Aquino vs Deala, 63 Phil 582
Subject: Obligations and Contracts
FACTS
The
defendant approached Mariano Aquino, the plaintiff’s father, to solicit a loan
for a certain amount secured by the real property, on which a house of strong
materials was built. Mariano Aquino acceded to the defendant’s proposition on
condition that the transaction be evidenced by a deed in the form and under the
conditions imposed because otherwise he would not have obtained the sum needed
by him.
The
deed was novated on December 26, 1926, the only alteration made being in the
clause referring to the price and the rent which were increased to P4,500 and
P45, respectively. It was renovated on May 31, 1927, by increasing said price
and rent to P5,200 and P52, respectively. On April 20, 1931, it was finally
renovated by increasing the price to P6,600, reducing the rent to P49.50 a
month and extending the period of repurchase to April 20, 1933, the original
period of four years agreed upon having expired some months before. Except for
the amount of the price and the rent and the extension of the period of
repurchase, the stipulations of the original deed were left intact in the
subsequent novation.
On
November 4, 1926, the defendant obtained permission from the department of
engineering and public works to construct a two-story house of strong materials
on the vacant part of the lot in question, the work having been finished about
June 23, 1928.
On
June 9, 1933, Mariano Aquino had the consolidation of his ownership of the
property referred to in said documents registered in the registry of deeds and
transfer certificate of title was issued to him. He died sometime later and his
son Antonio F. Aquino, who instituted the present ejectment proceedings in the
municipal court of Manila, was appointed special administrator of his testate
estate. The defendant timely raised the question of ownership both in the court
of origin and in the Court of First Instance. The municipal court ordered the
defendant to vacate the property in question and to pay the plaintiff the
unpaid rents at the rate of P50 a month, plus the costs. The Court of First
Instance, on appeal, substantially affirmed the appealed judgment, overruling
the defenses set up by the defendant.
ISSUE
Whether
or not the contract is really a sale with the right of repurchase (pacto de
retro) or is it really a mortgage (an equitable mortgage).
RULING
No, it
is not a “sale with right of repurchase” as it deemed be but actually an
equitable mortgage in disguise.
Under
the law (Article 1370 par.1, NCC), if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.
Although
apparently this is a pacto de retro, it really is an equitable mortgage, for
considering the circumstances of the case, the purpose of the contract was
really to make the house the security for the loan. There was no real intention
here to sell the house.
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