GR L 75395; (September, 1988) (Digest)
G.R. No. L-75395 September 19, 1988
SPS. ESTELITO BAGADIONG and REMEDIOS BAGADIONG, ET AL., petitioners, vs. PLACIDA VDA. DE ABUNDO, assisted by her son JOAQUIN ABUNDO, JR., respondents.
FACTS
The dispute involves a contract denominated as a “Deed of Sale Under Pacto de Retro” executed in 1971, whereby respondent Placida Vda. de Abundo conveyed a parcel of land to petitioner Remedios Bagadiong for P1,500.00, with a right to repurchase within six months. Upon Abundo’s failure to repurchase, Bagadiong took possession, cultivated the land, and paid its taxes. Abundo later filed an action seeking to have the contract declared an equitable mortgage, thereby allowing her to redeem the property beyond the stipulated period. The Court of First Instance ruled the contract was indeed an equitable mortgage, a decision affirmed by the Court of Appeals, prompting the petitioners to elevate the case to the Supreme Court via petition for review.
ISSUE
The core issue is whether the contract executed by the parties is a true sale with pacto de retro or an equitable mortgage disguised as such.
RULING
The Supreme Court reversed the lower courts, ruling the contract was a genuine sale with right to repurchase, not an equitable mortgage. The legal logic centered on the application of Article 1602 of the Civil Code, which enumerates circumstances creating a presumption of an equitable mortgage. The Court meticulously examined the record and found none of these statutory presumptions applied: the vendor did not remain in possession; no instrument extending the redemption period was executed; the purchaser did not retain part of the purchase price; the vendor did not bind herself to pay taxes; and no evidence suggested the transaction was intended to secure a debt. Conversely, the Court found affirmative indicators of a true sale: the purchase price was deemed adequate for the barren land; there was immediate delivery of possession to the vendee; the vendee consistently paid property taxes for years after the redemption period lapsed; and the vendor took no action to redeem for eight years. The Court emphasized the contract is the law between the parties, and its clear, unambiguous terms as a pacto de retro sale must be respected absent any legal basis for reclassification. Consequently, the petition was granted and the complaint dismissed.