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…

Bollozos versus Yu Tieng Su

The Case

This is a case about a parcel of agricultural land in Catarman, Misamis Oriental, and about who truly owns it after more than thirty years. The surviving children and grandchildren of Paulino Bollozos sued Yu Tieng Su, a Chinese national, to recover a 1.2 hectare parcel of land and to compel an accounting for its use. They claimed the land had been entrusted to Yu only for administration, so that its produce could be applied to their predecessor's debt. Yu answered that he had bought the land outright, first by a sale with right of repurchase in 1934 and then by a deed of absolute sale in 1936. The case matters because it fixes two rules every reviewee must know: a sale with pacto de retro, that is, a sale with right of repurchase, transfers ownership to the buyer at once, subject only to the seller's right to redeem; and an alien who lawfully acquired agricultural land before the 1935 Constitution took effect kept a vested right that the new charter could not disturb.

Procedural History

The action was commenced in the Court of First Instance of Misamis Oriental, Branch something the record calls the lower court, presided over by Judge Bernardo Teves. The parties entered into a stipulation of facts and submitted the case for decision without further evidence. The trial court ruled for the plaintiffs. It held that the 1934 deed of sale with pacto de retro was in reality an equitable mortgage and transferred no ownership, and that the 1936 deed of absolute sale was void from the beginning because by then the Constitution had already barred aliens from acquiring agricultural land. Yu appealed. After his death he was substituted by his heirs, and the case reached the Supreme Court by ordinary appeal, where the Court reversed the trial court.

Facts

Paulino Bollozos owned a parcel of land covered by Original Certificate of Title Number 5033. On September 1, 1934, he and his wife Faustina Liloc executed in favor of Yu Tieng Su a document entitled Escritura de Compra y Venta con Pacto de Retro. For 636 pesos, they sold, ceded, and transferred the land to Yu, reserving to themselves the right to repurchase it within seven years. The deed provided that if the period passed without redemption, the sale would become absolutely consummated.

Two years later, on September 21, 1936, Paulino Bollozos executed a second document entitled A Definite and Absolute Purchase and Sale. In it he ratified the 1934 sale, declared that he would forever renounce and repudiate his right to repurchase, and acknowledged receipt of an additional 295 pesos, bringing the total price to 931 pesos.

In January 1968 the heirs of Paulino Bollozos sued Yu to recover the land, alleging that it had only been delivered to him for administration in connection with a debt that had long been paid. Yu denied this and set up the two deeds. The plaintiffs themselves stipulated to the authenticity of both documents, and no evidence was ever offered to prove the alleged entrustment or the alleged indebtedness.

Issues

• Whether or not the deed of sale with right of repurchase executed on September 1, 1934 validly conveyed ownership of the land to Yu Tieng Su, or was merely an equitable mortgage.
• Whether or not the deed of absolute sale executed on September 21, 1936 validly conveyed the land to Yu, an alien, after the 1935 Constitution had prohibited alien acquisition of agricultural land.
• Whether or not the failure to register the sale in Yu's name and the continued registration and tax declarations in the name of Paulino Bollozos defeated Yu's ownership.

Applicable Provisions

The 1935 Constitution, Article Thirteen, Section One, reserved agricultural land to Filipino citizens, and the Court fixed its effectivity at November 15, 1935. The Court described its substance in these terms:

Article XIII, Sec. 1 of the Constitution of 1935 reserved ownership of agricultural lands to Filipino citizens.

This provision bears on the case because the first sale was concluded in 1934, before the prohibition began, while the second deed came in 1936, after it.

Article 1602 of the Civil Code lists the circumstances that indicate an equitable mortgage, and the Court discussed it although it held the article inapplicable to a 1934 contract. The Court summarized its office in these terms:

Article 1602 of the Civil Code enumerates the indications of an equitable mortgage.

It bears on the case because the plaintiffs invoked the continued registration and tax declarations in Bollozos' name as badges of a mere security arrangement rather than a true sale.

Ruling

On the first issue, the Court held that the 1934 transaction was a valid sale with right of repurchase that effectively transferred ownership to Yu. All the elements of a valid contract were present, and the plaintiffs had stipulated to its authenticity. The Court rejected the claim of administration as a bare averment without support, since it was not admitted in the stipulation and was categorically denied in the answer. It also rejected the finding of equitable mortgage, holding that the continued registration and tax declarations in the vendor's name did not change the nature of the contract; at most they showed neglect by the buyer, who had the right to transfer the registration to himself. The Court explained the nature of such a sale:

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.

On the second issue, the Court held that the 1936 deed could not have conveyed the land to Yu for the first time, because by then the Constitution already prohibited alien acquisition of agricultural land. But the deed was not useless. It was effective as an affirmation of the 1934 sale and, more importantly, as a renunciation of the vendor's right to repurchase, for which he received an additional 295 pesos. The sale thus became absolute. The Court stressed that Yu was not disqualified when the sale was concluded in 1934, and that his title was a vested right protected under the new charter.

On the third issue, the Court held that registration is not a mode of acquiring ownership. An unrecorded deed of sale binds the parties and their heirs, because actual notice is equivalent to registration, and registration serves only to give notice to third persons. The Court stated the rule:

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.

And on the constitutional question, the Court fixed the reckoning point:

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.

Doctrine

First, a sale with pacto de retro transfers ownership of the thing sold to the vendee upon execution of the contract, subject only to the resolutory condition that the vendor redeem within the period agreed upon. The buyer's title is immediate; the seller keeps only a right of repurchase, which is in the nature of an option resting on a contingency.

Second, an alien who acquired agricultural land before November 15, 1935, when the 1935 Constitution took effect, acquired a vested right that the constitutional prohibition cannot disturb. Title dates back to the time of purchase, not to the time of registration.

Third, registration is not a mode of acquiring ownership but only a means of confirming it and giving notice to the world. An unregistered deed of sale binds the parties and their privies, because actual notice is equivalent to registration.

Fourth, the circumstances listed in Article 1602 of the Civil Code are mere indicia of an equitable mortgage, and continued registration and tax declarations in the vendor's name, standing alone, do not convert a true sale into a security arrangement.

Disposition

The Supreme Court reversed the decision of the trial court, dismissed the complaint and the counterclaim, and recognized Yu Tieng Su as the lawful owner of the land, with costs against the plaintiffs.

Remember This

Memorize this line: a sale with pacto de retro transfers legal title to the vendee at once, subject only to the vendor's right to repurchase, and registration is not a mode of acquiring ownership. Examiners use this case to test the nature of a sale with right of repurchase, the effect of non-registration between the parties, and the vested rights of aliens who bought agricultural land before the 1935 Constitution took effect.