FORTUNATO BOLLOZOS, ANDREA BOLLOZOS VDA. DE RAPANOT, PABLO B. CALAM, EPIFANIA B. BEVERA, SERGIO B. CALAM, GUALBERTO B. CALAM, IGNACIO B. CALAM, JOSE B. CALAM, JR. AND CAROLINA B…

The original protagonists in this controversy have long since
passed away into “the tongueless silence of the
dreamless dust” and are now but mute witnesses to this litigation.  We can now go only by the musty records that
will take us back to more than half a century ago, before the period of the
Commonwealth.

This case was formally commenced on January 20, 1968, with the filing of a complaint for the
recovery of a 1.2 hectare parcel of land and accounting for its use from
defendant Yu, the herein appellant.  The
plaintiffs claimed that the said land had been delivered to him only for
administration so he could apply the produce thereof to the indebtedness of Paulino Bollozos, their
predecessor?in-interest.  It was
alleged that Yu had refused to return the land despite demand and to make the
required accounting although the debt had long been paid.^[1]

In his answer, the defendant averred that he had acquired
ownership of the land in question by virtue of two documents executed in his
favor by Paulino Bollozos,
to wit, a deed of sale with right of repurchase dated September 1, 1934, and a
deed of absolute sale dated September 21, 1936. 
He therefore had no obligation to return it.  Additionally, Yu claimed that the suit was
barred by prescription, the complaint having been filed only after all of 26
years.^[2]

Issues having been joined, the parties later entered into a stipulation
of facts before the trial court, reading in full as follows:

“1.     That both parties
hereby agree on the identity of the parcel of land in liti­gation as described
in paragraph II of the amended complaint, which parcel of land is covered by
OCT No. 5033 in the name of Paulino Bollozos;

“2.     That plaintiffs Fortunato Bollozos and Andrea Bollozos are the only surviving children of the late Paulino Bollozos while the rest
of the above-named plaintiffs are the grandchildren of said Paulino
Bollozos;

“3.     That sometime on
September 1, 1934, the late Paulino Bollozos executed a document entitled ‘Escritura
de Compra y Venta Con Pacto de Retro,’ the original of which is hereto attached
as Annex A to form part hereof and another document was executed by the late Paulino Bollozos entitled ‘A
Definite and Absolute Purchase and Sale’ dated September 21, 1936, the original
copy of which is hereto attached to form an integral part of this complete
stipulation of facts;

“4.     That
the parties agree to submit the entitled case for decision on the basis of the
following issue or issues:

“(a) Whether a valid conveyance of ownership was made of the
parcel of land in litigation on September 1, 1934 as appearing in Annex A,
entitled ‘Escritura de Compra
y Venta Con Pacto de Retro,’
or on September 21, 1936 as appearing in Annex B, entitled ‘A Definite and
Absolute Purchase and Sale’ of the parcel of land in litigation, and for the
Honorable Court to determine the legality or nullity of the above-mentioned
documents.”^[3]

On the basis of this agreement and of the memoranda filed
subsequently by the parties, the lower court,* without receiving further evidence,
rendered judgment in favor of the plaintiffs.^[4]
It held, first, that the deed of sale with pacto
de retro executed on September 1, 1934, was in reality an equitable
mortgage and did not transfer ownership of the land to the defendant; and
second, that the subsequent sale executed in 1936 was null and void ab initio because
by that time the transfer of agricultural lands to aliens was already
prohibited by the Commonwealth Constitution, which became effective on November
15, 1935.  Yu was a Chinese national.

The above rulings are the subject of this appeal,**
which we find meritorious.  We shall
reverse.

It is important to note at the outset that there is nothing in
the record to show that the disputed property had merely been entrusted to Yu
for administration in connection with Paulino Bollozos‘ indebtedness to him, as claimed by the
plaintiff.  Neither is there any evidence
of such indebtedness.  This allegation,
which was the very basis of the complaint, was not among those admitted in the
stipulation of facts and indeed had been categorically denied in the answer.  It thus remained a bare averment without any
actual or presumptive support.

It should also be noted that, by contrast, the defendant, to
substantiate his answer, produced the two above-cited documents Annexes
“A” and “B”, which clearly indicate the intention of the
parties regarding the owner­ship and disposition of the land in question.  These documents are the best and, as it
happens, the only evidence adduced of such intention.

Annex “A” reads as follows:

“ESCRITURA
DE COMPRA Y VENTA CON PACTO DE RETRO

“Nosotros,
PAULINO BOLLOZOS, de 71 anos de edad
y FAUSTINA LILOC, de 58 anos de edad,
marido y mujer respectivamente, filipinos y vecinos y residentes del barrio
de Bonbon, Municipio de Catarman,
Provincia de Misamis
Oriental, Islas Filipinas, por
la presente hacemos constar que consideracion
a la suma de SEISCIENTOS TREINTA Y SEIS PESOS
(P636.00), en moneda filipina
que nos ha pagado y hemos recibido a nuestra entera satisfaccion del SR. YU
TIENG SU, de 34 anos de edad,
chino, casado de la SRA. SIA PUTE, de 29 anos de edad, china y residente de este Municipio de Catarman, Provincia de Misamis Oriental, Islas Filipinas, VENDEMOS, CEDEMOS ENTREGAMOS y TRASPASAMOS
al referido SR. YU TIENG SU, sus
herederos y causahabientes una parcela de terreno con todas sus mejoras existentes
situada en el distrito de Quilambon, barrio de Bonbon, Municipio
de Catarman, Provincia de Misamis Oriental, Islas Filipinas
bajo el numero del Lote Cadastral de este Municipio Catarman, Misamis Oriental, Caso No. 9m y cuya descripcion tecnica es como
sigue:  ?

(Technical
Description)

“Hacemos constar
tambien que queda pacto y convenido
con el referrido SR. YU TIENG SUR; que si nosotros
devolvieramos o mandamos devolver dentro del termino de SIETE (7) ANOS contados
desde esta fecha la suma de SEISCIENTOS
TREINTA Y SEIS PESOS (P636.00) en moneda filipina, y le abonaremos ademas los gastos
que ocasione el presente contrato, nos otorgaran el comprador o sus representantes escritura de retroventa; pero si transcurre
dicho plazo sin haberse utilizado el derecho de redencion, adquirira la presente el caracter de absolutamente consumada, y entretanto solo podra el comprador disponer la finca con las limitaciones
presritas en la Ley Hipotecaria.

“En testimiento de rado lo cual firmamos
la presente en este
Municipio de Catarman, Provincia de Misamis Oriental hoy 1, o-de Septiembre, 1934,
A.D.

“(Sgd.)
PAULINO BOLLOZOS y

“(Sgd.)
FAUSTINA LILOC

“Firmada en presencia de:

“(Sgd.)
JOSE LIM PATUNGAN y

“(Sgd.)
EUFROSINO LIMBACO”

The second instrument, Annex “B”, declared the
following:

“DEFINITE
AND ABSOLUTE PURCHASE AND SALE

“That I, PAULINO BOLLOZOS, 72 years of age, filipino, married to Faustina Liloc, 60 years of age, and resident of the barrio of
Bonbon, Municipality of Catarman, Province of
Oriental Misamis, P.I. do hereby declare and
say:  –

“1st.  That I am the
lawful owner of one parcel of land together with all existing improvements
thereon, located in the sitio of Kilambon,
barrio of Bonbon, Municipality of Catarman, Province
of Oriental Misamis,
P.I., particularly described as follows:

(Technical Description)

“2nd. 
That the said parcel of land together with all existing
improvements thereon is registered in my name in the Office of the Register of
deeds of the Province of Oriental
Misamis, as evidenced
by the ORIGINAL CERTIFICATE OF TITLE number FIVE THOUSAND THIRTY THREE (5033).

“3rd.  That the said
parcel of land, together with all existing improvements thereon was sold by me
to Mr. YU TIENG SU, married Sia Pute
on September 1, 1934 for the sum of SIX HUNDRED THIRTY SIX (P636.00) under the
instrument of purchase with right or repurchase (Compra
venta con pacto de retro)
and said document is ratified before Notary Public Mr. Eufrosino
Limbaco, of Mambajao, Misamis Oriental, on the 1st day of September 1934, Not. Reg. No. 149-Page No. 97-Book No. 8-Series of 1934.

“4th.  That by these
presents I do hereby declare and say that I will forever renounce and repudiate
my rights and privileges to repurchase the said parcel of land together with
all its existing improvements thereon and for and in consideration of an
additional sum of TWO HUNDRED NINETY-FIVE PESOS (P295.00), Philippine Currency
to me in hand paid and the receipt whereof is hereby acknowledged by Mr. YU
TIENG SU, 36 years of age, Chinese, married to Sia Pute, 31 years of age, Chinese and resident of this
Municipality of Catarman, Misamis
Oriental, P.I., by these presents I do hereby sell, transfer and forever convey
a deliver unto said Mr. YU TIENG SU, his heirs, executors, administrators and
assigns that parcel of land together with all its existing improvements
thereon, particularly described above (Lot No. 473).  Original Certificate of Title number Five
Thousand Thirty-three.

“5th. 
Lastly, I do hereby declare and say that I will forever warrant
and defend unto said Mr. YU TIENG SU, his heirs, executors, administrator and
assigns all lawful claims of all persons whomsoever of his right of ownership
of the said parcel of land together with its existing improvements thereon
described above.

“IN WITNESSETH WHEREOF, I have hereunto signed my name in this
Municipality of Catarman, Province
of Misamis Oriental,
P.I., on this 21st day of September 1936.

“(Sgd.)
PAULINO BOLLOZOS

“Signed in the presence of:

“(Sgd.)
JOSE LIM PATUNGAN and

“(Sgd.)
JOSE L. RIVERA”

It is clear from the first document that Paulino
Bollozos actually sold the land in question to Yu for
the sum of P636.00, subject only to the former’s
right to repurchase it within a period of seven years.  There is nothing in this instrument
suggesting a different arrange­ment such as that alleged by the plaintiffs-appellees in their complaint, nor
have they submitted any evidence in proof of such arrangement.

The intention clearly embodied in Annex “A” was
affirmed in the second transaction between the same parties as reduced to
writing in Annex “B”, denominated as “A Definite and Absolute
Purchase and Sale.” Concluded
two years later, it specifically referred to the first sale made in 1934 by
virtue of which, as Paulino Bollozos
declared, the land in question and its improvements were “sold by me to
Mr. Yu Tieng Su” for the agreed consideration of
P636.00.  He further stated in Annex
“B” that “by these presents I do hereby declare and say that I
will forever renounce and repudiate my right and privilege to repurchase”
the said property as reserved by him in the first instrument.  For such renunciation, Bollozos
acknow­ledged receipt of an additional sum of P295.00, thus increasing the
total purchase price of the land to P931.00.

The Court holds that the first transaction was a valid sale with
right of repurchase and effectively trans­ferred ownership of the land in
dispute to the defendant-appellant.  All
the elements of a valid contract were present, and in any case the plaintiffs-appellees themselves have stipulated on its
authenticity.  As it was concluded in
1934, the prohibition against the acquisition of agricultural lands by aliens
was not yet applicable, having become effective only from November 15, 1935, under the Commonwealth
Constitution.  Moreover, the title
acquired by Yu was recognized in the said Constitution as a vested right that
could no longer be disturbed under the new provisions of that charter reserving
ownership of such lands to Filipino citizens.^[5]

The plaintiffs-appellees err in
suggesting that the first transaction, being conditional, did not effectively
transfer the ownership of the land to the vendee.  It did, certainly, subject only to the right
of the vendor to redeem it within the period specified.  As we said in an earlier case:

“In the deed of pacto de
retro sale executed by Ignacio Reyes in favor of Lim Kiam
on May 30, 1932, covering Lot
9203, the period of repurchase was not fixed. 
The Court of Appeals correctly held that in accordance with Article 1508
of the old Civil Code the right could be exercised within four years from the
date of execution of the conveyance – in this case up to May 30, 1936.  The fact, however, that on this date the
Constitution was already in force did not affect the right acquired by Lim Kiam.  We have held
in a number of cases decided under the provisions of the old Civil Code that
the nature of a sale with the right of repurchase is such that the ownership
over the thing sold is transferred to the vendee upon execution of the
contract, subject only to the resolutory condition
that the vendor exercise his right of repurchase within the period agreed
upon.  Manalansan
v. Manalang, L-13646, July 26, 1960; Almiranez v. Devera, L-19496, February
27, 1965; Rosario v. Rosario,
L-13018, December 29, 1960.”^[6]

“A sale with pacto de
retro transfers the legal title to the vendee and this, in the absence of
an agreement to the contrary, carries with it the right of possession.  In the case of Santos v. Heirs of Crisostomo and Tiongson (41 Phil.
342), this court, in discussing the nature of sale with pacto
de retro, said:  ‘x x x It is our opinion, however, that the insertion of a
stipulation for repurchase by the vendor in a contract of sale does not
necessarily create any right inconsistent with the right of ownership in the
purchaser.  Such a stipulation is in the
nature of an option, and the possible exercise of it rests upon contingency.’ x
x x.”^[7]

To be sure, Paulino Bollozos
could have repurchased the property within seven years pursuant to the first
contract.  However, he did not choose to
do so and in fact “renounced and repudiated” this right two years
later in the second contract.  It is
noted that this contract also purported to convey the same property to Yu but
this was merely an affirmation or reiteration of the parties’ intention in the
first transaction.  It was not really
necessary to repeat the sale because the first contract had already been
perfected and consummated.  Indeed, the
sale could not have been made for the first time then for it would have been
illegal under the provisions of the new Constitution that had come into force
in 1935.  Actually, the real purpose of
the second contract was to manifest Paulino Bollozos‘ waiver of his right to repurchase, for which he
received the additional sum of P295.00.

The plaintiffs-appellees make such of
the admitted fact that the disputed property is still in the name of Paulino Bollozos as so too are
the tax declarations.  This circumstance,
it is argued, proves that ownership of the land was retained by Bollozos and later transferred to his heirs, besides being
an indication as well that the first contract was really only an equitable
mortgage and not a deed of sale.  The
contention is that as long as the land had not yet been registered in the name
of the defendant-appellant, title hereto remained with Bollozos.

This is not correct.  The
first deed of sale took effect on September
1, 1934, and legally transferred ownership of the land subject
thereof from the vendor to Yu on the said date. 
Failure to register the sale did not vitiate it or render it
unenforceable.  As we have held in
several cases, an unrecorded deed of sale is binding between the parties and
their privies because actual notice is equivalent to registration.  The real purpose of registration being to
give notice to third persons, deed of sale that has not been registered does
not lose its efficacy insofar as the parties thereto and their heirs are
concerned.^[8]

It is settled that registration is not a mode of acquiring
ownership.  Thus:

“Registration does not
confer ownership.  It is not a mode of
acquiring dominion, but only a means of confirming the fact of its existence
with notice to the world at large.”^[9]

And with particular reference to problems such as the one at bar,
we have ruled that:

“Title and ownership over lands within the
meaning and for the purposes of the constitutional prohibition, dates back to
the time of their purchase, not later. 
Any other ruling would be illegal and unjust, and would operate to
dispossess alien owners who had acquired their lands in good faith before the
prohibition was established, but either failed wholly to register them or
registered them only after the Constitution was adopted.”^[10]

As for the finding of the trial court that the deed of sale with
the right of repurchase was an equitable mortgage, we hold it has no basis in
fact and law.  All that is invoked in its
support is that the land continued to be registered, and all the tax
declarations thereon were made, in the name of Paulino
Bollozos.  That
may well be, but that circumstance would not change the nature of the contract
concluded in 1934.  At best, it may
demonstrate neglect on the part of the vendee, who had a right to transfer the
registration in his name, but that would not signify that Paulino
Bollozos retained or recovered ownership of the land
he had already sold.

The defendant-appellant cites Article 1602 of the Civil Code and
argues that none of the indications mentioned therein of an equitable mortgage
are present in this case.  While we are
inclined to agree, it should be noted that the said article is not applicable
because it was not embodied in the old Civil Code which was in force in
1934.  This is an innovation in the
present Code.  In any event, it is worth
stressing that one of the indicia mentioned in the said article is that the
vendor remains in possession of the property in question, which is not the
situation here.  The complaint, in fact,
asks for recovery of possession of the land from defendant Yu.

In sum, we hold that the trial court erred in dis­regarding the
sale with right of repurchase concluded on September 1, 1934, and in considering it an equitable
mortgage.  The second contract executed
on September 21, 1936,
could not have validly conveyed the land in question to defendant Yu, who was
an alien, as this was already prohibited by the Commonwealth Constitution.  Nevertheless, it was effective in affirming
the earlier contract of September 1,
1934, and, more importantly, in making it absolute with the
renunciation by the vendor of his right to repurchase the property.  Accordingly, Yu should be recognized as the
lawful owner of the land in dispute, acquired by him by virtue of a legitimate
contract of sale with pacto de retro
which became absolute when the vendor waived his right of repurchase.

The fact that the defendant in this case was an alien cannot be
taken against him for he was not dis­qualified from acquiring the land in
question when the sale was concluded in 1934. 
It should not deter us from ruling in his favor now.

This Court dispenses equal justice to the citizen and the alien
and judges them on the merits of their cause and not the color of their
skin.  Having admitted him into our
territory, the State is committed to the recognition of all the rights of the
stranger in our midst save only where they unduly clash with the higher
interests of our own nation.  There is no
such collision here.  On the contrary, we
see here an opportunity to prove, as we do now, that respect for the foreign
guest is ingrained in the law of the land and in the nature of our people.

WHEREFORE, the appealed decision is REVERSED.  The complaint and the counterclaim in Civil
Case No. 66-C are DISMISSED, with costs against the plaintiffs-appellees.  It is so
ordered.

Teehankee, C.J., Narvasa,
Paras, and Gancayco, JJ., concur.

^[1]
Record on Appeal, p. 5.

^[2] Ibid., p. 10.

^[3] Id.,
pp. 35-36.

*
Presided by Judge Bernardo Teves.

^[4] Id.,
pp. 37-41.

**
Following his death, Yu Tieng Su was substituted as
defendant-appellant by Lourdes Y. Tan, Jose S. Yu, Josefa
Y. Tagarda, Severino S. Yu,
Juanito S. Yu, Joaquin S. Yu, Juanita S. Yu, and
Jorge S. Yu.

^[5] Constitution of 1935, Article XIII, Sec. 1; Tejido
v. Zamacoma, 138 SCRA 78.

^[6]
Parco v. Haw Pia, 45 SCRA 164.

^[7] Alderete v. Amandoron, 46
Phil. 488.

^[8] Obras Pias v. Devera Ignacio, 17 Phil. 45; Gustilo
v. Maravilla, 48 Phil. 422; Quimson v. Suarez, 45 Phil. 901; Winkleman
v. Veluz, 43 Phil. 609; Galasinao
v. Austria, 97 Phil. 82; Philippine Suburban Development Corporation v.
Auditor General, 63 SCRA 397.

^[9]
Bautista v. Dy Bun Chin, CA-L-6983-R, 49 O.G. 179.

^[10] Ibid.