PERFECTO ADRID, ET AL., PLAINTIFFS AND APPELLANTS, VS. ROSARIO MORGA, ETC., DEFENDANT AND APPELLEE, AND MAMERTO MORGA, ET AL., INTERVENORS AND APPELLEES.

On August 8, 1938, Perfecto Adrid and his wife Carmen Silangcruz, then
owners of Lot No. 550 of the San Francisco Malabon Estate Subdivision,
situated in General Trias, Cavite, executed a document entitled “Sale
with Right to Repurchase”, Exhibit A, purporting to sell the lot to
Eugenio Morga for the sum of P2,000 with the right to repurchase the
same within two years for the same sum of P2,000, plus 12% interest per
annum. The vendors never repurchased said Lot No. 550. But in 1956,
Perfecto Adrid and his son, (Carmen Silangcruz then being already dead)
brought the present action against the administratrix of the deceased
Eugenio Morga to recover the same Lot No. 550, offering to pay the sum
of P2,000, and asking for accounting of all the produce of the lot
since 1938, this on the theory that the original contract of sale with pacto de retro
(Exhibit A) was by acts of the parties to the said contract, converted
into one of antichresis. The parties plaintiff and defendant instead of
presenting evidence, submitted a stipulation of facts with the prayer
that decision be rendered on the basis of such facts. For purposes of
reference, we reproduce the pertinent portions of said stipulation of
facts:

“1. That on August 8, 1938, the
spouses Perfecto Adrid and Carmen Silangcruz executed a deed of sale
for P2,000.00 with 12% interest per annum with right to repurchase Lot
No. 550 of the Malabon Estate within the period of two (2) years from
date and covered by Trans. Cert. of Title No. 10028, Exh. ‘A’;”

“3. That said deed of sale was registered in the office of the Register
of Deeds of Cavite and inscribed at the back of Trans. Cert. of Title
No. 10028, covering lot 550, on August 11, 1939, a copy of which is
hereto attached as Exh. ‘B’;

“4. That on August 8, 1938,
the date of the execution of said deed of sale with right to
repurchase, the vendee Eugenio Morga took possession of the land and
benefited himself of the yearly produce of palay, and upon his death on
August 25, 1952, said possession and yearly harvest of palay were
transferred to his heirs, the herein defendant and intervenors;

“5. That in par. 5 of the notarial document Exh. ‘A’ there is
stipulation which reads: ‘Should we Perfecto Adrid and Carmen
Silangcruz, fail to repurchase the abovementioned parcel of land under
the stipulations above mentioned, then Eugenio Morga shall be the
complete and absolute owner of the same without the necessity of
further executing a deed of conveyance or any other document’;

“6. That this lot 550 appears assessed in the names of the spouses
Perfecto Adrid and Carmen Silangcruz under Tax Declaration No. 47, Exh.
‘C’, and its yearly taxes amounting to P17.00 were being paid by
Eugenio Morga;”

“11. That the yearly harvest of palay of
this lot No. 550 (is) 30 cavanes net since its area is 35,844 square
meters, as stated in Trans. Cert. of Title No. 10028, and that the
price per cavan is P10.00.”

The Court of First Instance of Cavite on July 15, 1957, rendered a decision, the dispositive part of which reads as follows:

“In
view of the foregoing considerations, this Court is of the opinion and
so holds that the contract entered into between the spouses Perfecto
Adrid and Carmen Silangcruz on one hand, and the spouses Eugenio Morga
and Genoveva Vasquez on the other, is a contract of sale with the right
to repurchase. The plaintiffs having failed to repurchase the land
within the stipulated period of two years from the date of the
execution of the contract, the title of the deceased vendee a retro,
Eugenio Morga and Genoveva Vasquez, became consolidated by operation of
law.” * * *

“Wherefore, judgment is hereby rendered against
the plaintiffs, with costs. They are likewise ordered to pay the amount
of P1,350.00 as attorney’s fees.”

We have
carefully studied this case, examined the document entitled “Sale with
Eight to Repurchase” (Exhibit A) and the acts of the parties thereto
subsequent to its execution and we have come to the conclusion that the
intention of the parties was merely for Perfecto and his wife Carmen to
borrow the sum of P2,000 from Eugenio Morga, Lot No. 550 being given as
security. In other words, we have here a clear case of equitable
mortgage. Otherwise, there would be no reason for the agreement made
for the payment of 12% interest per annum. This interest must refer to
the use of P2,000 by the alleged vendors until the same shall have been
paid to Eugenio. The parties to the contract must have contemplated the
lot remaining in the possession of the vendors inasmuch as it was
considered a mere security. However, after the execution of the
contract, the creditor, Morga according to the contention of the
plaintiff, decided to take possession of the land, pending payment of
the loan, finding it financially advantageous to receive the products
thereof, valued at P300.00 a year, in lieu of the payment of interest
at 12% a year, which would only be P240.00. But this did not convert,
as contended by plaintiffs, the contract from a sale with pacto de retro to that of antichresis.

Some of the reasons behind our conclusion that the present case is one
of equitable mortgage, are the following. Despite the expiration of the
two year period for the alleged repurchase, which should have been done
in 1940, neither Morga nor his heirs have consolidated their title to
the land. The certificate of title remained in the name of the alleged
vendors. Not only this, but the tax declaration for the lot also
remained in the name of said vendors, and all these years, Eugenio
during his lifetime, and his heirs after his death, continued to pay
the real estate tax in the name of the vendors.^[1]
It is also a fact that the price of P2.000 would be rather inadequate
for the supposed sale of Lot No. 550 which has an area of about 3½
hectares and has a yearly production of thirty cavans of palay valued
P10.00 a cavan, that is to say, P300.00 a year. A parcel of land with
an annual production of P300.00 would or should command more than
P2,000.00 for its sale. Besides, the contract provided for the payment
of interest which is characteristic of a loan or equitable mortgage.^[2]

The contention of plaintiffs that although the original contract was
one of sale with right to repurchase, it was converted, into one of
antichresis just because the vendee took possession of the land, is
clearly untenable. There is nothing in the document, Exhibit A, nor in
the acts of the parties subsequent to its execution to show that the
parties had entered into a contract of antichresis. In the case of
Alojado vs. Lim Siongco, 51 Phil., 339, this Court said:

“What
characterizes a contract of antichresis is that the creditor acquires
the right to receive the fruits of the property of his debtor with the
obligation to apply them to the payment of interest, if any is due, and
then to the principal of his credit, and when such a covenant is not
made in the contract, which speaks unequivocally of a sale with right
of repurchase, the contract is a sale with the right to repurchase and
not an antichresis.”

In view of the
foregoing, the appealed decision is hereby reversed. The defendants are
hereby ordered to give up the possession of the lot in question to the
appellants upon the payment of P2,000. No interest will be paid
inasmuch as Eugenio and his heir have received the products of the land
in lieu of the payment of interest. No costs.

Paras, C. J., Padilla, Bautista Angelo, Labrador, Concepcion, Endencia, Barrera and Gutierrez David, JJ., concur.

Bengzon, J., took no part.

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^[1] Escoto vs. Arcilla, 89 Phil., 199.

^[2] Ocampo vs. Potenciano, 89 Phil., 159.