AC 761; (March, 1948) (Digest)
G.R. No. L-761. March 23, 1948.
ROSARIO VDA. DE BALMORI, et al., plaintiffs-appellees, vs. CARLOS M. SISON, et al., defendants-appellants.
FACTS
On March 31, 1941, Pilar Balmori, acting under a power of attorney from her father Joaquin Balmori, executed a document in favor of Carlos M. Sison styled as a sale with right to repurchase (pacto de retro) over two parcels of land with a house for P18,000. The vendor reserved the right to repurchase within five years. The vendor also remained in possession as a lessee paying monthly rent, with obligations to pay insurance, taxes, and maintenance. A stipulation provided that failure to pay five consecutive months of rent would forfeit the right to repurchase. The Balmoris failed to pay rent from November 1941, leading Sison to recover possession through ejectment and subsequently consolidate title in December 1942. After Joaquin Balmori’s death, his heirs offered to repurchase in 1943, but Sison refused, claiming forfeiture. The heirs then filed suit, alleging the transaction was really a loan secured by a mortgage, not a true pacto de retro sale. Meanwhile, Sison sold the property to his brother Juan A. Sison.
ISSUE
Whether the contract executed between the parties was a true sale with right to repurchase (pacto de retro) or an equitable mortgage.
RULING
The Supreme Court ruled that the contract was a true pacto de retro sale, not an equitable mortgage. The Court examined the circumstances and found no conclusive evidence of a loan intent. Key factors included: the document’s clear terms as a sale; the vendor’s knowledge of its nature; the delivery of the certificates of title to Sison; and the presence of stipulations (like the lessee’s obligation to pay taxes and insurance) common in pacto de retro transactions and recognized in prior jurisprudence. The Court distinguished the case from those where circumstances like gross inadequacy of price, description of parties as debtor/creditor, or acceptance of partial payments indicated a mortgage. The defense of excusable breach due to the Japanese Occupation was barred by the prior final ejectment judgment. The defendants were absolved.
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