G.R. No. L-4297 January 31, 1952
SOTERA SALVADOR y GREGORIA SALVADOR, plaintiffs-appellants, vs. VICTORIO REYES y ENCARNACION PASCUAL, defendants-appellees.

FACTS

The plaintiffs allege in their sworn complaint that on February 5, 1937, they obtained a loan of P100 from the defendants, payable within one year with an annual interest of P25. As security, they mortgaged a parcel of land in Hagonoy, Bulacan. They signed a document titled “Kasulatan ng Biling Mabibiling Muli” (Annex “A”) based on the defendants’ assurances that they would not take advantage of its literal meaning and on the agreement that the defendants would not foreclose the mortgage as long as the plaintiffs paid the annual interest of P25. The plaintiffs attempted to redeem the land by paying P100 in January 1941, but the defendants refused, advising them to continue their fish trading business. During the Japanese occupation, the plaintiffs again tried to pay, but the defendants refused, stating the debt must be paid in genuine Philippine currency, not Japanese war notes. After liberation, the plaintiffs repeatedly offered to redeem the land, but the defendants refused, claiming the money was inflated and that redemption could occur once the Philippine peso regained its pre-war value. The defendants even told the plaintiffs to pay the land taxes for 1948 and 1949 to avoid penalties. In July 1950, the plaintiffs again tried to redeem the land, but the defendants refused, asserting for the first time that the contract was a sale with pacto de retro and the redemption period had expired. The plaintiffs claim they have always been ready to redeem the land for P100. They pray that Annex “A” be declared a mortgage deed, not a sale with pacto de retro; that the defendants be ordered to accept payment; and that they execute a cancellation of the mortgage.
The defendants filed a motion to dismiss, alleging that Annex “A” is a deed of sale with pacto de retro; that the redemption period expired on February 5, 1938; and that the plaintiffs’ action, filed only on August 5, 1950, had already prescribed. The lower court granted the motion to dismiss, accepting the defendants’ reasons. The plaintiffs’ motion for reconsideration was denied, prompting this appeal.

ISSUE

Whether the lower court erred in granting the motion to dismiss based on the defendants’ interpretation of Annex “A” as a sale with pacto de retro, without considering the plaintiffs’ allegations impugning its content and asserting it was a mortgage obtained through fraud.

RULING

Yes, the lower court erred. The motion to dismiss can be considered a demurrer. Under the rules of civil procedure, when considering a demurrer, the allegations of the complaint are deemed true. Assuming the plaintiffs’ allegations are true—that they were deceived into signing the document believing it was a mortgage, that the defendants assured them it would not be enforced as a sale, and that the fraud was only discovered in July 1950—then the document is void as it does not represent the true intention of the parties. The plaintiffs’ right to impugn the document arose only from the discovery of the fraud in July 1950. From July to August 5, 1950 (the filing of the complaint), only a few days had passed; therefore, their action had not yet prescribed. To declare Annex “A” a sale with pacto de retro without evidence, and when its validity is precisely challenged, is to decide the case prematurely on its merits. The order of dismissal is reversed, with costs against the defendants.