G.R. No. 18706 ; November 27, 1922
P. CHAVES Y HERMANO, applicant-appellant, vs. RAMON B. NERI and VICENTE NERI SAN JOSE, opponents-appellees.

FACTS

Applicant P. Chaves y Hermano filed for registration of three parcels of land. Opponents Ramon B. Neri and Vicente Neri San Jose opposed. On July 15, 1911, opponents sold the lands to Porfirio Chaves under a pacto de retro sale for P4,000 with a four-year redemption period, with the vendee leasing the lands back to the vendors for a monthly rental. The applicant succeeded to Chaves’ rights. Before the redemption period expired on May 8, 1915, opponents, in arrears on rent, signed a document acknowledging the applicant as the true owner entitled to possession. The next day, May 9, 1915, the applicant donated one parcel to the opponents’ wives, and in consideration, the opponents bound themselves to secure registration of the lands in the applicant’s name. Prior to the redemption expiry, opponents attempted to find another buyer, entering a provisional contract with “Vda. e Hijos de Placido Reyes” for P16,500, which fell through. In 1916, opponents sued that partnership for damages, alleging in their complaint that the lands had an incumbrance of P4,000 payable to the applicant and that title had consolidated in the applicant by May 8, 1915. In 1921, during these registration proceedings, opponents contended the 1911 contract was merely a loan with mortgage, not a true sale with right to repurchase.

ISSUE

Whether the contract executed on July 15, 1911, between the parties is a true pacto de retro sale or an equitable mortgage (loan secured by mortgage).

RULING

The contract is a true pacto de retro sale. The Supreme Court reversed the trial court’s denial of registration. The trial court erred in applying jurisprudence that treats certain deeds of sale with right to repurchase as equitable mortgages, as those cases involved circumstances showing the parties’ true intent was a loan. Here, the parties’ subsequent acts unequivocally demonstrate their intent was a true sale: (1) opponents acknowledged the applicant’s ownership and right to possession in 1915; (2) opponents accepted a donation of one parcel and bound themselves to secure registration for the applicant; (3) opponents, in their 1916 lawsuit against a third party, explicitly admitted the sale, the consolidation of title in the applicant, and the applicant’s absolute ownership. Their belated claim in 1921 that the contract was a loan is contradicted by their own prior consistent acts and judicial allegations. The Court cannot remake the contract or determine rights based on an intent not reflected by the parties’ conduct. The applicant is entitled to registration.