PANFILO B. MORALES AND ENCARNACION F. MORALES, PETITIONERS, VS. OSCAR VENTANILLA AND EUFEMIA CRUZ, RESPONDENTS.

This is a review of the decision of the Court of Appeals dated
July 12, 1947. The question at issue is whether the document Exhibit A
represents a true pacto de retro sale, or as petitioners contend, a mere
mortgage of realty. Said document reads as follows:

“SALE WITH RIGHT OF REPURCHASE

“KNOW ALL MEN BY THESE PRESENTS:

“That I, Panfilo B. Morales, of legal age, married to
Encarnacion N. Frias, Filipino and resident of Cabanatuan, Nueva Ecija,
Philippines, for and in consideration of the sum of One thousand six hundred
pesos (P1,600), Philippine currency, to me paid in hand this very moment and
received by me to my full and entire satisfaction from the spouses Oscar
Ventanilla and Eufemia Cruz, of legal age, Filipino, and residents of
Cabanatuan, Nueva Ecija, Philippines, by these presents, do hereby sell, cede,
convey and transfer, by way of sale with right of repurchase unto the said
spouses Oscar Ventanilla and Eufemia Cruz, their heirs, assigns and successors,
the parcel of land, the area and boundaries of which are as follows:

“Residential land designated as lot No. 13.

“* * * * * * *

“Dwelling house erected on lot No. 13, consisting of two
stories all occupied by me; with wooden posts, wooden walls, floors and
galvanized iron roofings. The area is ten meters wide and 14 meters long, more
or less. This house is declared under Tax No. 24753 and assessed at P2,500.

“The conditions of this sale with right of repurchase are (1)
if I shall pay unto the said spouses Oscar Ventanilla and Eufemia Cruz, the said
sum of P1,600 on or before April 24, 1941, then this sale will automatically
become null and void and a resale in my favor will be executed; otherwise, this
document shall have the character of absolute sale; (2) that during the period
of repurchase I will remain in possession of the above mentioned properties; (3)
that I bind, myself to pay all taxes to be due in favor of the government and
until now these properties are free from all liens and incumbrances.

“In witness whereof, I have hereunto set my hand at Cabanatuan,
Nueva Ecija, this 24th day of April, 1940.

“PANFILO B. MORALES

“* * * * * * *

Sometime in the month of April, 1940, said the Court of
Appeals, “the plaintiff Panfilo B. Morales, resident of Cabanatuan, Nueva Ecija,
being indebted to the Philippine National Bank and having mortgaged his
properties, was in imminent danger of losing the same, described in transfer
certificate of title no. 11768. Due to the intent of the bank to foreclose, he
approached the defendant Oscar Ventanilla for a loan in order to satisfy his
debt with the bank. It seems that the latter was not conformable to grant a
loan, but that he was willing to buy the properties of the plaintiff under a
sale with right of repurchase. Under these circumstances, and because of the
insistence of defendant Ventanilla that plaintiff Morales execute a deed of sale
in his favor, they went to Notary Public Herminio Algas of the municipality of
Cabanatuan and to the latter they explained their necessity, after which,
defendant Ventanilla left while plaintiff Morales waited for the document to be
drafted. Upon completion of the document, which now appears as Exhibit A, the
plaintiff Morales signed and acknowledged before the notary public the deed.

“At maturity, which was on April 24, 1941, the plaintiff failed
to redeem the properties sold by him, but on July 7 of the same year, Morales
wrote ihe defendant Ventanilla for the purpose of asking for an extension of
another year (Exh. 2), which request was granted. Upon the second maturity, that
is, on April 24, 1942, the plaintiff again requested for another year, which was
also granted, the request and approval for this extension being verbal. It
appears subsequently that upon the third maturity on April 24, 1943, no attempt
Was made nor offer extended by the plaintiff Morales to repay the price for
which reason, on July 7, 1943 the defendant Ventanilla, thru his attorney,
Ricardo Castelo, advised the plaintiff that it was the intention of the
defendant to consolidate ownership in the properties and granted the plaintiff
one month grace from said date, July 7, 1943, within which to return the
purchase price. The period of one month having elapsed, and the plaintiff
Morales not having turned over the purchase price * * * on August 14, 1943, the
plaintiffs consolidated their ownership and certificate of title No. 19457 was
issued in the name of the defendants. The plaintiffs having learned of the
issuance of the certificate of title in favor of the defendants, immediately
commenced this suit”.

The suit was heard in the court of first instance of Nueva
Ecija. There the plaintiffs asserted that their contract with Ventanilla was a
mortgage, and they asked that title in their names be reissued, and that
defendants be required to accept repayment of the loan, and to return usurious
interests reportedly received.

After hearing the parties the Honorable Quintin Paredes, Jr.,
Judge, declared that the transaction was a sale of property with right to
repurchase, and, consequently, dismissed the suit. The Court of Appeals
confirmed his ruling.

Petitioners insist here that the contract should be declared an
equitable mortgage, because:

(1) The price of P1,600 appearing in Exhibit A is
inadequate;

(2) The petitioners were financially embarrassed and applied
for a loan to respondents;

(3) Petitioners assumed the obligation of paying all taxes on
the properties;

(4) Petitioners remained in possession of the properties even
after the period of redemption; and

(5) Petitioners have been and are still renting to other
persons, the first floor of the building and a portion of the second floor, and
the rents collected accrue to their benefit.

As to the first point “the property was assessed” said Mr.
Justice Felix “at P2,500, and though we believe that the price of P1,600 is
quite low, appellees may retort that they graciously extended the period of
repurchase for more than two years”; and anyway, he reflected, the disparity
between the price and the market value was not so striking, because in 1943 the
petitioners could not raise on the property P1,600 in “mickey mouse” money
(Japanese fiat money) to effect its repurchase. At any rate mere inadequacy of
price is immaterial. It is only where the purchase price is grossly
inadequate that the point becomes important.^[1]

The second point was not unnoticed. Precisely, the two courts
found that, because petitioners needed money, and respondents did not want to
lend, a sale was consummated. Both tribunals concluded most logically, that, in
their hour of need the owners of the land, unable to obtain a loan, agreed to a
pacto de retro.

The third and fourth points were likewise considered by the
appellate court. It opined that as the contracting parties were free to
stipulate, they probably agreed that petitioners were to retain possession of
the property in return for the payment by them of all taxes due to the
Government.

As to the fifth point nothing is said by the Court of Appeals.
Perhaps it is merely a consequence of the third and the fourth. They are not
necessarily inconsistent with a veritable pacto de retro sale.

One circumstance which obviously led the Court of Appeals to
hold that the written contract expressed the intention of the parties is the
fact that petitioner Panfilo B. Morales is an experienced lawyer and a former
justice of the peace, whose letter Exhibit 5 of July 7, 1941 referred to their
transaction as a sale with the right to repurchase. The court went further,
finding specifically that there is no evidence “* * * other than the
uncorroborated and unreliable statement of Panfilo B. Morales, to establish that
appellee ever demanded or received from him any interests, usurious or
otherwise, and he cannot so easily come out of the ditch he fell into flippantly
quoting from People vs. Banguis (G.R. No. 5765-Jan. 31, 1941), that ‘in
usurious transactions, the usurer not only takes advantage of legal means to
conceal his usurious business, but also avoid the issuance of receipts or other
papers that would reveal the existence of such illegal transactions’ “.

In a recent decision of May 30, 1949,^[1] involving the identical question whether a
plain document of sale with pacto de retro was in fact a mortgage, we
laid down these propositions:

“* * * it is seriously to be doubted whether we could reverse
the conclusion of the appellate court to the effect that those facts and
circumstances are not ‘enough evidence’ to show clearly and beyond doubt that
the parties intended the contract to be a mortgage instead of a conditional
conveyance. That conclusion is obviously one of fact, * * *.

“In conclusion, the Court of Appeals having declared that
according to the evidence the instrument reflects the true agreement and
intention of the parties, we will not examine that same evidence nor declare
that it does not”.

Now, inasmuch as the document Exhibit A clearly denotes a
contract of sale with right to repurchase, and inasmuch as the Court of Appeals
has in effect declared that the findings of the trial judge and the facts proven
do not indicate that the contracting parties intended a mortgage instead of a
sale, we must, applying our policy, decline to interfere with the conclusions of
fact of the intermediate tribunal, whose decision will consequently be affirmed,
with costs against petitioners. So ordered.

Moran, C.J., Ozaeta, Feria, Padilla, Tuason,
Montemayor, and Reyes, JJ., concur.

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[1] C. F. Cabigao vs. Lim, 50 Phil., 844.

[1] Lim vs. Calaguas and Alcaraz,
G.R. No. L-2031.