G.R. No. L-22331. June 06, 1967
IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE VENDEES OF A HOUSE AND THE RIGHTS TO A LOT. MARIA BAUTISTA VDA. DE REYES, ET AL., VENDEES-PETITIONERS-APPELLEES, RODOLFO LANUZ…
REGALA, J.:
Rodolfo Lanuza and his wife Belen were
the owners of a two-story house built on a lot of the Maria Guizon
Subdivision in Tondo, Manila, which the spouses
leased from the Consolidated Asiatic Co.
On January 12, 1961,
Lanuza executed a document entitled “Deed of
Sale with Right to Repurchase” whereby he conveyed to Maria Bautista Vda. de Reyes and Aurelia R. Navarro the house, together
with the leasehold rights to the lot, a television set and a refrigerator in
consideration of the sum of P3,000. The
deed reads:
“DEED OF SALE WITH
RIGHT TO REPURCHASE “KNOW ALL MEN BY THESE PRESENTS:
“That I, RODOLFO LANUZA, Filipino, of legal age, married to
Belen Geronimo, and residing at 783-D Interior 14 Maria Guizon,
Gagalangin Tondo, Manila,
hereby declare that I am the true and absolute owner of a new two storey house
of strong materials, constructed on a rented lot – Lot No. 12 of the Maria Guizon Subdivision, owned by the Consolidated Asiatic Co.
– as evidenced by the attached Receipt No. 292, and the plan of the
sub-division, owned by said company.
“That for and in consideration of the sum of THREE THOUSAND
PESOS (P3,000.00) which I have received this day from Mrs. Maria Bautista Vda. de Reyes, Filipino, of legal age, widow; and Aurelia
Reyes, married to Jose S. Navarro, Filipinos, of legal ages, and residing at
1112 Antipolo St., Tondo,
Manila, I hereby SELL, CEDE, TRANSFER, AND CONVEY unto said Maria Bautista Vda. de Reyes, her heirs, successors, administrators and
assigns said house, including my right to the lot on which it was constructed,
and also my television, and frigidaire “Kelvinator” of nine cubic feet in size, under the
following conditions:
“I hereby reserve for myself, my heirs, successors,
administrators, and assigns the right to repurchase the above mentioned properties
for the same amount of P3,000.00, without interest, within the stipulated
period of three (3) months from the date hereof. If I fail to pay said amount of P3,000.00,
within the stipulated period of three months, my right to repurchase the said
properties shall be forfeited and the ownership thereto shall automatically
pass to Mrs. Maria Bautista Vda. de Reyes, her heirs,
successors, administrators, and assigns, without any Court intervention, and
they can take possession of the same.
“IN WITNESS WHEREOF, we have signed this contract in the City
of Manila, this 12th day of
January, 1961.
“s/t RODOLFO
LANUZA s/t
MARIA BAUTISTA VDA. DE REYES
Vendor Vendee
“s/t AURELIA
REYES WITH
MY MARITAL CONSENT:
Vendee
“s/t JOSE S. NAVARRO
When the original period of redemption expired, the parties
extended it to July 12, 1961
by an annotation to this effect on the left margin of the instrument. Lanuza’s wife, who
did not sign the deed, this time signed her name below the annotation.
It appears that after the execution of this instrument, Lanuza and his wife mortgaged the same house in favor of
Martin de Leon to secure the payment of P2,720 within one year. This mortgage was executed on October 4, 1961 and recorded in the
Office of the Register of Deeds of Manila on November 8, 1961
under the provisions of Act No. 3344.
As the Lanuzas failed to pay their
obligation, De Leon
filed in the sheriff’s office on October
5, 1962 a petition for the extra-judicial foreclosure of the
mortgage. On the other hand, Reyes and
Navarro followed suit by filing in the Court of First Instance of Manila a petition
for the consolidation of ownership of the house on the ground that the period
of redemption expired on July 12, 1961 without the vendees exercising their
right of repurchase. The petition for
consolidation of ownership was filed on October 19. On October 23, the house was sold to De Leon
as the only bidder at the sheriff’s sale.
De Leon immediately took possession of the house, secured a discharge of
the mortgage on the house in favor of a rural bank by paying P2,000 and, on October
29, intervened in court and asked for the dismissal of the petition filed by
Reyes and Navarro on the ground that the unrecorded pacto
de retro sale could not affect his rights as a third party.
The parties[1] thereafter entered into a stipulation of facts on which this opinion is
mainly based and submitted the case for decision. In confirming the ownership of Reyes and
Navarro in the house and the leasehold right to the lot, the court said:
“It is true that the original deed of sale with pacto de retro, dated January 12,
1961, was not signed by Belen Geronimo-Lanuza, wife
of the vendor a retro, Rodolfo Lanuza, at the time of its execution. It appears, however, that on the occasion of
the extension of the period for repurchase to July 12, 1961, Belen Geronimo-Lanuza
signed giving her approval and conformity.
This in act, in effect, constitutes ratification or confirmation of the
contract (Annex ‘A’ Stipulation) by Belen Geronimo-Lanuza,
which ratification validated the act of Rodolfo Lanuza
from the moment of the execution of the said contract. In short, such ratification had the effect
of purging the contract (Annex ‘A’ Stipulation) of any defect which it might have had from the moment of its
execution. (Article 1396, New Civil Code of the Philippines;
Tang Ah Chan and Kwong Koon
vs. Gonzales, 52 Phil. 180)
“Again, it is to be noted that while it is true that the
original contract of sale with
right to repurchase in favor of the petitioners (Annex ‘A’ Stipulation) was not
signed by Belen Geronimo-Lanuza, such failure to
sign, to the mind of the Court, made the contract merely voidable,
if at all, and, therefore, susceptible of ratification. Hence, the subsequent ratification of the
said contract by Belen Geronimo-Lanuza validated the
said contract even before the property in question was mortgaged in favor of
the intervenor.
“It is also contended by the intervenor
that the contract of sale with right to repurchase should be interpreted as a
mere equitable mortgage. Consequently, it
is argued that the same cannot form the basis for a judicial petition for consolidation of title over the property
in litigation. This argument is based on
the fact that the vendors a retro continued in possession of the
property after the execution of the deed of sale with pacto
de retro. The mere fact,
however, that the vendors a retro continued in the possession of
the property in question cannot justify an outright declaration that the sale should be construed as an equitable mortgage and not a
sale with right to repurchase. The terms
of the deed of sale with right to repurchase (Annex A’ Stipulation) relied upon
by the petitioners must be considered as
merely an equitable mortgage for the reason that after the expiration of
the period or repurchase of three months from January 12, 1961.
“Article 1602 of the New Civil Code provides:
‘ART. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases;
x x x x
‘(3) When upon or after the expiration
of the right to repurchase another instrument extending the period of redemption
or granting a new period is executed.
x x x x
“In the present case, it appears, however, that no other
instrument was executed between the parties extending the period of redemption. What was done was simply to annotate on the
deed of sale with right to repurchase (Annex A1 Stipulation)
that the period to repurchase, extended as requested until July 12, 1961’. Needless to say, the
purchasers a retro, in the exercise of their freedom to make
contracts, have the power to extend the period of repurchase. Such extension is valid and effective as it
is not contrary to any provision of law.
(Umale vs. Fernandez, 28 Phil. 89, 93)
“The deed of sale with right to repurchase (Annex ‘A’ Stipulation) is embodied in a
public document. Consequently, the same
is sufficient for the purpose of transferring the rights of the vendors a
retro over the property in question in favor of the petitioners. It is to be noted that the deed of sale with
right to repurchase (Annex ‘A’ Stipulation) was executed on January 12, 1961,
which was very much ahead in point of time to the execution of the real estate
mortgage on October 4, 1961, in favor of intervenor
(Annex ‘B’ Stipulation). It is obvious, therefore, that when the
mortgagors, Rodolfo Lanuza and Belen Geronimo-Lanuza, executed the real estate mortgage in favor of the intervenor, they were no longer the absolute owners of the
property since the same had already been
sold a retro to the petitioners.
The spouses Lanuza, therefore, could no longer
constitute a valid mortgage over
the property inasmuch as they
did not have any free disposition of the property mortgaged. (Article 2085, New Civil Code.) For a valid mortgage to exist, ownership of the property mortgaged is an essential
requisite. A mortgage executed by one who is not the
owner of the property mortgaged is without legal existence and its registration
cannot validate it. (Philippine National
Bank vs. Rocha, 55 Phil. 497)
“The intervenor invokes the
provisions of article 1544 of the New Civil
Code for the reason that while the real estate mortgage in his favor (Annex ‘B’ Stipulation) has been registered
with the Register of Deeds of Manila under the provisions of Act No. 3344 on
November 3, 1961, the deed of sale with right to repurchase (Annex ‘A’
Stipulation) however, has not been duly registered. Article 1544 of the New Civil Code, however,
refers to the sale of the same
property to two or more vendees. This
provision of law, therefore, is not applicable to the present case which does
not involve sale of the same property to two or more vendees. Furthermore, the mere registration of the property
mortgaged in favor of the intervenor under Act No.
3344 does not prejudice the interests of the petitioners who have a better
right over the property in question under the old principle of first in time, better in right. (Gallardo
vs. Gallardo, C.B., 46 O.G. 5568)”
De Leon appealed directly
to this Court, contending (1) that the sale in question is not
only voidable but void ab
initio for
having been made by Lanuza without the consent of his wife; (2) that the pacto de retro sale is in reality an equitable mortgage and
therefore can not be the basis of
a petition for consolidation of ownership;
and (3) that at any rate the sale,
being unrecorded, cannot affect third parties.
We are in accord with the
trial court’s ruling that a
conveyance of real property of the
conjugal partnership made by the
husband without the consent of
his wife is merely voidable. This is clear from article 173 of the Civil
Code which gives the wife ten years within which to bring an action for
annulment. As such it can be ratified as
Lanuza’s wife in effect did in this case when she
gave her conformity to the extension of the period of redemption by signing the
annotation on the margin of the deed. We
may add that actions for the annulment of voidable
contracts can be brought only by those who are bound under it, either
principally or subsidiarily (art. 1397), so that if
there was anyone who could have questioned the sale on this ground it was Lanuza’s wife alone.
We also agree with the
lower court that between an unrecorded sale of a prior date and a recorded mortgage of a later date the former is preferred to the latter for the reason that if the original owner had
parted with his ownership of the thing sold then he no longer had the ownership
and free disposal of that thing so as to be able to mortgage it again. Registration of the mortgage under Act No.
3344 would, in such case, be of
no moment since it is understood to be without prejudice to the better right of
third parties.[2] Nor would it avail the mortgagee any to
assert that he is in actual possession of the property for the execution of
the conveyance in a public instrument earlier was equivalent to the delivery of
the thing sold to the vendee.[3]
But there is one aspect of this case which leads us to a different
conclusion. It is a point which neither the parties nor the trial
court appear to have sufficiently
considered. We refer to the nature of
the so-called “Deed of Sale with Right to Repurchase” and the claim that it is in reality an
equitable mortgage. While De Leon
raised the question below and again in
this Court in his second assignment of error, he has not demonstrated his
point; neither has he pursued the logical implication of his argument beyond
stating that a petition for consolidation of ownership is an
inappropriate remedy to enforce a mortgage.
De Leon based his claim
that the pacto de retro sale is actually an equitable mortgage on the fact that,
first, the supposed vendors (the Lanuzas) remained in
possession of the thing sold and, second, when the three-month period of redemption expired the parties extended
it. These are circumstances which indeed
indicate an equitable mortgage.[4] But their relevance emerges only when they
are seen in the perspective of other circumstances which indubitably show that
what was intended was a mortgage and not a sale. These circumstances are:
1.
The gross inadequacy of the price. In the discussion in the briefs of
the parties as well as in the decision of the trial court, the fact has not
been mentioned that for the price of P3,000, the supposed vendors
“sold” not only their house, which they described as new and as being
made of strong materials and which alone had an assessed value of P4,000, but
also their leasehold right, television set and refrigerator, “Kelvinator‘ of nine cubic feet in size.” Indeed, the petition for consolidation of
ownership is limited to the house and the leasehold right, while the
stipulation of facts of the parties merely referred to the object of the sale
as “the property in question.”
The failure to highlight this point, that, is, the gross inadequacy of
the price paid, accounts for the error in determining the true agreement of the
parties to the deed.
2. The non-transmission of
ownership to the vendees. The
Lanuzas, the supposed vendors, did not really
transfer their ownership of the properties in question to Reyes and Navarro. What was agreed was that ownership of the
things supposedly sold would vest in the vendees only if the vendors failed to
pay P3,000. In fact the emphasis is
on the vendors’ payment of the amount
rather than on the redemption of the things supposedly sold. Thus, the deed recites that –
“If I (Lanuza)
fail to pay said amount of P3,000.00 within the stipulated period of three
months, my right to repurchase the said properties shall be forfeited and the ownership thereto
automatically pass to Mrs. Maria Bautista Vda. de
Reyes x x x without any
Court intervention and they can take possession of the same.”
This stipulation is
contrary to the nature of a true pacto de retro sale
under which a vendee acquires ownership of the thing sold immediately upon
execution of the sale, subject only to the vendor’s right of redemption.[5] Indeed, what the parties established by this
stipulation is an odious pactum commissorium which enables the mortgagees to
acquire ownership of the mortgaged properties without need of foreclosure
proceedings. Needless to say, such a stipulation is a nullity, being
contrary to the provisions of article 2088 of the Civil Code.[6] Its insertion in the contract of the
parties is an avowal of an intention to mortgage rather than to sell.[7]
3. The delay in the filing of the petition consolidation. Still another point obviously overlooked in
the consideration of this case is the fact that the period of redemption
expired on July 12, 1961
and yet this action was not brought until October 19, 1962 and only after De Leon
had asked on October 5, 1962
for the extra-judicial foreclosure of his mortgage. All the while, the Lanuzas
remained in possession of the properties they were supposed to have sold and
they remained in possession even long after they had lost their right of
redemption.
Under these circumstances we cannot but conclude that the deed in
question is in reality a mortgage. This conclusion is of far-reaching
consequences because it means not
only that this action for consolidation of ownership is improper, as De Leon
claims, but, what is more, that
between the unrecorded deed of Reyes and Navarro which we hold to be an
equitable mortgage, and the registered mortgage of De Leon, the latter must be
preferred. Preference of mortgage
credits is determined by the priority of registration of the mortgages,[8]
following the maxim “Prior tempore potior
jure” (“He who is first
in time is preferred in right.”)[9]
Under article 2125 of the Civil Code, the equitable mortgage, while valid
between Reyes and Navarro, on the one hand, and the Lanuzas,
on the other, as the immediate parties thereto, cannot prevail over the
registered mortgage of De Leon.
WHEREFORE, the decision appealed from is reversed, hence,
the petition for consolidation is dismissed.
Costs against Reyes and Navarro.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez,
and Ruiz Castro, JJ., concur.
[1]
In all the proceedings the Lanuzas do not appear to
have intervened.
[2]
Rivera v. Moran, 48 Phil. 836 (1926).
[3]
Civ. Code art. 1948. See also Lichauco
v. Berenguer, 39 Phil. 643 (1919); Bautista v. Sioson,
39 Phil. 615 (1919).
[4]
Art. 1602 (2)(3)
[5]
See, e.g., Guerrero v. Yñigo,
96 Phil. 37 (1954); Floro v. Granada, 83 Phil. 487 (1949).
[6]
Reyes v. Nebrija, 98 Phil. 639 (1956); Tan
Chun Tic v. West Coast Life Ins. Co., 54 Phil. 361 (1930).
[7]
Alcantara v. Alinea,
8 Phil. 111 (1907).
[8]
Civ. Code art. 2242 (5)
[9]
See Gomez v. Jugo, 48 Phil. 118 (1925).