[G.R. No. 32052. October 28, 1930. ]
ELENO CORREA, Plaintiff-Appellant, v. ALEJANDRO R. MATEO and MAXIMO ICASIANO, Defendants. ALEJANDRO R. MATEO, Appellant.
Camus & Delgado, for Plaintiff-Appellant.
Pedro R. Arteche, for Defendant-Appellant.
1. WHEN A "PACTO DE RETRO" IS AN EQUITABLE MORTGAGE. — August, 1920, for a consideration of P18,000, M executed a deed to I for ten parcels of land, of which P4,000 only was paid. On the same day I executed to C an instrument in the form of a pacto de retro for the same land, which provided that for failure to repurchase on or before August 12, 1925, the title to the property would become vested in C without the right of redemption. During the five-year period I was to have and remain in possession of the land upon the payment of an annual rental of P480. Neither instrument was filed for record, and M did not know of the execution of the pacto de retro, and the only money which he ever received was the P4,000 paid to him at the time he executed the deed to I, and for such reason M commenced an action against I to recover on the first installment, for which he obtained judgment and sold five of the ten parcels of land, concurrent with which I delivered possession of all of the ten parcels of land in satisfaction of his debt to M. Held, In an action by C, after the expiration of five years, to recover possession of the land as its owner, that M was the sole and absolute owner of the land, and that the pacto de retro should be construed as a prior, equitable of C’s debt with accrued interest from the date of the pacto de retro.
In his original complaint filed August 12, 1927, the plaintiff sought to recover the possession of five parcels of land and P5,000 as damages for its unlawful detention, to which on September 20, 1927, the defendant, Maximo Ino, filed an answer in which he alleged that the real contract between him and the plaintiff, executed August 12, 1920, was a simple contract of loan under which he took from the plaintiff P4,000 which he promised to pay within five years, with interest at 12 per cent per annum, and that to evade the legal effects incident to the exercise of the profession of a money lender, both parties agreed to draw up a mortgage contract of sale with pacto de retro, reserving to the defendant possession of the land. That the land was acquired by him from his codefendant, Alejandro R. Mateo, for the agreed price of P18,000, four thousand pesos was paid in cash, and the remainder payable in annual installments of P1,500, as evidenced by a promissory note. That for failure to pay the note, as agreed, the defendant, Alejandro R. Mateo, attached and took possession of all of the lands since 1922, five parcels of which are those described in the second paragraph of the complaint, and he prays that he be absolved from the complaint, with costs.
June 11, 1928, the plaintiff filed an amended complaint in which he alleges that on August 12, 1920, for a consideration of P4,000, the defendant Maximo Ino, sold to him ten parcels of land consisting of about twenty-four hectares, specifically described in the complaint. That in and by the terms and conditions of the sale, the defendant Ino had the right to repurchase the lands for P4,000, at any time on or before August 12, 1925, and that upon failure to do so, the lands would irrevocably become the sole and exclusive property of the plaintiff. A copy of that instrument is attached to, and made a part of, the complaint, marked Exhibit C. That Ino failed to exercise his right to repurchase. That by reason thereof, the plaintiff is the owner and entitled to the possession of the lands since August 12, 1925. That repeated demands have been made for possession and refused. That when the plaintiff tried to take possession he found that not only the defendant Ino was in possession, but that the defendant, Alejandro R. Mateo, was also in possession, who refused to surrender possession. That by the terms of Exhibit C, the defendant Ino agreed and bound himself to pay the plaintiff P480 annually, for five years, from August 12, 1920, to August 12, 1925, as rental for the use and occupation of the lands, no part of which has been paid, except P480 corresponding to the first yearly rental. That the use and occupation of the lands since August 12, 1925, is reasonably worth P480 annually, and plaintiff prays for judgment against the defendants that he is the owner and entitled to the possession of the lands and its improvements and for damages in the sum of P480 annually from August 12, 1921, until the rendition of the judgment, and for costs.
To this amended complaint, the defendant, Alejandro R. Mateo, filed an answer on June 25, 1928, in the nature of a general and specific denial, and as a special defense alleged that he has not made any contract with the plaintiff, and that in carrying out the alleged sale, with pacto de retro, the plaintiff knew that the defendant Ino had not yet paid the purchase price of the property, and that for want thereof, it was agreed that the sale should be rescinded, and possession of the property should be and was delivered to Alejandro R. Mateo, who prays that he be absolved from the complaint, with costs.
Upon such issues the lower court rendered judgment that Alejandro R. Mateo was the owner and entitled to the possession of the five parcels purchased by him at the sheriff’s sale, described as parcels (a), (b), (c), (d), and (e) in the amended complaint, and that the plaintiff was the owner and entitled to the possession of the remaining parcels (f), (g), (h), (i), and (j), and for damages of P480 annually from August 12, 1921, to April 23, 1923, to be recovered from the defendant, Maximo Ino only, to which plaintiff and Alejandro R. Mateo duly excepted, and from which both of them appealed, and the plaintiff assigns the following errors:jgc:chanrobles.com.ph
"I. The lower court erred in holding that Alejandro R. Mateo has a better right than Eleno Correa, and that the former is entitled to the five parcels of land purchased by him at the sheriff’s sale, said parcels being the ones described in Exhibit 2, and subparagraphs a, b, c, d, and e of paragraph 2 of Eleno Correa’s amended complaint.
"II. The lower court erred in not ordering the defendant- appellant Alejandro R. Mateo to deliver to plaintiff-appellant Eleno Correa the five parcels of land described in subparagraphs a, b, c, d, and e of paragraph 2 of the latter’s amended complaint.
"III. The lower court finally erred in denying plaintiff-appellant’s motion for reconsideration and new trial."cralaw virtua1aw library
The defendant, Alejandro R. Mateo, assigns errors as follows:jgc:chanrobles.com.ph
"I. The lower court erred in holding that the true nature of the supposed deed of sale, Exhibit C, executed on August 12, 1920, by the defendant Maximo Ino in favor of the plaintiff Eleno Correa was not put in issue.
"II. The lower court also erred in denying the ’motion for new trial by reason of surprise,’ supported by an affidavit of merits, filed by defendant-appellant Alejandro R. Mateo, under date of November 30, 1928.
"III. The lower court likewise erred in holding that the plaintiff Eleno Correa has a better right than the defendant-appellant Alejandro R. Mateo, and that the former is entitled to the possession of the five parcels of land described in sub-paragraphs (f), (g), (h), (i), and (j) of paragraph 2 of the plaintiff’s amended complaint.
"IV. The lower court in the same manner erred in ordering the defendant-appellant Alejandro R. Mateo to deliver to the plaintiff Eleno Correa the five parcels of land described in sub-paragraphs (f), (g), (h), (i), and (j) of paragraph 2, of the plaintiff’s amended complaint.
"V. The lower court finally erred in overruling the demurrer filed by Attorney Perfecto Gabriel in behalf of the defendant-appellant Alejandro R. Mateo, dated September 17, 1927, and in not absolving the defendant and appellant herein from the plaintiff’s complaint."
D E C I S I O N
The facts are simple, novel, and peculiar.
It is admitted that the defendant, Alejandro R. Mateo, was the original owner of the ten parcels of land in question. That on August 7, 1920, he executed a deed for them to his co-defendant, Maximo Ino, the consideration for which was P18,000, of which P4,000 only was paid on August 12, 1920, when the deed was actually delivered. The remaining P14,000 was payable in installments at the rate of P1,500 annually, the last of which was for P2,000. It is also admitted that on the same day that the deed was delivered and the P4,000 paid to Alejandro R. Mateo, the defendant, Maximo Ino, for a consideration of P4,000 then paid to him, executed to the plaintiff what is known in the record as Exhibit C, which in form is a pacto de retro, of the identical land which was conveyed to Maximo Ino by Alejandro R. Mateo, by the terms of which, for failure to repurchase on or before August 12, 1925, the absolute title to the property was to become vested in the plaintiff without the right of redemption. It also appears that during the five-year period Ino was to have and remain in possession of the land upon the payment of an annual rental of P480. It is also agreed that for the failure of Ino to pay the first installment of P1,500 on the purchase price of the property, Alejandro R. Mateo commenced an action against Ino to recover the first unpaid installment upon which he procured judgment, and that five of the ten parcels of land were levied upon and sold at public auction to Alejandro R. Mateo on or about April 23, 1923, which left a balance still due and owing him of P12,500 of the original purchase price of P18,000. The defendant not being able to satisfy the payment of the remaining P12,500, he then waived all of his rights to the remaining five parcels, and ceded them to his codefendant, all of which was in March and April, 1923. It is admitted that the deed from Alejandro R. Mateo to his codefendant was never recorded, and that at all times the record title to the property in dispute has remained and is now in Alejandro R. Mateo. It is also conceded that Exhibit C was never recorded. It is claimed and asserted, and not denied, that Alejandro R. Mateo never knew of the execution of Exhibit C or of its terms and conditions. It is also admitted that the only payment which Maximo Ino ever made to the plaintiff was P480, which was the first yearly rental.
The evidence is conclusive that after the sheriff’s sale of the five parcels of the property to Alejandro R. Mateo to satisfy his judgment, Maximo Ino delivered the actual possession of all of the ten parcels to his codefendant, Alejandro R. Mateo, who at all times since has been and is now in possession thereof.
In the final analysis, we have this situation. August 12, 1920, Alejandro R. Mateo sold and conveyed the ten parcels of land in dispute to his codefendant at an agreed price of P18,000. P4,000 was paid at the time the deed was delivered, and the remaining P14,000 was to be paid in annual installments, the deed for which was never filed for record. Upon that day and for a consideration of P4,000, Maximo Ino executed to the plaintiff what is known in the record as Exhibit C, which in form is a pacto de retro, which was never recorded. There is no claim or pretense that Alejandro R. Mateo ever knew of the existence of that judgment. After the execution of both instruments, Maximo Ino took and remained in possession of the property under a contract with the plaintiff in and by which he was to pay him P480 annually in the nature of rental. Things remained in that situation until Maximo Ino failed to make the payment of his first annual installment of P1,500 upon the purchase price of the property, by reason of which, in the ordinary course of business, his codefendant obtained judgment against Maximo Ino for that amount, levied upon, and sold five out of the ten parcels of land, to satisfy his judgment, pursuant to which in April, 1923, Maximo Ino not only delivered possession of the five parcels which were sold, but also the remaining five parcels which were not sold by the sheriff, for the reason that he was unable to pay the debt or any part of it to his codefendant.
It must be admitted that upon its face, Exhibit C is in form a pacto de retro, and that by its express terms and conditions, the title to all of the ten parcels should be and become vested in the plaintiff on August 12, 1925. Even so, upon the admitted facts, that would be harsh and cruel. The plaintiff would have us believe that on the very day that Maximo Ino purchased the ten parcels of land from his codefendant at an agreed price of P18,000 he sold and conveyed the same land to the plaintiff for P4,000. Such a business transaction would violate every rule of reason and common sense. Nobody in his right mine would ever purchase ten parcels of land at an agreed price of P18,000, and on the same day turn around, sell, and convey the same land to a third person for P4,000, and thus subject himself to the payment of the remaining P14,000 of the original purchase price.
As stated the record title to the property then and ever since has been in the name of Alejandro R. Mateo, and his deed to Ino was never filed for record, and while it was executed on August 7, 1920, it was never actually delivered until August 12, 1920, the same day that Exhibit C was executed and delivered, and it is fair to assume that the P4,000 which Ino paid to Alejandro R. Mateo was the P4,000 which plaintiff on that day paid to Ino.
In the very nature of things, plaintiff must have known of the execution of the deed to Ino and its actual consideration.
Among other things, Exhibit C recites:chanrob1es virtual 1aw library
x x x
"1st. That Mr. Maximo Ino is the owner of ten (10) parcels of land, all of which are destined to the cultivation of sugar cane and corn, with the exception of one which is destined to the cultivation of palay, acquired by absolute sale from Father Alejandro R. Mateo, as evidenced by the document issued in my favor under date of August 7, 1920, before the Notary Public Mr. Ambrosio Valero, Registry Number 47, Folio II, Series of 1920, which does not give their descriptions, inasmuch as the papers and documents concerning the ownership, with the descriptions of the ten parcels referred to in this deed of sale, subject to repurchase, are attached to the latter.
"That in consideration of the sum of four thousand pesos, Philippine currency, which the vendor Maximo Ino has received from the spouses Eleno Correa and Luisa Silverio, to his satisfaction, he hereby cedes, sells and transfers to them the aforesaid then parcels of land described in the document executed by Mr. Alejandro R. Mateo, registry No. 47, folio II, series of 1920, attached hereto.
"2nd. That the vendor Maximo Ino before the expiration of five agricultural years counted from the date of the execution hereof, has the right to repurchase the property hereby sold, for the same sum of P4,000.
"3rd. It is agreed and stipulated that during these five years, the vendor shall take a lease of this property at four hundred eighty pesos per annum, payable in August of every year. . . ."cralaw virtua1aw library
It is apparent from this specific reference that the plaintiff knew of the terms and conditions of that deed, and that the actual purchase price of the property was P18,000. Yet, by the express terms of Exhibit C, plaintiff would not only be entitled to 12 per cent per annum on his P4,000 for the period of five years, but he would then be and become the sole and absolute owner of the land for a consideration of P4,000 which Ino purchased from Alejandro R. Mateo on the very day that Exhibit C was executed, for a consideration of P18,000. Such a transaction would be grossly inequitable and unconscionable. Both the deed and Exhibit C having been delivered on the same day, they should be more or less construed together as one and the same transaction, even though Alejandro R. Mateo never knew of the execution of Exhibit C.
When neither the deed to Ino nor Exhibit C upon which it is based were filed for record, the law will not permit the plaintiff to become the sole and absolute owner of the land for a consideration of P4,000, which on the very day that Exhibit C was executed, Ino purchased from Alejandro R. Mateo for an actual consideration of P18,000, upon which P4,000 only of the purchase price was ever paid.
The judgment of the lower court cannot be sustained. by the express terms and provisions of Exhibit C, if enforced, the plaintiff would be the sole and exclusive owner of all of the ten parcels of land. There is no legal principle upon which the land can be divided. Be that as it may, upon the facts disclosed in the record, equity and good conscience will not permit the enforcement of Exhibit C as a pacto de retro.
All things considered, and in the interest of justice, it should be construed as an equitable mortgage upon all of the ten parcels of land. As stated, it is apparent that the P4,000 which plaintiff paid to Ino was the P4,000 which he paid to Alejandro R. Mateo. That is to say, since August 12, 1920, Alejandro R. Mateo has had the use and benefit of P4,000 of plaintiff’s money. In addition to that it also appears that since April, 1923, Alejandro R. Mateo has had the fruits and products of all of the land.
In his complaint the plaintiff prays for judgment that he is the sole and absolute owner of the land and for its possession and damages, by way of rental, for its unlawful use and occupation. Upon such a pleading, we would not feel justified in rendering a decree of foreclosure for the amount due and owing the plaintiff. But we are clearly of the opinion that the plaintiff has an equitable lien for his P4,000 which endured to the use and benefit of Alejandro R. Mateo on all of the ten parcels of land. It is true that as between the plaintiff and Alejandro R. Mateo no specific rate of interest is specified for the P4,000. But it appears by the express terms of Exhibit C that Ino was to pay an annual rental of P480 during the five-year period for the use and benefit of the land, of which P480 only was paid.
As stated, the admitted facts are simple and peculiar.
All things considered, we are of the opinion that Alejandro R. Mateo is the sole and exclusive owner of all of the ten parcels of land, for which he should have a corresponding judgment. We are also of the opinion that the plaintiff has an equitable lien upon all of the ten parcels of land in the nature of a mortgage to secure the payment to him of his P4,000, with interest thereon from August 12, 1921, at the rate of 12 per cent per annum until paid, with the legal right to enforce the lien in the court in a proper proceeding at any time within sixty days after this judgment should become final.
For such reasons, the judgment of the lower court is reversed and the complaint dismissed, without prejudice to the right of the plaintiff, within sixty days after final judgment, for a failure to pay the amount due and owing him, to foreclosure his mortgage in a proper proceeding and sell all or any part of the ten parcels of land to satisfy his debt. Neither party to recover costs. So ordered.
, Malcolm, Ostrand, Romualdez and Villa-Real, JJ.
Johnson and Street, JJ.
, reserve their votes.