G.R. No. L-8105 | December 17, 1913
THE HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner-appellee, vs. ANGEL ORTIZ, opponent-appellant.

FACTS:
Angel Ortiz filed an application with the Court of Land Registration for the registration in his name of twenty-one parcels of land in Sorsogon. During the pendency of the proceedings, The Hongkong and Shanghai Banking Corporation (the Bank) filed a motion to be substituted as the applicant. The Bank alleged that on April 21, 1908, Ortiz executed an instrument entitled “Assignment of property in payment of a debt” in its favor, covering the subject properties, with a right to repurchase within one year. This period was extended for another year until April 21, 1910. The Bank contended that Ortiz failed to exercise his right of redemption, thereby consolidating ownership in the Bank’s favor.

Ortiz opposed the substitution. He argued that the main instrument of April 21, 1908, referred to another covenant executed on the same date, which fixed the redemption period at five years, contingent upon his payment of P20,000 from his business proceeds. He further claimed that a subsequent agreement in July 1909, involving the firm Lizarraga Hermanos and made with the Bank’s knowledge, transferred the administration of his business to Lizarraga, thereby making it impossible for him to generate the P20,000 payment himself. The trial court granted the Bank’s motion and ordered the registration of the properties in the Bank’s name, prompting Ortiz’s appeal.

ISSUE:
Whether the Hongkong and Shanghai Banking Corporation has acquired absolute ownership over the subject properties, entitling it to be substituted as the applicant for their original registration.

RULING:
Yes. The Supreme Court affirmed the decree of the Court of Land Registration.

The Court examined the instruments executed by the parties. The deed of April 21, 1908, was unequivocally a sale with a pacto de retro (right of repurchase). It expressly stipulated that if Ortiz failed to repurchase the properties by paying the Bank the sum of P270,460.03 within the agreed period, the sale would become final and irrevocable. The subsequent instrument of April 21, 1909, merely extended the redemption period for one more year, until April 21, 1910. Ortiz failed to redeem within this extended period.

The Court rejected Ortiz’s defense based on the alleged separate five-year agreement and the contract with Lizarraga Hermanos. It held that the Bank’s rights as purchaser, now consolidated as owner due to non-redemption, could not be impaired by the private arrangements between Ortiz and Lizarraga. The Bank’s primary objective was to collect its credit, and it consented to Lizarraga’s administration merely as an attempt to make the properties productive, not to divest itself of its vested ownership rights acquired through the expired pacto de retro.

Since no other valid adverse claims were presented against the registration (except a minor issue from the Attorney-General regarding a parcel bordering the shore, which the lower court had already addressed), the Bank, as the absolute owner, was correctly substituted as the applicant. The decree of registration in the Bank’s favor was affirmed.