G.R. No. L-65425 November 5, 1987
IRENEO LEAL, et al., petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and VICENTE SANTIAGO (Substituted by SALUD M. SANTIAGO), respondents.

FACTS

On March 21, 1941, Vicente Santiago and his brother executed a “Compraventa” (sale) over three parcels of land in favor of Cirilo Leal. A clause in the Spanish-language document stipulated that “in case of sale, they shall not sell to others these three lots but only to the seller Vicente Santiago, or to his heirs or successors for the same price of P5,600.00, when the latter shall be able to pay it.” Title was transferred to Cirilo Leal, who possessed the lands. Upon his death, his children inherited and subdivided the properties. In 1966, Vicente Santiago offered to repurchase the lands, but the Leals refused. Santiago filed a complaint for specific performance in 1967.
The trial court dismissed the complaint, ruling the action was premature as there had been no sale by the Leals to trigger any right of repurchase. The Court of Appeals affirmed this decision. However, upon Santiago’s motion for reconsideration, the newly constituted Intermediate Appellate Court (IAC) reversed the earlier ruling. The IAC ordered the Leals to accept P5,600.00 from Santiago and execute a deed of repurchase, effectively enforcing the contractual prohibition against sale to others.

ISSUE

Whether the contractual clause prohibiting sale to anyone other than the original vendor or his heirs creates a valid and subsisting right of repurchase in favor of Vicente Santiago.

RULING

The Supreme Court reversed the IAC resolution and reinstated the original Court of Appeals decision. The Court held that the disputed clause was an invalid restriction on ownership. Citing Article 1255 of the Spanish Civil Code (applicable at the time of the contract’s execution), pacts contrary to public order are void. An indefinite prohibition against alienation subverts public policy, which favors the free disposition of property. The right of ownership includes the right to alienate, and a perpetual restriction thereon is unlawful.
Even assuming, for argument’s sake, that the clause granted a right of repurchase, such right had already prescribed. Under Article 1508 of the Spanish Civil Code (Article 1606, Civil Code of the Philippines), the redemption period in the absence of a stipulated time is four years from the date of the contract (March 21, 1941). The IAC theorized that the phrase “when the latter shall be able to pay it” made the period indefinite, triggering a ten-year prescriptive period under jurisprudence. Regardless, Santiago attempted to exercise the right only in 1966, 25 years after the contract. Thus, any conceivable right had long expired. The Court ordered the cancellation of the annotations regarding the prohibition from the titles.