FELISA TAYAO, ET AL., PLAINTIFFS-APPELLANTS, VS. PASCUALA DULAY, ET AL., DEFENDANTS-APPELLEES.

This is an action to compel
defendants to reconvey to plaintiffs a parcel of land
situated in Pulilan, Bulacan
which, according to plaintiffs, was merely mortgaged by Apolinario Tayao, their
predecessor-in-interest, to Pascuala Dulay on December 8,
1926 in
accordance with a public document entered into between Apolinario Tayao and Pascuala Dulay.

Defendants, in their answer,
claim that the document relied upon by the plaintiffs is not a mortgage but a
pacto de retro sale which, because of
Tayao’s failure to repurchase the property within the
period agreed upon, ripened into an absolute sale thereby vesting the ownership
and title of the property in Pascuala Dulay. The latter claims that she had sold the property to
her co-defendants Primitivo Reyes and Anatalia Cayetano who, on their
part, claim to have purchased it in good faith and for value. Defendants finally
claim that since the execution of the document on December 8, 1926 the land had
been in the possession respectively of Pascuala Dulay and of spouses Primitivo
Reyes and Anatalia Cayetano
continuously, openly, peacefully, adversely and in the concept of owner, having
declared the same in their names for taxation purposes and having paid
religiously the taxes due thereon. They pray that the complaint be dismissed.

After hearing, the court a
quo dismissed the complaint with both parties bearing their own costs and
expenses of litigation. The case is now before us on appeal taken by the
plaintiffs.

Apolonio Tayao,
during his lifetime, executed in favor of Pascuala
Dulay a deed of sate with option to repurchase
covering a parcel of land for a consideration of P138.79. It was expressly
agreed upon that the land object of the sale cannot be repurchased during the
first ten years following the execution of the sale although there is nothing
therein which limits the period within which the repurchase may take place. In
view of this failure to stipulate the time within which the repurchase may be
made, plaintiffs now contend that the said clause should be considered as
non-existent being contrary to law with the result that the contract has now
become a mere evidence of indebtedness.

Defendants apparently do not
agree with this theory if they aver that the contract entered into between
original parties is one which embodies a real sale option to repurchase with the
only particularity that was there agreed upon that such repurchase could not
effected until after the period of ten years from its execution. The fact that
this stipulation is contrary to law does not in itself convert the contract into
a mere evidence of indebtedness and much less one of mortgage for it would at
most be considered as one where the repurchase is to be made within a period not
exceeding ten years in accordance with Articles 1508 of the Civil Code of Spain
which provides: “Should there be an agreement, the period should not exceed ten
years.”

The case in point is that of
Santos vs. Heirs of Crisostomo, 41 Phil., 342, the facts of which are on all
fours with the present. In that case, one Jose Tiongson sold a parcel of land to spouses Teodorico Santos and Venancia
Bautista with option to repurchase for the sum of P211.00 with the express
stipulation that the seller should not repurchase the land “until after ten
years of its enjoyment.” In ruling that this stipulation is illicit for being
contrary to the spirit of the law, this Court declared that it did not have the
effect of changing the character of the transaction for the most that can be
said is that the law should control the veiled intent of the parties in the
sense that the period for the exercise of the right of repurchase in case there
is an agreement should not exceed ten years from the date of contract, as may be
gleaned from the following rationale of this Court:

“We think, however, that the
document is what it purports to be; and its character is not changed by the fact
that, as will presently he seen, the stipulation as to the time when repurchase
may be effected contravenes the provisions of article 1508 of the Civil Code.
When the stipulation in question is examined, it will be discovered that the
intention of the parties was to suppress the exercise of the right of repurchase
for the full period of ten years from the date of the contract and,
inferentially, to allow the exercise of that right after the expiration of ten
years. In the second paragraph of article 1508 of the Civil Code it is in effect
provided that if there should be an agreement with respect to the time of
repurchase, the period shall not exceed ten years. The stipulation under
consideration offends against this provision in two particulars, namely, (1) in
providing that the right to repurchase may be exercised after ten years shall
have elapsed, and (2) in prohibiting the exercise of the same right during the
whole period when, according to the statute, it might be lawfully
exercised.

“The stipulation is, therefore,
illicit; and the result is that the right of repurchase could in fact under the
second paragraph of article 1508 of the Civil Code, have been exercised in this
case at any time after the making of the contract and prior to the expiration of
ten years. The law must here control over the revealed intention of the
parties.

“In what has boon said we do not
mean to declare that the parties to a contract of sale with pacto de retro can not under any conditions
lawfully suspend the exercise of the right of repurchase. Doubtless they may do
so, provided there remains an appreciable space of time for the exercise of the
right within the limitation allowed by law. For instance, if it were provided
that repurchase should not be effected before five nor
after ten years from the date of contract, we see no reason for supposing the
stipulation to be unlawful. It is different where the parties attempt totally to
suppress the right during the whole period when it might lawfully be exercised.

“It follows from what has been
said that under the contract before us the right of repurchase expired and the
property consolidated in the purchaser, Teodorico T.
Santos and his wife, Venancia Bautista or the
successors of the latter, on March 4,
1914.”

It appearing that neither
plaintiffs nor their predecessor-in-interest have exercised their right of
redemption within the period of ten years allowed by Article 1506 of the Spanish
Civil Code, it follows that their claim over the property has already been
forfeited, while the title of the defendants over it has become consolidated
with all the rights thereunto appertaining.

WHEREFORE, the decision appealed from is
affirmed with the same allocation of the costs and expenses of litigation.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar, JJ., concur.