46 Vda. de Macoy v. CA

G.R. No.
95871 February 13, 1992
HEIRS OF DOMINGA TABORA VDA. DE MACOY, represented by GENEROSO MACOY, petitioners
vs.
HON. COURT OF APPEALS, JESUS F. REDILLAS AND ANATALIA ELON, respondents.
 Dominga Tabora Vda. de Macoy was the owner of a rice land, located at, Camarines Norte.
 She acquired the land from spouses Patrocinio and Pablo Serrano on January 27, 1964, for a consideration
of P11K
 On December 28, 1970, she executed a document which is dominated "Pabilihang Mabibili-Muli" or sale with
a right to repurchase in favor of private respondents spouses Jesus F. Redillas and Anatalia Elon, for the
sum of P6,000.00 over the land
 Among other things, it was provided therein that the period of repurchase is between December 29, 1973
and December 29, 1975.
 Dominga Tabora Vda. de Macoy died in February, 1972, leaving as heirs petitioners Julieta Macoy Pongco,
Rufina, Francisco, Miriam and Herson Macoy and Teopista Macoy de Zantua.
 Alleging failure of petitioners to repurchase the land, private respondent Jesus F. Redillas executed an
Affidavit of Consolidation of Ownership on May 31, 1977
 On July 21, 1977, he and his wife filed a petition for Recording of Consolidation of Ownership before the
Regional Trial Court
 In the trial court's order dated January 16, 1978, it declared petitioners in default for failure to file an
answer to the petition).
 February 1, 1978, judgment was rendered by the trial court ordering consolidation of ownership and
registration of title over the land in the name of private respondents
 On June 16, 1978, private respondents mortgaged the land to the Rural Bank of Jose Panganiban, Inc. to
secure a loan of P15K
 On July 17, 1980, they borrowed an additional amount of P10,00.00 from the bank.
 On October 4, 1978, petitioners filed a petition for relief from the trial court's decision
 On October 19, 1978, finding the petition meritorious, the trial court set aside its previous order and
decision and granted new trial
 They alleged that the document executed by the late Dominga Tabora Vda. de Macoy was not a sale with a
right to repurchase but an equitable mortgage or a contract of antichresis.
o They alleged further that even assuming it to be a sale with a right to repurchase they nevertheless
had thirty (30) days from final judgment under Article 1606 of the Civil Code within which to redeem
the land
RTC:
 On July 16, 1986, judgment was rendered by the trial court in favor of petitioners
o . It declared the document to be in fact an equitable mortgage on the basis of its findings that the
consideration thereof was inadequate and the taxes on the land continued to be paid under the
name of Dominga Tabora Vda. de Macoy even up to 1977.
 It also found that petitioner Teopista Macoy de Zantua offered to private respondents the amount of
P6,000.00 in order to repurchase the land but she was turned down, thus, she deposited said amount in
court on September 18, 1980.):
 The Register of Deeds of Camarines Norte is hereby ordered to cancel the annotation of the
sale with pacto de retro dated December 28, 1970 upon TCT No. T-7520 on the ground that
the repurchase therein mentioned was effected legally on September 18, 1980, in spite of
petitioners' refusal to allow defendant-heirs to exercise their right to repurchase reserved to
their mother Dominga Tabora Vda. de Macoy in the document.
CA:
 private respondents appealed to public respondent Court of Appeals.

 On September 4, 1990, respondent court reversed the trial court's decision
 WHEREFORE, the decision appealed from is RESERVED and judgment is hereby rendered
granting consolidation of ownership in favor of the plaintiff-appellants
 Petitioners raise the following errors committed by respondent court:

o it set aside their petition for relief from judgment; and
o it held that the transaction in question was a pacto de retro sale.
SC:
 Even assuming that the transaction was pacto de retro, they have validly exercised their right to repurchase
the land. The consideration in the transaction was inadequate
o In fact, private respondents had obtained a loan for P25K using it as collateral. The fact that in the
receipts of payment there is no showing that the real estate taxes were paid by private respondents,
as is usually written across the body of the receipts if so paid by a person other than the owner
named thereon, shows that Dominga Tabora Vda. de Macoy paid the taxes during the period of
repurchase.
 On the other hand, private respondents contend that the summons served on petitioner Teopista Macoy de
Zantua, through her sister petitioner Miriam Macoy, who both live in the same address, is valid. Article 1606,
paragraph 3, of the Civil Code is not applicable
o There are absolutely no indications from which to draw the conclusion that the transaction is one of
equitable mortgage. The price of the sale, which is more than one half (1/2) of the acquisition cost
is not inadequate. Private respondents have paid the real estate taxes from the time they took
possession thereof up to 1977..
 The foregoing discussions lead Us to no other conclusion that the trial court was correct in setting aside its
February 1, 1987 decision.
 Yet, We regret that Our favorable action on this petition ends here. After a judicious consideration of the
merits of this case. We find that respondent court did not commit any reversible error in granting
consolidation of ownership in favor of private respondents.
Under Article 1602 of the Civil Code, the contract shall be presumed to be an equitable mortagage,
in any of the cases:
1) When the price of a sale with right to repurchase is unusually inadequate;

2) When the vendor remains in possession as lessee or otherwise;
3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
4) When the purchaser retains for himself a part of the purchase price;
5) When the vendor binds himself to pay the taxes on the thing sold;
6) In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation.
 Based on the evidence on record, none of the aforementioned instances is present in this case. Rather,
evident manifestations of a genuine sale with right to repurchase exist.
 Dominga Tabora Vda. de Macoy did not bind herself to pay the real estate taxes on the land
o There is not even any proof that she paid the real estate taxes thereon since the time of the sale.
o On the contrary, the private respondent Anatalia Elon shows that she paid the real estate taxes
thereon for the calendar years 1974-1977.
 Inasmuch as the document is plainly a pacto de retro sale, it cannot be considered a loan with mortgage
 We reiterate that the contract is the law between the parties. When the words of a contract are clear and
readily understandable, there is no room for construction .freedom of contract must be maintained and
respected.
Article 1606, paragraph 3, of the Civil Code provides that:
However, the vendor may still exercise the right to repurchase within thirty days from the time
final judgment was rendered in a civil action on the basis that the contract was a true sale with
the right to repurchase.
 Petitioners invoke this provision as an alternative legal remedy in the event that the document be finally
declared a pacto de retro sale
o The application of the third paragraph of Article 1606 is predicated upon the bona fides of the
vendor a retro.
o As postulated by the petitioner, "to allow herein private respondents to repurchase the property by
applying paragraph . . .
 to the case at bar despite the fact that the stipulated redemption period had already
long expired when they instituted the present action, would in effect alter or modify
the stipulation in the contract as to the definite and specific limitation of the period
for repurchase (2 years from date of sale or only until June 25, 1958) thereby not
simply increasing but in reality resuscitating the expired right to repurchase . . . and
likewise the already terminated and extinguished obligation to resell by herein
petitioner." The rule would thus be made a tool to spawn, protect and even reward
fraud and bad faith, a situation surely never contemplated or intended by the law.
 This Court has already had occasion to rule on the proper interpretation of the provision in
question.
 `where the proofs established that there could be no honest doubt as to the parties'
intention, that the transaction was clearly and definitely a sale with pacto de retro,
the Court adjudged the vendor a retro not to be entitled to the benefit of the third
paragraph of Article 1606.
 ACCORDINGLY, the petition is hereby DENIED. The decision of the Court of Appeals dated September 4,
1990 and its resolution dated October 17, 1990 are hereby AFFIRMED.
 SO ORDERED.

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G.R. No.

95871 February 13, 1992

HEIRS OF DOMINGA TABORA VDA. DE MACOY, represented by GENEROSO MACOY, petitioners

 private respondents appealed to public respondent Court of Appeals.

 Petitioners raise the following errors committed by respondent court:

1) When the price of a sale with right to repurchase is unusually inadequate;

Article 1606, paragraph 3, of the Civil Code provides that:

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