LEONARDO LUCIDO, PLAINTIFF AND APPELLEE, VS. GELASIO CALUPITAN ET AL., DEFENDANTS AND APPELLANTS.

In this case it appears that some chattels and real estate belonging to the
plaintiff, Lucido, were regularly sold at an execution sale on February 10,
1903, to one Rosales, who the next day transferred a one-half interest in the
property to Zolaivar. On March 30, 1903, a public document was executed and
signed by all of the above parties and the defendant, Gelasio Calupitan, wherein
it was stated that Rosales and Zolaivar, with the consent of Lucido, sold all
their rights and obligations pertaining to the property in question to Calupitan
for the amount of the purchase price together with 1 per cent per month interest
thereon up to the time of redemption, or 1,687 Mexican dollars, plus 33.74
Mexican dollars, the amount of the interest. It will be observed that the
computation of the transfer price is in accordance with section 465 of the Code
of Civil Procedure. On the same day Lucido and Calupitan executed the following:
document:

“I, Gelasio Calupitan y Agarao, married, certify that I have delivered this
instrument to Leonardo Lucido y Vidal to witness that his lands, which appear in
the instrument I hold from the deputy sheriff and for which he has accepted
money from me, I have ceded to him all the irrigated lands until such time as he
may repurchase all said lands from me (not only the irrigated ones), as also the
Vienna chairs, the five-lamp chandelier, a lamp stand, two wall tables, and a
marble table; no coconut tree on said irrigated land is included. Apart from
this, our real agreement is to permit three (3) whole years to elapse, reckoned
from the date of this instrument, which has been drawn up in duplicate, before
he may redeem or repurchase them from me.”

The lower court held that this document constituted a sale with the right to
conventional redemption set forth in articles 1507 et seq. of the Civil
Code. The present action not having been instituted until February 17, 1910, the
further question arose as to whether the redemption period had expired, which
the lower court decided in the negative. The lower court further found as a fact
that Lucido had prior to the institution of the action offered the redemption
price to the defendant, who refused it, and that this offer was a sufficient
compliance with article 1518 of the Civil Code. The decision of the lower court
was that the property in question should be returned to the plaintiff. From this
judgment the defendant appealed, and all three of the above rulings of the court
are assigned as errors.

1. Considerable doubt might arise as to the correctness of the ruling of the
lower court upon the first question, if the document executed by the execution
purchasers and the parties to this action stood alone. In that document it
appears that Calupitan acquired the rights and obligations of the execution
purchasers pertaining to the property in question. These rights and obligations
are denned in the Code of Civil Procedure to be the ownership of the property
sold, subject only to the right of redemption on the part of the judgment debtor
or a redemptioner, within one year from the date of the sale. (Sees. 463-465,
Code Civ. Proc.) Were this the nature of the transaction between the parties,
however, the intervention of Lucido in the transfer would be wholly unnecessary.
Hence, the fact that he intervened as an interested party is at least some
indication that the parties intended something more or different by the document
in question than a simple assignment of the rights and obligations of the
execution purchasers to a third person.

Any doubt, however, as to the character of this transact tion is removed by
the agreement entered into between Lucido and Calupitan on the same day. In this
document it is distinctly stipulated that the right to redeem the property is
preserved to Lucido, to be exercised after the expiration of three years. The
right to repurchase must necessarily imply a former ownership of the
property.

Further indication that Calupitan himself considered this transaction as a
sale with the right to conventional redemption is to be found in his original
answer to the complaint. This original answer was introduced in evidence by the
plaintiff over the objection of the defendant. Its admission was proper,
especially in view of the fact that it was signed by Calupitan himself, who was
at the time acting as his own attorney.

Jones on Evidence (sees. 272, 273), after remarking that the earlier cases
were not in harmony on the point, says:

“Many of the cases holding that pleadings were inadmissible ad admissions
were based on the theory that most of the allegations were merely pleader’s
matter—fiction statedly counsel and sanctioned by the courts; The whole modern
tendency is to reject this view and to treat pleadings as statements of the real
issues in the cause and hence as admissions of the parties, having weight
according to the circumstances of each case. But some of the authorities still
hold that if the pleading is not signed by the party there should be some proof
that he has authorized it.

“On the same principle where amended pleadings have been filed, allegations
in the original pleadings are held admissible, but in such case the original
pleadings can have no effect, unless formally offered in
evidence.”

In this original answer it was expressly stated that the transaction was one
of sale with the right to repurchase governed by the provisions of articles 1507
et seq. of the Civil Code.

It further appears from the uncontradicted testimony of the plaintiff that he
furnished $120 Mexican of the amount necessary to redeem the property from the
execution purchasers. It therefore appears beyond dispute that the redemption of
the property from the execution purchasers was made by the plaintiff himself by
means of a loan furnished by the defendant Calupitan, who took possesion of the
major portion of the land as his security for its redemption, The ruling of the
lower court that the transaction between Lucido and Calupitan was one of
purchase and sale with the right to redeem was therefore correct.

2. By the terms of his agreement with Calupitan the plaintiff could not
exercise his right to redeem the property within three years from March 30,
1903; and the lower court arrived at the date upon which the right to redeem
expired by computing four years from March 30, 1906, on the ground that there
was no express agreement as to how long the right to repurchase, once available,
should continue. Counsel for the appellant admits in his brief that the
complaint was filed forty-three days before the expiration of this period. In
accordance with our decision in Rosales vs. Reyes and Ordoveza (25
Phil. Rep., 495), we hold that this ruling of the court was correct.

3. The court Held that the plaintiff had actually tendered the redemption
price to the defendant Calupitan. After an examination of the evidence of record
as to-this finding of fact, we concur therein. We discussed the legal
sufficiency of such a tender in the above-cited case of Rosales vs. Reyes and
Ordoveza, and held that it was sufficient. This assignment of error must
therefore be held to be unfounded.

4. The defendants Oreta and Bueno have no interest in the subject matter of
this action. It appears that the defendant Dorado purchased the land from his
codefendant Calupitan subsequent to the tender of the redemption price to the
latter by the plaintiff. It does not appear that the property was ever
registered by any one, nor was the document of sale with the right to repurchase
registered by either Calupitan or Lucido. No evidence of the purchase of the
land from Calupitan by Dorado is of record with the exception of the oral
testimony although it may be taken as established that such a sale actually took
place, since all the parties interested agree on this point. Dorado himself
testified that he purchased the property with the knowledge that Calupitan had
purchased the property from Lucido subject to the right of redemption, and
insists that he purchased with the knowledge and consent of Lucido. Lucido
denies that he was aware of the sale to Dorado until after it had taken place.
Upon this state of facts, it is clear that the following provisions of article
1510 of the Civil Code are applicable:

“The vendor may bring his action against every possessor whose right arises
from that of the vendee, even though in the second contract no mention should
have been made of the conventional redemption; without prejudice to the
provisions of the Mortgage Law with regard to third persons.”

The provisions of the Mortgage Law with regard to third persons are clearly
not applicable to Dorado. (Manresa, vol. 10, p. 317.)

5. The lower court ordered the redelivery of the land to the plaintiff upon
his payment to Calupitan of P1,600, plus the costs entailed in the execution of
the document of repurchase. The amount paid to the purchasers at the execution
sale for the redemption of the property was $1,720.74 Mexican. Of this amount
the plaintiff furnished $120 Mexican, and Calupitan the balance of $1,600.74
Mexican. No amount is fixed in the document of purchase and sale above set
forth, but the amount borrowed from Calupitan to redeem the land from the
execution sale being thus clearly established no objection can be or is made to
the plaintiff’s paying this amount. In ordering the payment of this amount to
the defendant the lower court failed to reduce it to Philippine currency. On
this appeal plaintiff alleges that this amount in Mexican currency exceeds the
amount he actually owes to the. defendant by about P100, but that rather than
spend the time and incur the expense attendant to a new trial for the purpose of
determining the equivalent of this amount in Philippine currency he is agreeable
to pay the defendant P1,600.74 Philippine currency, as the redemption price of
the property. In view of this offer and in case it is accepted by the defendant
it will be unnecessary to go through the formality of a new trial for the
purpose of ascertaining the amount of the redemption price in Philippine
currency. In view of the fact that it is claimed that Calupitan has sold the
land in question to his codefendant, Macario Dorado, and it not clearly
appearing to whom the plaintiff should pay the P1,600.74, we think this amount
should be turned over to the clerk of the Court of First Instance of the
Province of Laguna to be held by him until it is determined in the proper manner
who is the owner of this amount, Calupitan or Dorado.

For the foregoing reasons, judgment will be entered directing the defendants
Calupitan and Dorado to deliver the possession of the land in question to the
plaintiff upon the plaintiff’s depositing with the clerk of the court the sum of
P1,600.74, to be disposed of in the manner above set forth. In all other
respects the judgment appealed from is affirmed with costs against the
appellants Calupitan and Dorado.

Arellano, C. J., Carson and Araullo, JJ., concur.

---

MORELAND, J.

I am extremely sorry to be obliged to dissent from the opinion of my
brethren. Were it not for the fact that I regard the decision in this case so
fundamental in character, and its effects on the law relative to sales with the
right of repurchase so far-reaching, I would be silent. I cannot permit to pass
unchallenged a doctrine which, in my judgment, if followed in the future, as it
is to be presumed it will be, renders entirely ineffective the main provisions
of the statute law governing a given subject. This decision, taken together with
that of Rosales vs. Reyes and Ordoveza (25 Phil. Rep., 495), I regard as an
abrogation, a repeal, of article 1508, of the Civil Code, together with these
articles which depend upon it I dissented in the case of Rosales vs.
Reyes and Ordoveza. Only one phase of the question was really raised, presented,
or argued in that case. A further study of the questions involved both in that
case and the one at bar has brought the strong conviction that the decisions in
these cases are not only wrong in a fundamental sense but result in a
destruction of the provisions of the Civil Code governing the contract known as
a sale with the right of repurchase. The question raised and argued in this case
covers the whole field, whereas in Rosales vs. Reyes and Ordoveza only
one phase was touched by the briefs of the parties. I feel that the decision in
Rosales vs. Reyes and Ordoveza should be reexamined in view of the fact that the
real questions involved were not presented or argued and, therefore, not
considered in the opinion in that case.

THE FACTS.

The plaintiff, by a written instrument, sold to the defendant certain lands,
expressly reserving to himself the right to repurchase the same at a given
price, but without fixing in the instrument the period within which the
repurchase must be made. The conveyance contained a provision that the
repurchase could not be made “until after three years from this date.”
This document bears date March 30, 1903. The contract became effective
and went into operation on its date; the vendor receiving his money and the
purchaser his title and other rights created by the contract on that date.

This action was commenced February 17, 1910, nearly seven years
after the date of the contract, to compel the defendant to accept the sum
specified in the conveyance as the repurchase price and to deliver to the
plaintiff the premises described therein.

These facts are admitted.

THE LAW APPLICABLE TO THE CASE.

As the facts are admitted so, also, is the law governing the case. It is
admitted by all that the first paragraph of article 150S of the Civil Code must
rule in the decision of this case. I quote that article as. well as those
preceding and succeeding, to which it refers or which are material:

“Art. 1506. The sale shall be rescinded for the same causes as all other
obligations, and furthermore for those mentioned in the preceding chapters and
by conventional or legal redemption.

“Art. 1507. Conventional redemption
shall exist when the vendor reserves to himself the right to recover the thing
sold, binding himself to fulfill that which is stated in article 1518, and
whatever more may have been stipulated.

“Art. 1508. The right stated in the preceding article, in default of an
express stipulation, shall last four years to be counted from the date of the
contract.

“When a stipulation exists, the term shall not exceed ten years.

“Art. 1509. When the vendor does not comply with the provisions of article
1518, the vendee shall irrevocably acquire the ownership of the thing sold.

“Art. 1518. A vendor can not exercise the right of redemption without
returning to the vendee the price of the sale, and furthermore:

“1. The expenses of the contract and any other legitimate payment made on
account of the sale.

“2. The useful and necessary expenses incurred by the thing
sold.”

The court expressly holds that the period of limitation is four
years and not ten, “on the ground that there was no express
agreement as to how long the right to repurchase * * * should continue.”
(See opinion.)

The complaint I make against the decision is that, while it expressly holds
that article 1508 is applicable, it does not apply it, and bases the
refusal to apply on a principle which destroys the article altogether. It
declares that the four year limitation applies, but, instead of counting it
“from the date of the contract” as expressly required by the article
referred to, begins to count it three years from the date of the contract, thus
holding the life of the redemption period to be seven years instead of
four.

I regard the findings and conclusions of the court not only fundamentally
erroneous but preeminently destructive in their results. This is so evident to
me that I enter upon the further exposition of the case with the embarrassment
which one always feels when he attempts to demonstrate a proposition which he
regards as self-evident. The mere statement of a correct proposition is its own
greatest support and the bare statement of a proposition inherently bad is its
most perfect refutation. The bald statement that a party is entitled to seven
years in which to redeem when the code expressly says he shall have but four is
about all that need be said to demonstrate the unsoundness of the statement. But
in order that all the questions involved in the case as well as the results of
the doctrine laid down may be fully developed, I proceed.

I shall first inquire what the purpose of article 1508 is. After finishing
that inquiry I shall proceed to determine how the article affects the contracts
with which it deals.

AS TO THE PURPOSE.

Concerning this there can be no question. That is already very largely
settled. We held in the case of Yadao vs. Yadao (20 Phil. Rep.,
260):

“A pacto de retro is, in a certain aspect, the suspension of the
title to the land involved. We are of the opinion that it was the intention of
the legislature to limit the continuance of such a condition, with the purpose
that the title to the real estate in question should be definitely placed, it
being, in the opinion of the legislature, against public policy to permit such
an uncertain condition relative to the title to real estate to continue for more
than ten years.”

Manresa, commenting on the article under consideration (vol. 10, p. 302),
says in this connection:

“Above all we should note that the question of the period within which the
repurchase may be made is unanimously considered as a question of public
interest. Portalis has already observed that it is not a good thing that the
title to property should be left for any long period of time subject to
indefinite conditions of this nature. For this reason, the intention of the code
is restrictive and limitative, and in our opinion all doubts should be resolved
having this intention in mind, as such intention is, without doubt, in better
accord with the spirit of the law.”

Scaevola (vol. 23, p, 759) refers to the period of redemption created by
article 1508 as the “period within which the party must repurchase so as not to
leave longer in an
uncertain condition the -title to the premises.” He also
says:

“Yet, with a keen desire for the public good, for the better interests of
society and for the greater order and development of property, every solicitous
legislator can not but perceive the danger that would lurk in redemption by
leaving to the unrestricted will of the contracting parties a remedy which might
in the course of time become the means of maintaining the ownership of things in
a pernicious incertitude, perhaps indefinitely, and might possibly seriously
affect the orderly conveyance of property.

“The illustrious Jovellanos said in his superb report on the Agrarian Law,
that the appreciation of property is always the measure of its care . * * *;
hence it is that the laws which protect its exclusive utilization strengthen,
while those that threaten this, lessen and weaken the affection for it; the
former stimulate individual interest and the latter discourage it; the first are
favorable, the second unjust and disastrous, to the development of agriculture.”
(Scaevola, Civil Code, vol. 28, p. 749.)

“A long term for redemption renders the tenure of property uncertain and
redounds to its detriment, for neither does the precarious holder cultivate the
ground with the same interest as the owner, nor does he properly attend to the
preservation of the building, and owing to the fact that his enjoyment of the
property is temporary, he endeavors above all to derive the greatest benefit
therefrom, economizing to that end even the most essential expenses.” (Scaevola,
Civil Code, vol. 23, p. 767.)

Moreover, there can be no doubt that one of the aims of those who framed the
law relative to the retroventa was to protect, as far as possible, the
borrower from the machinations of usurers. The purpose in limiting the duration
of a sale of this nature was not only to preserve the stability and certainty of
ownership but. also to prevent the usurer from fixing his own time for the
repayment of the purchase price. While it may be true that a short term is the
joy of the money-lender, as contended by some, that is so only in a limited
sense and in an especially limited sense when related to a sale with right of
repurchase. The purchaser having the absolute right of possession up to the
moment of repurchase, very serious results would follow not only to the vendor
but to society as well if he were permitted to fix, without limitation, the date
when the repurchase could be made.

Having seen what the purpose of the Civil Code was in fixing periods beyond
which the right to repurchase cannot extend, whether the parties agree upon the
time or not, I next proceed to ascertain how the law impresses itself upon the
contract of the parties.

Let us make the law personal and permit it to speak for itself. It says to
persons entering into a contract of sale with the right to repurchase: “You
yourselves may fix the time within which the repurchase may be made; but while
you may fix that period and write it in your contract, I, the law, will myself
become a third party to the contract and write therein a provision which neither
of you can evade or escape, which is that the period cannot exceed ten years and
that the ten years shall be counted from the date of the contract You may also,
if you wish, refrain from fixing in your contract a period within which the
repurchase must be made; but do not think that, by refusing or failing to fix
the period, you may thereby let the contract run as it pleases you and permit
the period to drag along indefinitely. If you do not fix the period, I, the law,
will myself become a third party to that contract and will write therein a
provision which neither of you can, by any sort of legerdemain, evade or escape,
which is that the repurchase must be made within four years, and that the said
four years shall be counted from the date of the contract.”

This is what the law says, in effect, to the parties to the contract which I
am discussing. Into every contract of sale with right of repurchase the law
itself writes a term. The parties themselves are not free to contract as they
will. They may make only a part of the contract. The law makes the remainder.
The parties may contract as they will in relation to those matters within their
powers and may create, destroy, alter and suspend rights and obligations as they
please; but may they do the same with regard to the terms which the law
writes into their contract or the rights and obligations which it creates? It
would seem not; and yet the decision of the court in this case permits precisely
that. The decision lays down the proposition and applies it to the case under
discussion that, while the contract between the parties is in full force and
effect from its date, the vendor having received the purchase price and
the purchaser his title and his possession or income on and from that date,
nevertheless, the parties may, at will, suspend the force and operation of the
term which the law wrote into the contract. In other words, although a contract
is in full force and effect and in complete operation, the parties may suspend
the law applicable thereto. The contention that, although a contract may be
perfected and in operation, the parties enjoying their respective rights
thereunder, they may permit the application to suah contract of only such law or
laws as pleases them and when it pleases them needs only to be stated
to provoke its immediate rejection. Yet this is in effect what the parties to
the contract before us have done. They have made a contract to which the
four-year limitation is concededly (the court so finds expressly) applicable.
The contract goes into instant operation, the parties exercising their
respective rights and assuming their respective obligation’s there-under. In
spite, however, of all this, they are permitted to suspend for three years the
law applicable to the contract and to say that it shall not apply for that
period; that is, they are allowed to say, with full effect, that the four years
shall not begin to run from the date of the contract, as provided by law, but
from some other date which they themselves fix.

In order to arrive at this, to me, extraordinary result, the date of
a contract of sale with right of repurchase is held, in effect, without
significance in applying article 1508 of the Civil Code to such contract. This
holding is very serious in its results for, next to the period itself, the most
important factor in such a contract is, for the purpose before us, the date
thereof. This is too evident to require words when we note that article 1508, as
we have so often seen, expressly requires that the four-year period shall be
“counted from the date of the contract.” Nevertheless, no importance
seems to have been attached to the date of the contract in the application of
said article. Is the date of the contract mentioned or even remotely
referred to in the decision in this case? Yes, the date is expressly found; but
not for the purpose of fixing the time from which the four years mentioned
in the law should be counted; but, rather, for the purpose of fixing the
time from which it should not be counted. Is the date of the contract the
subject of consideration in the case of Rosales vs. Reyes and Ordoveza,
referred to in the decision of this case? Yes; it was expressly found therein;
but, as I understand it, no consideration was given to that date with the
object of fixing the precise time from which the four years should run. On
the contrary, whatever attention was given to the date, was given for
the purpose, and the sole purpose, of fixing the point from which the
three years’ suspension of the right to repurchase should be counted.
Nowhere, in either case, has the court, so far as I can see, given the slightest
consideration to the date of the contract as an element in applying article
1508. This seems clearly so, for, after finding and fixing the dates of the
contracts in both cases, as the court expressly did in Rosales
vs. Reyes and Ordoveza and expressly and specifically does in the case
at bar, the court refuses to count the four years from that date, as article
1508 absolutely requires, but, instead, counts the four years from a point
placed three years after the date of the contract. It would seem that
where the law requires a thing to be done within four years from a date, the
whole problem is solved when the date is found and fixed. Absolutely nothing
remains but plain addition. No question arises, and none has been even hinted at
by the parties of the court, as to the suspension, or the setting forward, of
the date of the contract three years, or any other time. The court has
found the date and set it out and fixed it in this case as in the other. It has
expressly found in this case over and over again that the date of the contract
is that which it bears, namely, March 30,1903, and
not March 30, 1906. The decision says: “On March 30, 1903, a
public document was executed,” referring to the contract before us. The decision
quotes the contract, which contains these words: “The lands cannot be redeemed
until after three years from this date.” “This date” is March 30, 1903.
The court again expressly refers to the date of the contract in the paragraph of
the decision numbered two. There is absolutely no question therefore, of
suspending or setting forward the date of the contract three years, as
the court has found that the parties did not do it or attempt to do it
but, instead, fixed the date which it bears as the date of the
contract. Why, then, is the four years not counted from that date instead of
March 30, 1906? I find it impossible to explain this satisfactorily to
myself. The court itself seems to give no explanation either in this case or in
Rosales vs. Reyes and Ordoveza. The only thing we find in this
connection is in the latter case where the court says: “In all such cases it
would seem that the vendor should be allowed four years from the expiration
of the time within which the right to redeem could not be exercised * * *.”
This is not an explanation of the action of the court, as I understand it. It
refers to no law, cites no article of the Civil Code, but simply states that
this is what “should be allowed.” The point, it seems to me, is what does the
law say ? Does article 1508 provide that the four years shall be
counted “from the expiration of the time within which the right to redeem could
not be exercised?” Or does it say that the four years “shall be counted from the
date of the contract?” Whence comes the authority to count the four years “from
the expiration of the time within which the right to redeem could not be
exercised,” as something that “should be allowed?” Does article 1508 convey any
such authority? If so, where? Is there anything which “should be allowed” except
what the law allows? It seems to have the same fundamental misapprehension as
appears in the question propounded in the same decision: “In such case the
question arises, Upon what basis must the duration of the right to repurchase be
calculated?” What other basis can there be to calculate the “duration of the
right to repurchase” except the basis fixed by the law? Why look a
field for a “basis” when the law puts it under the very nose ? The law says it
is “the date of the contract,” as plainly as words can speak. The “time within
which the right to redeem could not be exercised” has, as I view it,
nothing to do with the application of the four-year period under article 1508.
It does not recognize any time or period during which the redemption can
not be made; but the precise contrary; it recognizes only a
period in which it can be made. I cannot see how one can be substituted
for the other when they are exact opposites. If the four years must be counted
from the date of the contract, and the parties to the contract have
fixed the date, and the court by solemn declaration has also fixed the
date, how, can it be conceived that the four years can be counted from a
different date?

What I regard as the fallacy of the reasoning employed is demonstrated by the
following syllogism, both premises of which are actual findings of the court,
and the conclusion precisely its conclusion;

First premise: Article 1508 provides that the four years shall be “counted
from the date of the contract.”

Second premise: The “date of the contract” is March 30, 1903.

The conclusion: Therefore, the four years must be counted from March 30,
1906.

As I have said before, no explanation is given for this. The mere declaration
that the four years shall be counted “from the expiration of the time within
which the right to redeem could not be exercised” is, it seems to me, no
explanation. It merely accentuates the irremediable quality of the
syllogism.

From these remarks it is clear, to my mind, that in this decision the court
holds that the date of the contract is without significance in applying article
1508 to a sale with a right to repurchase. Although in both of the cases under
discussion, the one at bar and Rosales vs. Reyes and Ordoveza, the
court found and fixed the date of the contract, it apparently held that date to
be of no importance in connection with the express wording of article 1508,
disregarded it, and proceeded to count the four years from a different date.

Nor can it be urged in palliation or explanation of the apparent failure to
apply the law, after having expressly found all the grounds necessary for its
application, that it must be presumed that it was intended to hold that the date
of the contract was fixed by the parties, impliedly at least, as of the time
when the three-year suspension terminated; and that, the true date of the
contract being March 30, 1906, instead of 1903, the four years should be counted
from that date. Such a suggestion cannot be accepted. The date of a contract is
fixed by law in certain cases and for certain purposes and the parties cannot
alter or change it. Manresa (vol. 10, p. 303) says that “the phrase ‘date of the
contract’ must not always be taken literally. The date of the contract is the
date from which that contract begins to produce its natural effects.”
That is, “the date which fixes the moment of the consummation of the purchase,
the moment when the vendor is divested of his rights and receives the price that
was in such event stipulated.” Scaevola (vol.23, pp. 769, 770) says:

“(A) Computation of the periods.—In the solution of problems of
computation, the essential datum is the starting point, and this the code
furnishes us with unsurpassable clearness. The right to recover the thing sold,
with the resultant obligations to restore and indemnify, lasts four years, or
the time agreed upon, provided it does not exceed ten years, counted from
the date of the contract. This definiteness with which the legislator has
fixed the commencement of the period implicitly carries in itself the
determination of a point discussed by jurists but which is no longer of moment.
May the condition of repurchase be stipulated through a consideration distinct
from that of purchase and sale? We find the answer in article 1508: If, in
computing the time, its commencement must necessarily run from the date of the
contract, and it is understood that that of sale is alluded to, then the
covenant of repurchase must be consubstantial with the contract, implying a
condition of the same, and both the conveyance and the condition subsequent are
governed by one single consent. The subsequent agreement might be a new contract
equivalent to a promise of sale, but it produces a personal, not a real, action;
it does, not convert the original indefeasible contract into one revocable by
its nature. Legal redemption is connascent with the contract of purchase and
sale; they both came into juridical life in the same birth.”

While, as Manresa says, the contract may not be of the precise date which the
instrument actually bears, the real date can not be later than the time when the
contract actually takes effect, that is, the time when the parties obtain their
rights and assume their obligations under it. Parties who, on a particular day,
accepted the mutual benefits and assumed the mutual obligations of a contract
between them, in other words, put the contract into operation, cannot be heard
to say that that date was not the real date of the contract and that the true
date was three years thence. This is especially so in respect of contracts
which, from the nature of the subject matter and form of the covenants, take on
a public aspect and as to which laws have been specially passed for the
protection of the public interests.

Therefore, the purpose of article 1508 being, as we have already shown, to
prevent the contract dealt with therein from unsettling the title to the real
estate which is the subject matter thereof for periods beyond those provided for
in that section, no person will be permitted, on any sort of pretense, to
produce the result by said section sought to be avoided; and especially not by a
method so wholly without foundation or merits as that of claiming that the true
date of a contract is not that on which the contract goes into full operation
but such date as the parties may be pleased to fix. When contracts operate, the
law applicable to them operates. The proposition that persons may make and enjoy
the benefits of contracts and still prevent the law from operating upon them is
one that would, if adhered to, result disastrously. Notwithstanding, I fear that
the result of the decision in this case is to lay down precisely this
proposition. The court says that, while the contract took effect and went into
full operation on the 30th of March, 1903, article 1508 of the Civil Code did
not begin to operate upon it till the 30th of March, 1906; and why?
Simply because, the court seems to say, the parties agreed to suspend the
law until that time. This would seem to be erroneous when confronted with
the proposition that the law held to be suspended was one in the interests of
the public as well as the parties. May parties to contracts suspend laws of this
nature?

Moreover, the contention that the parties suspended the contract, or its
date, fails, in my judgment, to perceive the distinction between the suspension
of the operation of a contract and the suspension of the law
which governs the contract. As I have already noted, parties to contracts,
after they are executed, may suspend their operation until such time as they
please. In such case they take no present benefits and incur no present
obligations under the contract. No present rights or interests are transmitted.
It is executed and laid away and nothing is done under it till the
date to
which its operation was suspended. This is a suspension of the
operation of the contract, of the date, if you please. Such a procedure
is recognized as legal. But nothing of this was done in the case before us. The
contract took effect at once. It is the law applicable thereto which
was suspended.

As I have already intimated, the doctrine that the parties may, at will,
suspend the operation of the statute and thereby destroy the force and effect of
the four-year limitation, is fatal to the efficacy of the law governing sales
with right to repurchase. In effect, it repeals it. It is clear that, if the
parties may suspend the law for three years, they may suspend it for ten years,
or twenty years, or fifty years, or for any period that pleases them. This, of
course, makes the law a farce and destroys its value completely.

It appears that the court in the decisions under discussion foresaw, to some
extent at least, the fatal results which would follow such a doctrine and
apparently sought to avoid, in part, the evil results thereof. To accomplish
this it brought into requisition the ten-year limitation found in the same
article of the code, and declared that, although the four-year period was
applicable to the contract at its origin, the ten-year period also was
applicable thereto; so that, although persons may suspend the operation of the
four-year limitation, they may not do so to such an extent that the period of
suspension added to the four years will exceed ten years. The germ of this
strange theory is found in this expression of the court:

“In such a case the question arises: Upon what basis must the duration of the
right to repurchase be calculated? Any such contract must necessarily be
terminated ten years from the date of its execution, but should the vendor have
the privilege to exercise this right for the balance of the ten years, or should
he be allowed only four years on the ground that there was no express agreement
of the parties upon this point? In all such cases it would seem that the vendor
should be allowed f6ur years from the expiration of the time within which the
right to redeem could hot fee exercised, or in the event that four years would
extend the life of the contract beyond ten years, the balance of the ten year
period, on the ground that vendors, where the right to redeem is not thus
suspended and no express agreement as to the length of time during which it may
be exercised is made, are also allowed four years.”

The error into which the court appears to me to have fallen in making- this
suggestion is plain. It is held by virtue of this suggestion, that the four-year
period and the ten year period apply to the same contract. This appears
to me to be an impossibility on its face, impossible by virtue of language
itself. When it made the suggestion referred to the court was engaged in
interpreting a contract which, by its express holding, was such a contract in
form and nature that the four-year period and not the ten-year period applied to
it. That the four-year period was applicable the court expressly holds. This
holding was arrived at by selecting between the four and the ten-year periods.
The very first thing the court had to do in interpreting the contract was to
determine which period was applicable, the four or the ten. It held
that the four-year period was applicable. That necessarily held that
ten-year period was not. Where it is necessary to make a choice between two
periods of limitation, the selection of the one is necessarily the
rejection of the other. Therefore, when the court made the suggestion that the
ten-year period was also applicable, it had already held that it was not.
This, in itself, it seems to me, is a complete refutation of the
suggestion; or, perhaps better said, the suggestion is in complete contradiction
of the previous action of the court when it held that the four and not the
ten-year period was applicable.

If anything further were needed to show the fallacy of the proposition
involved in this suggestion that both periods are applicable to the same
contract, the question might be put: What is the reason that the court decided
that the four year period was applicable instead of the ten-year
period?

The answer to that question completely destroys the theory now
under discussion and shows how impossible it is to sustain it. Whether the
four-year period or the ten-year period applies to a given contract depends upon
the nature of that contract. The four-year period applies to a contract, not by
virtue of the time which it is to run, but by virtue of the nature thereof. The
test as to whether the four-year period applies is: Did the parties expressly
stipulate in their contract a period within which the repurchase might be made?
If they did not, the four-year period is applicable. That is the decisive
feature which determines whether the four-year or the ten-year period is
applicable. If the parties did expressly stipulate the time within which the
repurchase might be made, then the ten-year period applies. It is thus clear
that the conditions which determine in favor of the application of the four-year
period are precisely the opposite of those which determine in favor of the
ten-year period. In other words, if the conditions are such that the four-year
period is applicable, then they are such as to render it impossible that the
ten-year period be applicable; and we behold a condition in which it is utterly
impossible, legally or logically, that both periods of limitation be
applicable to the same contract. In spite of this, however, it is contended
by the decision that, although it is conceded that the parties did not expressly
stipulate the time within which the repurchase might be made and that,
therefore, the four-year period was applicable, nevertheless, the ten-year
period was also applicable. This is impossible in the face of the fact that the
court at the threshold of the inquiry expressly held that the ten-year
limitation had no application; and the reasons given why the ten-year period had
n6 application were the very reasons why the four-year limitation did apply. The
only reason given, so far as I can gather, for applying both periods to the same
contract is to prevent the first error, namely, permitting the parties to
suspend the operation of the four-year limitation, from destroying the efficacy
of the law altogether. For, if the parties may suspend the operation of the law
at will, then not only is the four-year restriction rendered worthless but the
ten-year limitation also. To avoid this result, the decision committed the other
error of applying both limitations to the same sale. But the error committed in
saying that 2 and 2 make 5 cannot be corrected by holding thereafter that 2 and
3 make 4.

Besides the error of applying to the same contract two periods of limitation
which depend upon precisely opposite conditions, the court, in my humble
opinion, has also committed the further error of confounding the nature ‘of the
two limitations. The four-year limitation is really a limitation. Where the
parties say nothing about the time for redemption, then the law imposes a
limitation as to the time. On the other hand, the provision which contains the
ten-year limitation does not create a limitation on the contract, as does the
first. It simply places a limitation upon the power of the parties as to their
stipulations. It provides that they may not contract for a longer
period of redemption than ten years. It is not, therefore, a statute of
limitations, nor does it have the significance, force or effect thereof. The
ten-year limitation prohibits an act. The four-year period limits the life of
the contract. The ten-year limitation applies to the acts of the parties. The
four-year limitation applies to the contract after it is executed. The one is a
limitation. The other is a prohibition. This distinction is not made in the
decision; and, taken together with the fact that the two periods of limitation
depend for their existence and limitation upon exactly opposite conditions, we
see clearly the error committed in applying both limitations to the same
contract. The statute had in mind the covering of two radically different
conditions, one with a limitation and the other with a prohibition. The court,
by its decision, destroyed the limitation and made the prohibition cover both
conditions.

That the decision has destroyed one limitation and made the other applicable
to both conditions specified in the code is clear, for, if the parties may
suspend the operation of the four-year period for six years and then, in
accordance with the holding of the court, may add the four-year period to that,
they have taken advantage of a ten-year period without fulfilling the conditions
which the law requires before they have a right to do so. It has already been
held by this court that the limitations specified in article 1508 cannot be
enlarged, as they refer to matters of public concern; and any method which
extends these limitations, or either of them, beyond the periods named in the
law trenches on the public welfare and destroys to that extent the value of the
provisions designed to preserve and protect it. Therefore, it is a matter of
public concern that the parties who refused to put in their contract the period
during which they desired the right of repurchase to continue, should be
restricted in such right to the period which the law names, namely, four years;
whereas, if the parties are willing to state the period during which the right
of repurchase shall run, the law gives them the right to stipulate a more
generous period, namely, ten years. In other words, the law, if we may so speak,
places a premium upon the open and clear expression of the time by giving the
parties a ten-year privilege as against the grant of only four years where the
parties refuse to be clear and definite. It is the policy of the law to destroy
uncertainties in contracts of this character, and where the uncertainty is the
greatest the law restricts the period most. Where the uncertainty is least, the
law restricts the period less. The decision puts parties who do not expressly
stipulate the period of redemption in exactly the same position as those who do
stipulate, and gives them exactly the same privileges. In other words, under the
holding of the court, the parties, although they have not expressly stipulated
the term of redemption in their contract, may, nevertheless, by the legerdemain
of suspending the operation of the statutory period for repurchase, obtain
exactly the same period for their contract as the parties to another contract
who have expressly stipulated the period. This wipes out the division or
classification made in the law, destroys the difference between the parties who
act openly and those who do not, and gives the same privileges to both.

There is another and fundamental reason why the decision of the court is
erroneous; and that is that the suspension of the application of the four-year
limitation destroys the essential element and changes the distinctive character
of the sale with a right to repurchase, as it is known to the Spanish law, and
converts the contract into one of mere loan on security. One of the essential
requisites of the contract of sale with pacto de retro is the right of
the vendor to repurchase when he will. The code itself speaks in no other way of
the period of repurchase than to declare that the repurchase may be made
within the period specified. It is not like a promissory note or
mortgage, under which the indebtedness therein mentioned or secured must be paid
on the date named. The contract under discussion provides always, and no other
description of it is given by any statute or other, that the repurchase may be
made within a given time. This means, of course, that the time
when the repurchase is made is left to the will of the vendor. He can
repurchase on any one of the days which constitute the period agreed upon or
fixed by the statute.

This theory corresponds perfectly with the history of the contract. It
originated, so far as its Spanish history is concerned, in the Province of
Catalonia and was devised to assist landholders in cultivating their land. A
landholder, not having sufficient funds with which to properly cultivate his
various parcels, would obtain a loan, selling, as security for the loan, one of
the parcels, reserving the right to repurchase the same. The time within which
the borrower could make the repurchase was generally not known. It depended
either upon the time when he could sell the crop which he, perhaps at the time,
had in the warehouse, or upon the time when he could harvest and market the
crops for the cultivation and harvesting of which the money was borrowed. This
being so, the precise time for repurchase could not, as a general rule, be
fixed. The borrower could not say that he would repay it six months, or nine
months, or a year from date, or at any other specific time. It depended on when
the crop was ripened and ready for harvest and when it could be marketed
thereafter. These things were, in turn, dependent upon so many uncertainties
that it became the custom to leave the time during which the repurchase could be
made entirely to the will of the vendor. So thoroughly was this understood that
the contract in Catalonia was called a venta a carta de gracias. This
special and distinctive feature was carried into the Civil Code and, as we have
seen, it is provided that the right to repurchase shall continue
(durara) for four years, during any one of the days constituting which
the repurchase can be made. Every author who treats the subject uses, with
reference to the period of redemption, the word “dentro,” within, indicating
that the right may be exercised at any time within the period named.
The fact is that the right to repurchase at any moment is such an essential part
of a sale with a right to repurchase that its existence is taken for granted by
all the authors dealing with the subject. I have found none who directly discuss
the question; but all of them go upon assumptions which sustain the proposition
I am presenting.

If my contention be sustainable, then the purchaser, if he intends to create
a sale with right of repurchase, has no right to, prohibit the vendor from
repurchasing. Such a prohibition takes from the vendor a privilege which the law
confers upon him and makes use of it for the enrichment of the purchaser. It is
generally stated by Spanish authors dealing with this subject that the purchaser
cannot, by stipulation in the contract, compel the vendor to
repurchase; and that if such a stipulation is placed in the contract, it changes
its essential nature and transforms it into a mere contract of loan on security,
something in the nature of a pledge of real estate. Scaevola (vol. 23, p. 764)
says:

“If the stipulation were such as to oblige the vendor to avail himself of his
right of repurchase, the juridical institution or organism thus created would be
a different thing from a sale with a right of repurchase, the nature of which
does not allow that a covenant introduced for the benefit of the vendor may be
converted into an instrument against him of which the purchaser may make
exclusive use.”

If this is true, and I regard the proposition stated by Scaevola as
universally accepted, then why should not the same result follow where the
purchaser prohibits the vendor from repurchasing for a given time?
Certainly the prohibition against the repurchase is far more injurious to the
vendor and beneficial to the purchaser than the requirement that he
must repurchase. The obligation to repurchase is not necessarily a
severe one, whereas the prohibition against repurchase for six years, for
example, may be a very severe blow to the vendor’s interests, Not only that, but
it enables the lender to obtain by means of this contract, which the law
designed primarily for the benefit of the vendor, not only all of the privileges
which inure to him by virtue thereof, but also the additional advantage which
inheres in a mortgage, or, a long period during which he may draw interest or
have complete possession and control of the property purchased.

In this connection it must not be forgotten that, on the execution of a sale
with a right of repurchase, the purchaser has the right of immediate possession.
Now, if he be permitted, by a stipulation in the contract, to prohibit the
vendor from repurchasing for six years, then he not only obtains, the title to
the property itself as security for repayment, but he also deprives the vendor
of the possession of his property for an extremely long period. This is one of1
the precise things that the Civil Code sought to prevent. As a necessary
consequence, the decision of the court, that a sale with
a right of
repurchase is permissible which prohibits the vendor from repurchasing for six
years, appears to me to be in direct violation of the spirit which animated the
code, and results in delivering the borrower into the power of the lender, from
whose hands it was the intention and purpose of the Civil Code to rescue him. It
is no reply to my argument to urge that the code permits the parties to
stipulate a ten-year period, for, under such stipulation, the vendor may
repurchase at any time he pleases during the ten years.

The decision
says: “But if it were held that, regardless of such a provision, the redemption
right expires within four years from the date of the contract unless there is a
special provision as to how long this right, once effective, shall continue,
many other perfectly valid contracts can be conceived in which the redemption
privilege would be unenforceable. For instance, if the stipulation in question
had provided that the right to redeem should not be exercised within- five years
from the date of the contract, it is quite apparent that, according to the
argument adduced by the defendants, the vendor could not have redeemed the
property at all, for the right to do so would have expired one year
previously.”

This portion of the decision merely assumes that a stipulation suspending the
application of the four-year period for five years is valid. This is
unquestionably true; but it misses the whole question at issue when viewed from
the standpoint from which I am now discussing it. The point is, does such a
stipulation destroy the nature of the relation between the parties; that is,
does it destroy the contract as a sale with a right of repurchase, and
transform ii into another and entirely different contract? No one contends
that such a stipulation is invalid; the sole contention is that it is not a
valid, proper, or permissible stipulation in a sale with a right to
repurchase and that it destroys the essential nature of the contract and
transforms it into something entirely different. The proposition I am presenting
is that such a stipulation converts the sale with right of repurchase, as the
Code knows it, into a mere relation of borrower and lender, thereby destroying
completely the relation of vendor and vendee; and that none of the provisions of
the Civil Code relating to such a sale are applicable. Such a stipulation may be
valid and its presence may not render the agreement void in the general sense;
but it does render the contract void as a sale with right of
repurchase. This is the point. The decision assumes that the parties, in a
contract of sale with a right of repurchase, may do whatever they please and the
contract still remains a sale with a right of repurchase. The contention that I
am making is that such a contract is of a highly special nature, in many of its
aspects strictly statutory, and that, when certain of its elements are
destroyed, it ceases to be such a contract and becomes something different; that
when such a contract provides that the vendor must repurchase, that
stipulation changes the nature of the contract and transforms it into something
different, and that where it stipulates that the vendor shall not
repurchase, that stipulation also changes the nature of the contract and
converts it into a different species of relation. To repeat, then: A stipulation
in a contract of sale with a right to repurchase that the vendor shall not
repurchase during a period of years is a stipulation in violation of the
essential nature of the contract, which deprives the vendor of the protection
which the statute gives him, which places him in the power of the lender from
which it was the intention of the law to rescue him, and transforms and converts
it into one of loan on security which is governed by principles wholly different
from those that govern the sale with pacto de retro.