G.R. No. 196733, November 21, 2018
Heirs of Roger Jarque, Petitioners, vs. Marcial Jarque, Lelia Jarque-Lagsit, and Teresita Jarque-Bailon, Respondents.

FACTS

This case involves a dispute over the ownership of an unregistered parcel of land, Lot No. 2560, originally declared under the name of Laureano Jarque. Laureano was married to Servanda Hagos, and they had four children: Roger, Lupo, Sergio, and Natalia. Petitioners are the heirs of Roger, the original plaintiff. Respondents are the children of Lupo.
Petitioners claim that upon Laureano’s death in 1946, their father Roger inherited Lot No. 2560 and exercised ownership and possession. After Servanda’s death in 1975, the children orally partitioned the estate, with Lot No. 2560 ceded to Roger. Roger mortgaged the property to Benito Coranes. When Roger sought to redeem it, Benito informed him it had been redeemed by Lupo. Lupo pleaded to keep the property for his family’s support, and Roger agreed. This pattern continued with Lupo’s wife, Asuncion, and later their daughter Dominga, all requesting and being allowed by Roger to possess the property out of tolerance. Upon Dominga’s death in 1992, respondents continued possession. In 2004, petitioners discovered respondents were claiming ownership, based on a “Ratification of Ownership” executed by Dominga claiming acquisition through redemption from Benito, and a “Waiver and Confirmation of Rights” among respondents leading to a tax declaration in Lelia’s name. Roger filed a complaint for annulment of deeds, recovery of ownership, and damages.
Respondents claim that after Laureano’s death, Servanda managed the properties. Servanda sold Lot No. 2560 to Benito Coranes in 1972 with a right to repurchase. Before the redemption period expired, Servanda requested her granddaughter Dominga to redeem the property, which Dominga did in 1974. Dominga thereafter possessed the property and paid taxes, later transferring her rights to Lelia.
The Municipal Circuit Trial Court (MCTC) ruled in favor of petitioners, declaring them the rightful owners, nullifying the deeds executed by Dominga and respondents, and awarding damages. The Regional Trial Court (RTC) affirmed the MCTC. The Court of Appeals (CA) reversed, ruling that under the Spanish Civil Code of 1889 applicable at Laureano’s death, Servanda owned half of the conjugal property and had the right to dispose of her share. The CA found Servanda transferred her right of redemption to Dominga, who validly redeemed and acquired the property. The CA also found no evidence of the alleged oral partition prior to the sale to Benito.

ISSUE

The sole issue is who among the parties has the better right of ownership over Lot No. 2560.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals Decision, and reinstated the MCTC and RTC Decisions declaring petitioners as the rightful owners.
The Court held that the property was part of the conjugal partnership of Laureano and Servanda. Upon Laureano’s death in 1946, his one-half share in the conjugal property passed to his heirs (his children and his widow Servanda) through intestate succession. Servanda, as surviving spouse, was entitled to a usufruct over a portion of the estate but did not automatically become the owner of the entire property. The remaining half of the conjugal property belonged to Servanda as her share.
Crucially, the Court found that the contract between Servanda and Benito Coranes in 1972 was not a true sale with pacto de retro, but an equitable mortgage. The circumstances, including the gross inadequacy of the price (P700 for a 5,000 sqm. lot) and the fact that Servanda remained in possession, indicated the transaction was a loan secured by the property. Since it was a mortgage, the right of redemption is inherent and the “redemption” by Dominga in 1974 was, in legal effect, a payment of the loan, which extinguished the mortgage and restored full ownership to the mortgagor, Servanda. Dominga did not acquire new ownership through this act.
Furthermore, the Court found that the alleged oral partition among Laureano’s children after Servanda’s death in 1975 was credible and valid. Through this partition, Roger acquired Lot No. 2560. Respondents’ possession of the lot from 1974 onward was not in the concept of an owner, but was merely by the tolerance of Roger and his heirs, as evidenced by the repeated pleas from Lupo, Asuncion, and Dominga to be allowed to stay. Such possession, by tolerance, cannot ripen into ownership by acquisitive prescription. The deeds executed by Dominga and respondents were therefore without legal basis. The Court upheld the award of damages and the order for respondents to vacate and surrender the property to petitioners.