G.R. No. 143697; January 28, 2008
DIONISIA DORADO VDA. DE DELFIN, represented by her heirs, petitioner, vs. SALVADOR D. DELLOTA, represented by his heirs, and THE INTESTATE ESTATE OF THE LATE GUMERSINDO DELEÑA, respondents.

FACTS

Petitioner Dionisia Dorado Vda. de Delfin was the registered owner of a large parcel of land. In 1949, she executed a notarized “Deed of Sale with Right of Redemption” over a 50,000-square meter portion in favor of respondent Gumersindo Deleña for P5,300. Dionisia never redeemed this portion. In 1956, she also executed a “Deed of Mortgage and Promise to Sell” over a 90,000-square meter portion in favor of respondent Salvador Dellota, without specifying if it included the area sold to Deleña. In 1964, Dionisia filed a complaint for recovery of possession against Dellota, and Deleña’s estate intervened.
The trial court ruled that ownership of the 50,000-square meter portion sold to Deleña had been consolidated in his favor due to non-redemption, and allowed redemption only of a separate 40,000-square meter portion from Dellota. The Court of Appeals affirmed this decision.

ISSUE

Whether the 1949 Deed of Sale with Right of Redemption between Dionisia and Gumersindo Deleña should be construed as an equitable mortgage under Article 1602 of the Civil Code due to alleged gross inadequacy of the purchase price.

RULING

The Supreme Court denied the petition and affirmed the appellate court’s decision, ruling that the contract was a true sale with right to repurchase, not an equitable mortgage. The Court explained that for a sale with pacto de retro, the presumption of an equitable mortgage under Article 1602 arises if the price is “unusually inadequate.” The determination of adequacy is contextual. Citing jurisprudence, the Court held that in pacto de retro sales, the agreed price is not necessarily the property’s exact just value, as the vendor’s right to repurchase makes the absolute price less material, and the vendee assumes the risk of redemption. The Court found no cogent reason to deem the 1949 price of P5,300 for five hectares as unreasonable or unusually inadequate for that time. The petitioner’s ancillary claim—that payment of realty taxes proved ownership—was also rejected, as tax receipts are not conclusive evidence of title, and the belated tax payments made just months before filing suit appeared tactical. Consequently, with no presumption of an equitable mortgage arising, and with the redemption period long expired, ownership was correctly consolidated in favor of Deleña’s heirs by operation of law.