G.R. No. 48290 ; September 30, 1942
JULIAN MEDIANTE and NICOMEDES GARCIA, plaintiffs-appellees, vs. VALENTIN ROSABAL, defendant-appellant; CLEOFE VDA. DE NERI, intervenor-appellant.

FACTS

The land in question originally belonged to Macario Rosabal and Tomasa Valmoria. On April 9, 1929, they executed an unrecorded contract of sale with a right to repurchase within three years in favor of Ramon Neri San Jose (husband of intervenor Cleofe Vda. de Neri) for P500. The land remained in the possession of their son, defendant Valentin Rosabal, under an alleged lease requiring quarterly rentals of P30. By virtue of a writ of execution in a separate case (Texaco Co., Inc. vs. Valentin Rosabal and Macario Rosabal), the same land was sold at public auction to plaintiff Nicomedes Garcia on April 17, 1931; this sheriff’s sale was recorded on June 25, 1931. On May 14, 1931, Garcia allowed Valentin Rosabal to redeem the land and accepted partial payments (totaling P200) toward the redemption price. Garcia later sold his rights to co-plaintiff Julian Mediante. In the present case, both Mediante and Vda. de Neri claim ownership and seek possession of the land. The trial court ruled in favor of Mediante, holding that his registered sheriff’s sale title was superior to Vda. de Neri’s unregistered sale and that Rosabal’s failure to pay the full redemption price consolidated ownership in Garcia. Both Rosabal and Vda. de Neri appealed.

ISSUE

1. Whether the trial court correctly applied Article 1473 of the Civil Code to give preference to Mediante’s registered sheriff’s sale over Vda. de Neri’s unregistered sale.
2. Whether the acceptance of partial redemption payments by Garcia from Rosabal effected a resale and altered Garcia’s (and subsequently Mediante’s) rights to the land.
3. Whether the contract between Macario Rosabal/Tomasa Valmoria and Ramon Neri San Jose was a true sale with pacto de retro or an equitable mortgage.

RULING

The Supreme Court REVERSED the trial court’s judgment.
1. On the application of Article 1473 of the Civil Code: The Court held that Article 1473, which gives preference to the first recorded deed, is not applicable to an execution sale of real estate not registered under the Torrens system ( Act No. 496 ). Therefore, the trial court erred in ruling that Mediante’s registered sheriff’s sale gave him superior proprietary rights over Vda. de Neri’s unregistered sale.
2. On the effect of partial redemption payments: The Court ruled that the moment Garcia, the purchaser at the sheriff’s sale, accepted partial payment from the judgment debtor Rosabal on account of the redemption price, a resale was effected in Rosabal’s favor. Garcia was only entitled to recover the balance from Rosabal and could look to the land merely as security for its payment. By accepting a part of the redemption money, Garcia changed the character of his title and surrendered his right to enforce a forfeiture under the statute.
3. On the nature of the contract in favor of Vda. de Neri: The Court held that the alleged sale with pacto de retro was really an equitable mortgage, based on the following: (a) The vendors remained in possession of the land through their son, Valentin Rosabal, who was treated as an owner (the land was levied upon and sold as his property, and he was allowed to redeem it from Garcia). (b) Rosabal was required to pay quarterly rentals of P30, which were obviously in the nature of interest. (c) Despite Rosabal’s failure to pay these rentals, the vendee or his successor did not take steps to eject him and only asserted a claim of ownership in 1935, more than three years after the redemption period expired.
DISPOSITIVE:
The appealed judgment was reversed. Defendant-appellant Valentin Rosabal was declared the owner of the land. He was ordered to pay Julian Mediante the sum of P245 (the balance of the redemption price) and to pay intervenor-appellant Cleofe Vda. de Neri the sum of P500. The land was declared subject, first, to Vda. de Neri’s equitable mortgage (being prior) and, then, to Mediante’s lien. No costs were awarded.
SEPARATE OPINION:
Justice Moran dissented on two main points:
1. He disagreed with the majority’s ruling that acceptance of partial redemption payment automatically effected a resale, arguing that it merely waived the purchaser’s right to enforce forfeiture and gave the owner the right to redeem after the expiration period, but did not itself constitute redemption.
2. He disagreed with the finding that the pacto de retro sale was an equitable mortgage, contending that the inferences made by the majority (e.g., that Rosabal acted merely as an instrument of his parents, that rentals were “obviously” interest) were without sufficient evidence and violated the rule that a written agreement is considered to contain all its terms. He believed the case should have been decided in favor of intervenor-appellant Vda. de Neri.