GR 43304; (October, 1936) (Digest)
G.R. No. 43304 ; October 21, 1936
ANTONIO F. AQUINO, special administrator of the testate estate of the deceased Mariano Aquino, plaintiff-appellee, vs. TOMAS DEALA, defendant-appellant.
FACTS
Defendant Tomas Deala obtained money from Mariano Aquino, secured by a parcel of land with a house. The transaction was documented as a pacto de retro sale (Exhibit 1 and subsequent novations), where Deala appeared to sell the property to Aquino with a right to repurchase within four years, while simultaneously leasing it back. Deala failed to repurchase, and Aquino consolidated ownership. After Aquino’s death, his special administrator initiated an ejectment case in the municipal court. Deala raised the question of ownership, arguing the true transaction was a loan with mortgage, not a sale. Both the municipal court and the Court of First Instance ruled in favor of the plaintiff, ordering ejectment and payment of unpaid rents.
ISSUE
1. Whether the contract is a pacto de retro sale or a simple loan secured by real property.
2. Whether the courts had jurisdiction to proceed with the ejectment case after the question of ownership was raised.
RULING
1. The contract is a loan secured by real property, not a pacto de retro sale. Despite its form, the stipulations (e.g., lessee paying taxes, insurance, and construction costs) and the parties’ conduct show the true intent was a loan with 12% annual interest, secured by the property. The transaction is an equitable mortgage under Article 1282 of the Civil Code, as the vendor remained in possession and bore all charges of ownership.
2. The municipal court initially retained jurisdiction despite the ownership claim, as a mere claim does not automatically divest it. However, the Court of First Instance, on appeal, upon examining evidence that the title was legitimately in dispute (given the contract’s true nature), should have declared itself without jurisdiction and dismissed the case. The Supreme Court dismissed the ejectment case without prejudice to any other appropriate action.
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