G.R. No. L-37504 December 18, 1974
ROBERTO ESCAY, ET AL., petitioners, vs. COURT OF APPEALS, ET AL., respondents.

FACTS

Emilio Escay mortgaged his properties to the Philippine National Bank (PNB) and died in 1924, leaving an unpaid obligation. In 1930, PNB filed a foreclosure suit against his estate. Pending this suit, a contract dated April 28, 1933, was executed among PNB, Jose Escay (Emilio’s brother), and the estate administrator, Atty. Eduardo Arboleda. Under this contract, Jose assumed the mortgage debt of his deceased brother. Magdalena Vda. de Escay, Emilio’s widow, consented in her own behalf and as guardian ad litem of their children. A supplementary contract was later executed to clarify the transfer of ownership of the properties to Jose, subject to the heirs’ right of repurchase within five years after Jose fully paid the mortgage. This supplementary contract was approved by the probate court in an order dated February 24, 1934.
In 1941, Magdalena and her children, including Roberto Escay, filed a complaint against Jose Escay, Sr. and Atty. Arboleda to recover ownership and possession of the properties. This case was provisionally dismissed in 1944. The petitioners later challenged the validity of the contracts and the court order, arguing the transactions did not transfer ownership and were simulated or void. The Court of Appeals ruled against the petitioners, leading to this petition for review.

ISSUE

The primary issue is whether the Court of Appeals committed a grave abuse of discretion in upholding the validity of the contracts and the probate court’s order, thereby recognizing Jose Escay’s ownership of the properties, and in rejecting the petitioners’ claims of implied trust and lack of prescription.

RULING

The Supreme Court, in a Resolution, denied the petition for review for lack of merit and voted to deny the motion for reconsideration. The Court held that the questions raised were fundamentally factual, and the Court of Appeals did not commit any grave abuse of discretion in its findings. The Court affirmed the appellate court’s conclusion that the contracts validly transferred ownership to Jose Escay, Sr.
On the validity of the contracts, the Court sustained the finding that the original and supplementary contracts, together with Magdalena’s written conformity, constituted a clear conveyance of ownership to Jose in consideration of his assumption of the mortgage debt, subject to a repurchase right. The approval by the probate court cured any initial formal defect. The Court rejected the petitioners’ arguments that the contracts were simulated, antichretic, or executed without proper notice, noting these were factual determinations properly made by the Court of Appeals.
Regarding the claim of an implied trust, the Court found no basis, as the express terms of the contracts and the parties’ actions indicated a sale with pacto de retro, not a fiduciary relationship. On prescription, the Court agreed with the appellate court that the petitioners’ action, filed decades after the contracts were executed and the repurchase period had lapsed, was barred. The Court emphasized that it is not a trier of facts and found no reversible error in the appellate court’s application of law to the established facts. The dissent’s view that the transaction was an equitable mortgage was not adopted by the majority.