GR L 2227; (January, 1906) (Digest)
FACTS:
Plaintiff-appellant Maximino Espiritu entered into a written contract with defendant-appellee Jose Luis on May 13, 1892. By its terms, Espiritu received 250 pesos from Luis, and in consideration thereof, Luis “bought” Espiritu’s lands “en calidad de retroventa” (with the right of repurchase). The contract stipulated that Espiritu could repurchase the lands by returning the money within four years, failing which the lands would remain with Luis and his ownership over them would be consolidated. On June 16, 1895, Espiritu acknowledged an additional debt of 40 pesos. On June 14, 1896, the parties agreed to a four-year extension of the repurchase period. The extended period expired on June 14, 1900. Espiritu never returned the money. On July 29, 1903, Espiritu filed an action seeking a declaration that the contract was without force and compelling Luis to reconvey the land upon payment of 290 pesos.
ISSUE:
What is the correct legal nature of the contract executed between the parties, and what are the rights of the parties thereunder?
RULING:
The Supreme Court ruled that the contract is a contract of sale with a right of repurchase (pacto de retro) as defined under Article 1507 et seq. of the Civil Code. The Court found that the clear intent of the parties, as evidenced by the language of the contract, was for Luis to buy the land subject to Espiritu’s right to repurchase it within a stipulated period. The contract expressly provided that if Espiritu failed to return the money within the term, the land would remain with Luis and his ownership would become absolute. Since Espiritu failed to repurchase the property within the agreed period, which expired on June 14, 1900, he lost all his rights to the land by operation of Article 1509 of the Civil Code. The judgment of the lower court in favor of Luis was affirmed.