G.R. No. 6085, September 1, 1911
PEDRO VASQUEZ, plaintiff-appellant, vs. JOAQUIN VILLADELGADO, ET AL., defendants-appellees.

FACTS

On August 16, 1904, Esteban Vasquez y Decena executed an instrument in favor of Pedro Yulo, involving a house for P250, stipulating a right to repurchase within six months and a leaseback arrangement. Yulo later sold the property to Joaquin Villadelgado on February 12, 1906, claiming the repurchase period had lapsed, making him the absolute owner. Meanwhile, Esteban Vasquez remained in possession until he sold the house to Pedro Vasquez on January 5, 1907, who then took possession. Villadelgado initiated ejectment proceedings against Esteban Vasquez, obtained a favorable judgment, and dispossessed him. Pedro Vasquez then filed this action to recover title and possession, arguing the 1904 instrument was not a true pacto de retro or that the repurchase obligation had been paid.

ISSUE

Whether the instrument dated August 16, 1904, between Esteban Vasquez and Pedro Yulo is a pacto de retro (sale with right to repurchase) and, if so, whether the repurchase price was paid within the stipulated period, thereby preventing Yulo from acquiring absolute ownership.

RULING

The Supreme Court reversed the trial court’s decision. It held that the evidence preponderated in favor of the finding that Esteban Vasquez had paid the repurchase price within the stipulated period. The conduct of the partiessuch as Esteban Vasquez remaining in possession without paying rent to Yulo or Villadelgado, and the latter’s failure to assert ownership or demand rent for an extended periodsupported the conclusion that the obligation under the pacto de retro had been extinguished. Consequently, Yulo had no absolute title to transfer to Villadelgado, and Esteban Vasquez validly sold the property to Pedro Vasquez. Title and possession were awarded to Pedro Vasquez.