G.R. No. L-6389 November 29, 1954
PASTOR AMIGO and JUSTINO AMIGO, petitioners, vs. SERAFIN TEVES, respondent.

FACTS

On August 11, 1937, Macario Amigo and Anacleto Cagalitan executed a broad power of attorney in favor of their son, Marcelino Amigo, granting him powers including to “lease, let, bargain, transfer, convey and sell, remise, release, mortgage and hypothecate” their properties upon such terms and conditions as he shall think fit. On October 30, 1938, Marcelino Amigo, as attorney-in-fact, executed a deed of sale with pacto de retro over a parcel of land in favor of Serafin Teves for P3,000, with a redemption period of 18 months. The same deed contained a lease covenant stipulating that the vendors (the principals) would remain in possession as lessees for 18 months, paying rent every six months, and that failure to pay any rental would automatically terminate the lease and consolidate absolute ownership in the vendee. On July 20, 1939, the principals donated their right to repurchase the land to their sons, petitioners Pastor Amigo and Justino Amigo. The vendors-lessees paid the first rental but failed to pay the subsequent rental. Consequently, on January 8, 1940, Teves executed an “Affidavit of Consolidation of Title” which was registered, and a transfer certificate of title was issued to him. On March 9, 1940, the petitioners, as donees of the right to repurchase, offered to redeem the land, but Teves refused, claiming consolidation of ownership. The petitioners then filed an action seeking, among others, a declaration that the contract was merely a mortgage, or alternatively, that their offer to repurchase was timely, and for reconveyance.

ISSUE

1. Whether the lease covenant in the deed of sale with pacto de retro, executed by the attorney-in-fact, was ultra vires and null and void for being outside the scope of the power of attorney.
2. Whether the penal clause in the lease covenant providing for automatic termination of the redemption period is null and void.
3. Whether petitioners should be allowed to repurchase the land on equitable grounds due to a great disproportion between the redemption price and the market value of the land.

RULING

1. The lease covenant was not ultra vires. The power of attorney granted to Marcelino Amigo was broad enough to cover the execution of any contract concerning the lands, including a lease, as it authorized him to act upon such terms, conditions, and covenants as he shall think fit. The covenant was germane to the contract of sale with pacto de retro, as the vendor’s continued possession as lessee constitutes a mode of tradition (constitutum possessorium) by which possession is deemed transferred to the vendee. Furthermore, the principals tacitly ratified the act by subsequently donating the right to repurchase under the terms of the deed.
2. The penal clause is valid and enforceable. Such a clause, making the right to repurchase dependent upon the punctual payment of rent by the vendor-lessee, is lawful and common in contracts of sale with pacto de retro, as established in Vitug Dimatulac vs. Coronel. While courts may relieve parties from its effects where possible under established principles of law, no such grounds exist here as the respondent promptly asserted his right to consolidate ownership upon default and showed no vacillation or waiver.
3. Petitioners are not entitled to repurchase on equitable grounds. The claim of gross inadequacy of price involves a question of fact, and the finding of the Court of Appeals that the price was not unreasonable is final and conclusive in this appeal by certiorari. Furthermore, in a sale with pacto de retro, the price is usually less than in an absolute sale because the vendor expects to redeem the property. The evidence of increased value pertained to sales in 1940 and 1941, not to the time of the contract in 1938.
The decision of the Court of Appeals is affirmed.