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PHILIPPINE SUPREME COURT DECISIONS

EN BANC

[G.R. No. 14106. August 5, 1919. ]

EUTIQUIANO CUYUGAN, Plaintiff-Appellee, v. ISIDORO SANTOS, Defendant-Appellant.

Charles C. Cohn, for Appellant.

Ramon Diokno, for Appellee.

SYLLABUS


1. "PACTO DE RETRO;" MORTGAGES; PAROLE EVIDENCE. — The beneficent doctrine announced in Cuyugan v. Santos ([1916], 34 Phil. 100) that parole evidence is competent and admissible in support of allegations that an instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the title with a mere right of repurchase, was in truth and in fact given merely as security for the repayment of a loan, followed and affirmed.

2. ID.; ID.; ACCEPTANCE OF PARTIAL PAYMENTS; EFFECT. — The doctrines announced in Lichauco v. Berenguer ([1911], 20 Phil., 12) and in Cuyugan v. Santos ([1916], 34 Phil., 100) that where a sale of lands has been made reserving to the vendor a right to repurchase under stipulated conditions, and one or more partial payments have been made by the vendor and accepted by the purchaser, the acceptance of such partial payments is absolutely incompatible "with the idea of irrevocability of the title of ownership of the purchaser" at the expiration of the term stipulated in the original contract for the exercise of the right of repurchase, followed and affirmed.

3. ID.; ID.; ID.; ID. — One C received from one S the sum of P3,500. C executed in favor of S a document which on its face appeared to be a venta con pacto de retro [sale with right of repurchase] of four parcels of land. It is found as a fact that the sum of P1,000 was later paid by C to S on account of the redemption of the land. Held: That the public instrument is no longer a venta con pacto de retro but a mortgage.


D E C I S I O N


MALCOLM, J.:


Even at the expense of twice telling a tale, for this case has been before the appellate court once before, it is incumbent to enter upon a chronological narrative of the case and of the facts, though wearisome, in order to understand the conclusion and ultimate judgment.

On April 3, 1895, Guillerma Cuyugan received from Isidoro Santos the sum of P3,500. She executed in favor of Santos a document which on its face appears to be a venta con pacto de retro [sale with right of repurchase] of four parcels of land. The yearly rental was fixed at P420. In 1896, Guillerma Cuyugan paid P420 as one year’s rent. In 1897, she paid P324 as one year’s rent and her son also claims, although denied by Santos, and this, as will later becomes the crux of the case, that she paid P1,000 on account of her debt. From that date until 1913, P300 per year was paid as rent, except that for the year 1908 it is claimed by Santos that the amount was P350, although this is refuted by the contention that this amount pertained to another parcel of land. In 1913, the sum of P420 was demanded by Isidoro Santos from Eutiquiano Cuyugan, as the correct amount for the year’s rental. In lieu of payment of this sum, he deposited P2,800 in the provincial treasury and commenced action to have the deed of conveyance cancelled and to require Santos to accept the P2,800 tendered.

A demurrer was interposed on behalf of Isidoro Santos appearing as defendant, on the principal ground that the written document, apparently a venta con pacto de retro, could not be varied by parole evidence. The demurrer was sustained by the trial court. Plaintiff appealed to the Supreme Court where on two separate and distinct grounds, it was found that the demurrer should have been overruled. (See Cuyugan v. Santos [1916], 34 Phil., 100.) The first ground for the reversal of the order of the trial court announced the beneficent doctrine, which has since been steadfastly adhered to, that parole evidence is competent and admissible in support of allegations that an instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the title with a mere right of repurchase, was in truth and in fact given merely as security for the repayment of a loan. This equitable principle with which we are all in agreement, is not again in issue. It is the second ground on which the appellate court held that the demurrer should have been overruled which is now of interest. On this point, this court, speaking through Mr. Justice Carson, said:jgc:chanrobles.com.ph

"The second ground upon which the demurrer should have been overruled is that it admits the truth of the allegation of the complaint that in the year 1897, two years after the date of the execution of the instrument purporting to be a deed of sale, the nominal vendor paid the nominal purchaser P1,000, whereupon the nominal rent of the land was reduced from P120 to P300 per annum, the real purpose and object of this arrangement being to reduce the amount of the annual interest on the original loan made to the nominal vendor of the land, proportionately to the reduction of the amount of the loan itself by the payment of P1,000.

"If it be true that two years after the transaction evidenced by the instrument attached to the complaint, the defendant accepted from the plaintiff’s mother the sum of P1,000, and thereafter reduced the amount of the annual payments to be made by her, it can not be doubted that the plaintiff has a good cause of action against the defendant.

"The acceptance by the defendant of this large sum of money, under the circumstances as they appear from the complaint, can only be accounted for on one or two hypotheses. Either the original transaction was in truth and in fact an arrangement or agreement by virtue of which a loan of money was made and secured by a formal deed of sale of land with a reserved right of repurchase; or, if the original transaction was in truth and in fact one of purchase and sale of real estate, with a reserved right of repurchase in the vendor, then the purchaser, by the acceptance from the vendor of the sum of P1,000, waived and surrendered his rights under the original contract, and entered into a new contract with the vendor, under which he obligated himself to cancel the deed, or resell the land to the original vendor on the payment of the balance of the original purchase price, and bound himself not to exercise his right, under the original deed of sale, to refuse to allow the original vendor to repurchase after the expiration of the period stipulated in the original contract for that purpose.

"Upon either hypothesis, plaintiff would clearly be entitled to the relief prayed for in his complaint. Of course the defendant is not entitled to keep both the land and the payment of a thousand pesos. The acceptance and retention of such a payment is wholly inconsistent with a claim of a right of absolute ownership in the land, without any obligation to resell it to the original vendor. Defendant can not eat his cake and have it too."cralaw virtua1aw library

Add to the foregoing, the rule announced in the case of Lichauco v. Berenguer ([1911], 20 Phil., 12) where this court, speaking through the Chief Justice, said that if various partial payments had been made by the vendor, and accepted by the purchaser, this was incompatible with the idea of the irrevocability of the title of ownership of the purchaser, and the ultimate issue before the court, is to find if the sum of P1,000 was paid by Guillerma Cuyugan on account of the redemption of the land which is the subject matter of the complaint. If it be found that she did make such a payment, then the public instrument Exhibit D is no longer a venta con pacto de retro, but a mortgage. On the other hand, if it be found that she did not make such a payment, then the public instrument is a venta con pacto de retro and must be enforced as such.

After this court had remanded the record for further proceedings and after evidence had been received, the trial court, in its decision, found as a fact that the sum of P1,000 had been paid by Guillerma Cuyugan and accepted by Isidoro Santos. On this point, we have to choose between the testimony of Roman Cuyugan, the father of the plaintiff, who said that the payment was made by Guillerma Cuyugan in his presence, and of Isidoro Santos who denies that he ever received any money for this purpose from Guillerma Cuyugan or from any one in her behalf. Without deciding which is the more trustworthy witness, for one or the other must be mistaken, the most eloquent corroboration of the finding of the trial court comes from a study of the payments of the rent. Excepting the first year, when naturally Guillerma Cuyugan would be expected to pay the yearly rent of P420, and the succeeding years for some reason she paid P324, which is explained by counsel for appellee as being rent for two additional months, it is incontestable that in the succeeding years she paid Santos P300 per year. P420 is 12 per cent of P3,500, the loan of Guillerma Cuyugan. P300 is 12 per cent of P2,500, Plainly demonstrating that after 1897, both parties recognized that the loan had been reduced by P1,000. In a way, although but slightly, the same finding is corroborated by the clause in the will of Guillerma Cuyugan executed on July 13, 1901, wherein it was stated that there exists a loan upon four parcels of land in favor of Isidoro Santos in the sum of P2,500. Equitable considerations finally move in this direction, for it would not be just for Santos, after receiving the rent for all these years and possibly a partial payment of P1,000, to be permitted to retain possession of property now said to be valued at P14,000. Sales with right of repurchase (ventas con pacto de retro) are not favored by the law.

We agree with the trial court, who had the further advantage of seeing and hearing the witnesses testify, that P1,000 was paid by Guillerma Cuyugan to Isidoro Santos. The result is to hold the document Exhibit D to be, not a venta con pacto de retro, but a mortgage.

One more assignment of error only must be discussed. Before the trial court, counsel for defendant demurred on the ground that the cause of action had prescribed. This defense, the trial court for some undisclosed reason saw fit to disregard entirely. It is again pressed on appeal. All that need be said on this point is, that if this public instrument is in truth a mortgage, acceptance of interest thereon has served to toll the prescriptive period. The matter only reached a head when the defendant attempted to collect more than the customary amount. The action instituted by the plaintiff then became in effect one to redeem mortgaged property.

The judgment of the Court of First Instance of Pampanga, ordering the defendant to accept the amount of P2,800 giving receipt therefor and to return the documents in question to the estate of Guillerma Cuyugan with costs against the defendants, is affirmed, with the costs of this instance against the appellants. So ordered.

Arellano, C.J., Torres, Johnson, Araullo, Street and Avanceña, JJ., concur.

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