G.R. No. L-8156; November 10, 1913
EMILIANA RACCA, plaintiff-appellee, vs. CATALINO VILORIA, ET AL., defendants-appellants.

FACTS:
On December 10, 1908, defendants (vendors) executed a written contract in favor of plaintiff Emiliana Racca involving two parcels of land. The plaintiff alleged this contract was a pacto de retro (sale with right to repurchase), allowing the defendants to repurchase the property within two years. The defendants failed to repurchase by the maturity date of December 10, 1910. The plaintiff filed an action to recover the land and damages.

The defendants admitted executing the contract (Exhibit A) but contended it was a simple mortgage or loan with guaranty, not a pacto de retro. They further alleged that before the maturity date, they offered to pay the amount due (P500), but the plaintiff requested deferment until February 1911. In February 1911, they again offered payment and the rental of three hundred manojos de palay, but the plaintiff refused acceptance, prompting them to deposit the amount with the justice of the peace.

The trial court ruled in favor of the plaintiff, declaring her the absolute owner due to the defendants’ failure to repurchase within the stipulated period. The defendants appealed.

ISSUE:
1. Whether the contract (Exhibit A) is a pacto de retro or a simple mortgage.
2. Whether the defendants validly exercised their right of repurchase within the stipulated period.

RULING:
The Supreme Court affirmed the trial court’s decision.

1. Nature of the Contract: The contract is unequivocally a pacto de retro. The Court examined the explicit language of Exhibit A, which stated the defendants “sell and transfer in the character of sale with right to repurchase.” This clear wording distinguishes it from a mortgage or simple loan agreement.

2. Exercise of the Right to Repurchase: The defendants failed to validly repurchase the property within the two-year period. Under Articles 1509 and 1518 of the Civil Code, the vendors were obligated to complete the repurchase by the maturity date (December 10, 1910). Their failure to do so, in the absence of a valid excuse, rendered the conditional sale absolute in favor of the plaintiff.

The Court found the defendants’ evidence of an attempted repurchase insufficient. Their claim that messengers were sent to the plaintiff in December 1910 lacked specificity as to the exact date, and critically, the messengers did not bring the repurchase money with them. The trial court, having observed the witnesses’ credibility, found the plaintiff’s denial of any offer to repurchase more credible. Since the defendants did not prove they performed all acts necessary to repurchase at maturity or were prevented by the plaintiff, they lost their right of redemption.

The contract, being a notarized document, was also upheld as a valid public document. Consequently, the plaintiff was declared the absolute owner entitled to possession of the lands and the awarded rental in palay.