G.R. No. L-6461; May 31, 1954
Pilar Araullo Macoy, on her behalf and as Judicial Administratrix of the Intestate Estate of the late Gregoria Araullo, assisted by her husband, Jose Macoy, plaintiffs and appellees, vs. Carmen Vasquez Trinidad, assisted by her husband Pedro Trinidad, Zacarias Jamelo and Jose Jamelo, defendants. Zacarias Jamelo, defendant and appellee, Gertrudes A. Martir as administratrix of the Intestate Estate of Hermogenes Martir, Intervenor and appellee, Carmen Vasquez Trinidad, assisted by her husband Pedro Trinidad, defendants and appellants.

FACTS

Plaintiff Pilar Araullo Macoy (for herself and as administratrix of her sister Gregoria’s estate) filed an interpleader action against defendants Carmen Vasquez Trinidad, Zacarias Jamelo, and Jose Jamelo due to their conflicting claims over an obligation she was willing to pay. Gertrudes A. Martir, as administratrix of the estate of Hermogenes Martir, intervened. The properties in question are Lots Nos. 1200-B and 1200-C, Bacolod Cadastre. The facts, as stipulated, are: On October 27, 1937, Pilar and Gregoria Araullo sold the lots to Hermogenes Martir for P6,000 (Exhibit B). On the same date, Martir granted the Araullos an option to repurchase within eight years for P6,000 plus 12% interest (Exhibit C). On November 11, 1937, Martir mortgaged the lots to Luis F. de Castro. This mortgage was foreclosed, and a certificate of sale was issued on June 6, 1939. On May 23, 1940, before the Araullos’ option expired and before Martir’s redemption period from the foreclosure sale expired, Martir executed a contract titled “Sale with right of repurchase” in favor of Carmen Vasquez over his rights for P4,000, redeemable within one year (Exhibit D). On May 24, 1940, Martir redeemed the properties from de Castro (Exhibit E). On May 31, 1940, the Araullos executed a mortgage over the lots in favor of Martir for P7,300 at 8% interest for six years (Exhibit F). On May 15, 1941, Martir sold his rights to Jose Jamelo for P2,500 with a right to repurchase within one year, which Zacarias Jamelo admitted was a mortgage (Exhibit G). Carmen Vasquez extended Martir’s redemption period to May 23, 1942. Jose Jamelo later assigned a half interest to Zacarias Jamelo. Martir died. The Araullos remained in continuous possession and had made payments totaling P1,260 to Carmen Vasquez and P825 to Zacarias Jamelo. The lower court rendered a decision ordering plaintiff to pay the mortgage debt to intervenor Gertrudes A. Martir (Hermogenes Martir’s estate), and ordering defendants Carmen Vasquez and Zacarias Jamelo to return the amounts they received from plaintiff. Defendant Carmen Vasquez appealed.

ISSUE

The main issues raised by appellant Carmen Vasquez are: (1) Whether the transaction between Hermogenes Martir and the Araullo sisters was one of mortgage or sale; (2) Whether the contract between Hermogenes Martir and Carmen Vasquez (Exhibit D) was a mortgage or a sale with right of repurchase; (3) Whether, as between intervenor (Martir’s estate) and appellant Carmen Vasquez, the former has the better right to receive payment of the mortgage debt; (4) Whether the trial court erred in ordering Carmen Vasquez to pay the intervenor the amount she received from plaintiff; and (5) Whether the trial court erred in not rendering judgment in favor of appellant.

RULING

The Supreme Court affirmed the lower court’s decision with modification. The Court ruled that the transaction between the Araullos and Hermogenes Martir was an equitable mortgage, not a sale, because the Araullos remained in continuous possession of the properties and the “option to repurchase” was essentially a right to redeem. The contract between Martir and Carmen Vasquez (Exhibit D) was construed as a mortgage, not a sale with pacto de retro, because the stipulated interest rate of 12% per annum on the P4,000 indicated a loan transaction, and Vasquez never took possession of the properties nor demanded the titles. Therefore, the intervenor Gertrudes A. Martir (as administratrix of Hermogenes Martir’s estate) has the better right as mortgagee of the Araullos. However, the Court modified the decision regarding the payment of the obligation. The amount due from the Araullos to Martir’s estate should be deposited with the lower court. After hearing, the court shall order the disposition of said amount as follows: (1) payment of the credit of Carmen Vasquez; (2) from the balance, payment of the credit of the Jamelos; and (3) the remaining balance, if any, to be turned over to the intervenor (Martir’s estate). The decision was affirmed in all other respects.