendant at the time of the execution of the contract in question was only P3,728, whereas the value of the land was estimated at P7,000. In our opinion this disproportion of the price to the value of the land is not great enough to justify the conclusion that the transaction was a mere loan, in the absence of other circumstances incompatible with the terms of purchase and sale set forth in the contract itself. In the case of De Ocampo and Custodio vs. Lim (38 Phil., 579), we held that the price ;in a sale with pacto de retro is not necessarily the true value of the land sold.

Our conclusion is, that the contracts in question (Exhibit B-43 and Exhibit C) are sales with a right or repurchase ( pacto de retro), governed by articles 1507 et seq. of the Civil Code. Exhibit B-43 was executed May 19, 1894. Under its terms the redemption was not to be made within two years from that date, and nothing was said as to how long the right to redeem should continue. In other words the vendors could redeem the land in question at any time after May 19, 1896. Under the first paragraph of article 1508 of the Civil Code, and following the decisions in the cases of Rosales vs. Reyes and Ordoveza (25 Phil., 495) and Lucido vs. Calupitan (27 Phil., 148), the right of the plaintiffs to redeem the land in question expired at the end of four years from the 19th day of May, 1896, i.e., on May 19, 1900.

It appears from the record that subsequent to May 19, 1900, the defendant-purchaser, at various times, delivered to the plaintiffs small sums aggregating P85, as “increase of price” of the land in question; and as late as May 15, 1903, the defendant, apparently, did not yet consider himself to be the absolute owner of said land, for in a communication to Cosme Manalo (one of the plaintiffs) the said defendant referred to said land as his (Manalo’s) land. (See Exhibit D, fol. 236.) Evidently, the defendant did not know that, under the law, the time within which the plaintiffs could redeem said land at that time expired. Such attitude of the defendant, as well as of the plaintiffs, was undoubtedly due to the fact that no definite period for redemption was fixed in the contract, other than that such redemption should not be made within two years from date. We are of the opinion, nevertheless, that such conduct of the defendant, based upon his ignorance of the law, cannot in any way affect the irrevocability of his title to the land in question, which became vested in him by operation of law. The parties might as well have stipulated in good faith that the vendors could repurchase the land in question within a period of twenty years; yet such stipulation, and the conduct of the purchaser in accord therewith, could not prevent the sale from becoming absolute after the lapse of ten years. (Par. 2, art. 1508, Civil Code.)

Therefore, even admitting the allegation of the plaintiffs that they offered to redeem the land in question in the year 1909 (although the present action was not commenced until December 12, 1917), the title of the defendant to said land had become absolute and the plaintiffs cannot now recover the same; much less are they entitled to have the same registered in their name under the Torrens systems.

For all of the foregoing reasons, the judgment of the lower court is hereby revoked without any finding as to costs, and it is hereby further ordered and decreed that a judgment be entered in cadastral case No. 5, G. L. R. O. Rec. No. 128 (R. G. No. 16202), ordering the registration under the Torrens system of the land in question (lot No. 369-A) in the name of the appellant, Manuel Gueco. So ordered.

Mapa, C.J., Araullo, Malcolm, Avanceña and Villamor, JJ., concur.

Footnotes

¹ The present case.

² Decided November 5, 191920, not reported.

³ Decided November 1, 1919, not reported.

Batas Pinas