**Facts:**
1. **Execution of “Compraventa”**:
– On March 21, 1941, Vicente Santiago and his brother, Luis Santiago, sold three parcels of land to Cirilo Leal under a “Compraventa” (Deed of Sale) written in Spanish.
– The title to the parcels was transferred to Cirilo Leal, who took possession and ownership.
2. **Inheritance**:
– Cirilo Leal died on December 10, 1959. The lands were inherited by his six children (petitioners), who subdivided and mortgaged or leased the properties between 1960 and 1965.
3. **Attempted Repurchase**:
– Prior to the agricultural year 1966-1967, Vicente Santiago approached the petitioners to repurchase the properties for P5,600. The petitioners refused.
4. **Complaint for Specific Performance**:
– Vicente Santiago filed a complaint for specific performance in the Court of First Instance of Quezon City on August 2, 1967, which was dismissed on the grounds that no sale or alienation occurred.
– Santiago appealed to the Court of Appeals, where Justice Paras affirmed the initial dismissal. The private respondent (Vicente Santiago) filed a motion for reconsideration and an opposition to petitioners’ motion to amend the dispositive portion for title annotation cancellation.
5. **Intermediate Appellate Court Reorganization**:
– Due to the court reorganization, the Intermediate Appellate Court (IAC) took over, assigning the case to the Fourth Civil Cases Division.
– On September 27, 1983, the IAC reversed its earlier decision, ordering petitioners to accept P5,600, execute a deed of repurchase, and pay rentals and legal fees. This prompted petitioners to seek review by certiorari to the Supreme Court.
**Issues:**
1. **Interpretation of “Compraventa”**: Whether the stipulation in the Compraventa constitutes a right of repurchase for Vicente Santiago or his successors.
2. **Validity of Restriction on Sale**: Whether the prohibition to sell to third parties is valid or contravenes public policy.
3. **Prescription of the Right to Repurchase**: Whether Vicente Santiago’s right to repurchase has prescribed under Civil Code provisions.
**Court’s Decision:**
1. **Interpretation of “Compraventa”**:
– The Supreme Court held that the Compraventa did not create a right of repurchase but merely contained a restraint against selling to third parties. The clause “in case of sale” meant that if the buyers wished to sell, they must first offer it to Vicente Santiago or his heirs.
2. **Validity of Restriction on Sale**:
– The Court ruled such a prohibition void as it imposed an indefinite restriction on the right of ownership, contrary to public policy. It considered this an unwarranted infringement on the owner’s right to freely dispose of property, referencing Article 1306 of the Civil Code concerning public order and policy.
3. **Prescription of the Right to Repurchase**:
– Assuming arguendo that a right to repurchase existed, the Supreme Court stated it would have prescribed four years after the execution of the Compraventa (under Article 1508 of the Civil Code of Spain). Since the repurchase request was made 25 years later, it was clearly beyond the prescriptive period.
**Doctrine:**
– **Nullity of Perpetual Restrictions**:
– Article 1306 of the Civil Code: While parties may establish stipulations, these should not be contrary to law or public policy. Perpetual restrictions that affect property ownership are null and void.
– **Right to Repurchase and Prescription**:
– Right to repurchase must be expressly stipulated and is time-bound (four years from contract execution in the absence of an express period).
**Class Notes:**
– **Key Elements/Concepts**:
– Conventional Redemption: A reserved right to repurchase must be expressly stated and subject to a prescriptive period.
– Public Policy: Restrictions on property transactions that are indefinite or perpetual undermine public policy.
– Relevant Statutory Provisions:
– Article 1306, Civil Code: Stipulations contrary to public order are void.
– Article 1508, Civil Code of Spain (Article 1606, Civil Code of the Philippines): Time limits for the right of redemption.
**Historical Background:**
– The case ties back to pre-World War II legal documents and reflects the transition from Spanish-influenced legal principles to modern Philippine jurisdiction. The legal focus on public policy and the proper interpretation of contractual agreements underscores evolving judicial standards post-Spanish and American occupations. This decision reinforces property rights and limits on contractual freedom in alignment with public order.
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