HEIRS OF DOMINGA TABORA VDA. DE MACOY, REPRESENTED BY GENEROSO MACOY, PETITIONERS, VS. HON. COURT OF APPEALS, JESUS F. REDILLAS AND ANATALIA ELON, RESPONDENTS.

This is a petition for review on certiorari seeking
reversal of the decision of public respondent Court of Appeals in CA-G.R. CV
No. 12062, entitled “Jesus F. Redillas, et al., Plaintiffs-Appellants v. Heirs
of Dominga Tabora Vda. de Macoy, represented by Generoso Macoy,
Defendants-Appellees,” dated September 4, 1990, which set aside the decision of
the Regional Trial Court of Daet, Camarines Norte; and its resolution dated October 17, 1990, which
denied the motion for reconsideration.

The antecedent facts are, as follows:

Dominga Tabora Vda. de Macoy was the owner of a rice land, with
an area of 3.0082 hectares, located at Bagasbas, Daet, Camarines Norte. Her ownership thereof was evidenced by TCT
No. T-7520 of the Register of Deeds of Camarines Norte (pp. 27-B-28,
Records). She acquired the land from
spouses Patrocinio and Pablo Serrano on January 27, 1964, for a consideration
of P11,000.00 (p. 191,
Records). On December 28, 1970, she
executed a document which was denominated “Pabilihang Mabibili-Muli” or sale
with a right to repurchase in favor of private respondents spouses Jesus F.
Redillas and Anatalia Elon, for the sum of P6,000.00 over the land (p. 4,
Records). Among other things, it was
provided therein that the period of repurchase is between December 29, 1973 and
December 29, 1975.

Dominga Tabora Vda. de Macoy died in February, 1972, leaving as
heirs petitioners Julieta Macoy Pongco, Rufina, Francisco, Miriam and Herson
Macoy and Teopista Macoy de Zantua. Alleging failure of petitioners to repurchase the land, private
respondent Jesus F. Redillas executed an Affidavit of Consolidation of
Ownership on May 31, 1977 (p. 26, Records). On July 21, 1977, he and his wife filed a petition for Recording of
Consolidation of Ownership before the Regional Trial Court of Daet, Camarines
Norte, docketed as Civil Case No. 2933 (pp. 1-3, Records).

In the trial court’s order dated January 16, 1978, it declared
petitioners in default for failure to file an answer to the petition (p. 16,
Records). Private respondents then
presented their evidence and, on February 1, 1978, judgment was rendered by the
trial court ordering consolidation of ownership and registration of title over the land in the name of private
respondents (pp. 17-18, Records). Accordingly, TCT No. T-7520 was cancelled and TCT No. T-14665 was issued
on February 3, 1978, in the name of private respondent Jesus F. Redillas,
married to private respondent Anatalia Elon (pp. 188-189, Records).

On June 16, 1978, private respondents mortgaged the land to the
Rural Bank of Jose Panganiban, Inc. to secure a loan of P15,000.00. On July 17, 1980, they borrowed an
additional amount of P10,000.00 from
the bank.

On October 4, 1978, petitioners filed a petition for relief from
the trial court’s decision alleging (pp. 33-34, Records):

“x x x.

“III

“That respondents (petitioners) could not possibly have filed their
Answer to the Petition for Consolidation of Ownership and gone to trial for the
following reasons:

“1. Summons have (sic) been improperly served:

“a) The petition for Consolidation of Ownership
alleged that respondents (petitioners) therein is (sic) represented by one
Generoso Macoy, when there is NO such representative of the respondents
(petitioners);

“b) Not one of the Heirs of Dominga Tabora Vda.
de Macoy resides at 2004 Muñoz St., Paco, Manila and/or 1970-B Anak Bayan,
Paco, Manila as mentioned in the Petition;

“2. Not all the Heirs of Dominga Tabora Vda. de
Macoy were made party respondents.

“3. There are other
factors constituting fraud, mistake, accident or excusable negligence which
deprived the respondents (petitioners) of due process of law; ATTACHED HEREWITH
IS AN AFFIDAVIT OF ONE OF THE HEIRS OF DOMINGA TABORA VDA. DE MACOY.

“IV

“That this petition is being filed within sixty (60) days after the
respondents (petitioners) have learned of the aforesaid Decision and not more
than six (6) months after such judgment was entered;

“V

“That respondents (petitioners) have good and substantial defense
(sic) in this action, to wit:

1.   The instrument in question is not one of
Pacto de Retro but rather a Deed of Antichresis or the least an Equitable
Mortgage;

2.   The consideration is unconscionable;

3. There was tender of payment of the
redemption price, and in this connection, the respondents (petitioners) are
willing to deposit with the Clerk of Court the necessary amount to effect legal
redemption;

x x x.”

On October 19, 1978, finding the petition meritorious, the trial
court set aside its previous order and decision and granted new trial (pp.
40-41, Records). Consequently,
petitioners, through their representative Teopista Macoy de Zantua, filed their
answer to the petition of private respondents. They alleged that the document executed by the late Dominga Tabora Vda.
de Macoy was not a sale with a right to repurchase but an equitable mortgage or
a contract of antichresis. They alleged
further that even assuming it to be a sale with a right to repurchase they
nevertheless had thirty (30) days from final judgment under Article 1606 of the
Civil Code within which to redeem the land. During the trial, the trial court, upon motion of petitioners, ordered
the Register of Deeds to immediately restore TCT No. T-7520 in the Registry
office (pp. 215-216, Records).

On July 16, 1986, judgment was rendered by the trial court in
favor of petitioners. It declared the
document to be in fact an equitable mortgage on the basis of its findings that
the consideration thereof was inadequate and the taxes on the land continued to
be paid under the name of Dominga Tabora Vda. de Macoy even up to 1977. It also found that petitioner Teopista Macoy
de Zantua offered to private respondents the amount of P6,000.00 in order to
repurchase the land but she was turned down, thus, she deposited said amount in
court on September 18, 1980. The
dispositive portion of its decision reads (pp. 243-244, Records):

“WHEREFORE, judgment is hereby rendered for the Heirs of Dominga
Tabora Vda. De Macoy who retains ownership of Lot 2032 covered by Transfer
Certificate of Title No. T-7520 of the Registry of Deeds of Camarines Norte by
automatic operation of law when payment of the obligation has been effected
when the amount of P6,000.00 was deposited with the Clerk of Court on September
18, 1980; to pay defendant-heir Teopista M. Zantua transportation expenses for
having gone to Daet from Manila and from Manila to Daet for hearings since 1978
up to 1986 in the sum of P7,000.00; likewise to pay an additional sum of
P14,000.00 representing attorney’s fees paid by defendant-heir Teopista M.
Zantua to her two (2) counsel; and finally the sum of P10,000.00 (as) moral,
punitive, exemplary and corrective damages.

“The Register of Deeds of Camarines Norte is hereby ordered to
cancel the annotation of the sale with pacto de retro dated December 28, 1970
upon Transfer Certificate of Title No. T-7520 on the ground that the repurchase
therein mentioned was effected legally on September 18, 1980, in spite of
petitioners’ refusal to allow defendants-heirs to exercise their right to
repurchase reserved to their mother Dominga Tabora Vda. de Macoy in the
document.

“With costs.

“Let copies of this Decision be served upon the Register of Deeds
of Daet, Camarines Norte, and the National land Titles and Deeds Registration
Administration, Ministry of Justice.

“SO ORDERED.”

From this judgment, private respondents appealed to public
respondent Court of Appeals. On
September 4, 1990, respondent court reversed the trial court’s decision, the
dispositive portion of which, reads (p. 36,
Rollo):

“WHEREFORE, the decision appealed from is REVERSED and judgment is
hereby rendered granting consolidation of ownership in favor of the
plaintiff-appellants and the Register of Deeds of Camarines Norte is ordered to cancel TCT No. T-2520
(sic) in the name of Dominga Tabora Vda. de Macoy and issue a new one in the
names of the plaintiff-appellants.

“Costs against the defendant-appellees.

“SO ORDERED.”

On October 17, 1990, the motion for
reconsideration was denied for lack of merit (p. 53, Rollo). Hence, the present petition.

Petitioners raise the following errors committed by respondent
court:

1)  it set aside their petition for relief from
judgment; and

2)  it held that the transaction in question was a
pacto de retro sale.

They asseverate that the finding of the
trial court relative to the invalidity of the service of summons on them is
vital and must be respected. The
respondent court should have treated their petition for relief from judgment as
an action for annulment of judgment since it was aimed at annulling the trial court’s
decision. Even assuming that the
transaction was pacto de retro, they have validly
exercised their right to repurchase the land. The consideration in the transaction was inadequate because when the
land was acquired for P11,000.00 in
1964, its market value had increased considerably at the time of the execution
of the document in 1970. In fact,
private respondents had obtained a loan for P25,000.00 using it as
collateral. The fact that in the
receipts of payment there is no showing that the real estate taxes were paid by
private respondents, as is usually written across the body of the receipts if
so paid by a person other than the owner named thereon, shows that Dominga
Tabora Vda. de Macoy paid the taxes during the period of repurchase.

On the other hand, private respondents contend that the summons
served on petitioner Teopista Macoy de Zantua, through her sister petitioner
Miriam Macoy, who both live in the same address, is valid. Article 1606, paragraph 3, of the Civil Code
is not applicable, as held in the case of Felicen, Sr., et al. v. Orias, et
al., G.R. No. L-33182, December 18, 1987, 156 SCRA 586. There are absolutely no indications from
which to draw the conclusion that the transaction is one of equitable
mortgage. The price of the sale, which
is more than one half (1/2) of the acquisition cost is not inadequate. Private respondents have paid the real
estate taxes from the time they took possession thereof up to 1977.

The trial court, in setting aside its January 16, 1978 order and
February 1, 1978 decision, rationalized (pp. 40-41, Records):

“x x x since Miriam is not the representative of the heirs of the
late Dominga Tabora Vda. de Macoy, her receipt if (sic) the summons, if at all,
is valid only in so far (sic) as it concerns her. It cannot bind the other heirs of the deceased Dominga Tabora Vda.
de Macoy. Consequently, since no valid
service of summons was effected on Teopista Macoy de Zantua, Julieta,
Francisco, Rufina and Herson Macoy, the order of this Court declaring them in default
and the consequent judgment against them is null and void for lack of due
process.

“The fact that the six-month period has already expired under Rule
38 of the Rules of Court is of no moment because a void judgment never acquires
finality. It can be attacked anytime.”

The respondent court viewed the validity of the service of
summons and the propriety of the petition for relief from judgment
differently. According to it (pp.
34-35, Rollo):

“x x x. For the fact is
that Miriam is a sister of Teopista Macoy and one of the heirs of Dominga
Tabora Vda. de Macoy. x x x.

“x x x, Teopista Macoy admitted that she learned of the judgment
rendered on February 1, 1978 in February 1978 (TSN, p. 16, Nov. 5, 1980) but
her petition was filed only on October 4, 1978. x x x.”

We adopt the
finding of the trial court that no valid service of summons was effected on the
other petitioners. Therefore, its
February 1, 1978 decision is void. Service of summons upon the defendant is the means by which the court
acquires jurisdiction over his person. This process is for the benefit of the defendant, and is intended to
afford the latter an opportunity to be heard on the claim against him (Keister
v. Navarro, G.R. No. L-29067, May 31, 1977, 77 SCRA 209). In the absence of such service or a valid
waiver thereof, the trial and judgment are void (Venturanza, et al. v. Hon.
Court of Appeals, et al., G.R. No. 77760, December 11, 1987, 156 SCRA 305;
Filmerco Commercial Co., Inc., et al. v. Hon. Intermediate Appellate Court,
G.R. No. 70661, April 9, 1987, 149 SCRA 193; Consolidated Plywood Industries,
Inc. v. Breva, et al., G.R. No. 82811, October 18, 1988, 166 SCRA 589; Phil.
National Construction Corp. v. Ferrer-Calleja, et al., G.R. No. 80485, November
11, 1988, 167 SCRA 294).

There is no debate that the petition for relief from judgment was
filed by petitioners beyond the reglementary period prescribed by Rule 38,
Section 3, of the Rules of Court. However, inasmuch as the petition was aimed at annulling the February 1,
1978 decision based on lack of jurisdiction over petitioners (p. 34, Records),
We treat it as an action for annulment of judgment. And, an action to declare the nullity of a void judgment does not
prescribe (Ang Lam v. Rosillosa and Santiago, 86 Phil. 447; Paluwagan ng Bayan
Savings Bank v. King, et al., G.R. No. 78252, April 12, 1989, 172 SCRA 60).

The foregoing discussions lead Us to no other conclusion that the
trial court was correct in setting aside its February 1, 1978 decision. Yet, We regret that Our favorable action on
this petition ends here. After a
judicious consideration of the merits of this case, We find that respondent
court did not commit any reversible error in granting consolidation of
ownership in favor of private respondents.

We quote hereunder the body of the questioned document (p. 4,
Records):

“DAPAT MALAMAN NG SINOMANG MAKABABASA
NITO:

“Itong PABILIHANG MABIBILI-MULI (Pacto-­de-retro Sale) na ito ay
ginawa nina: DOMINGA TABORA VDA. DE
MACOY, may sapat na gulang, balo, naninirahan sa 2004 Muñoz St., Paco, Manila,
na tatawagin sa kasulatang ito na NAGPABILI, at JESUS F. REDILLAS, may sapat na gulang, Pilipino, asawa ni Anatalia
Elon, naninirahan sa Daet, Camarines Norte, na tatawagin sa kasulatang ito na
BUMILI.

“NAGPAPATOTOO

“Na ang NAGPABILI alang-alang sa halagang ANIM NA LIBONG PISO
(P6,000.00), salaping Pilipinok (sic), na (sa) kaniyang tinanggap ng (sic)
buong kasiyahan galing sa BUMILI, sa pamamagitan ng kasulatang ito ay kaniyang
ipinagbibili, inililipat at ipinauubaya sa paraang bilihang-mabibili muli
(pacto-de-retro) sa nasabing BUMILI, sa kaniyang mañga tagapagmana at
lilipatan, ang lahat niyang pagkamayari at pakialam sa sumusunod na parsolang
lupain:

‘x x x.’

“at ang nasabing lupain ay pinanagutan ko (WARRANTY)
na walang ano mang lingatong o pagkakautang kahi’t kanino mang tao.

“Datapwa’t kong (sic) ako, ang NAGPABILI, ay matubos ko ang
nasabing lupain sa datinghalagang (sic) P6,000.00 pagkalipas ng tatlong taon
simula ngayon – ñguni’t hindi naman lilipas sa limang taon mula ng (sic)
lagdaan ang kasulatang ito – ang usapang ito ay mawawalan ng bisa at kabuluhan;
ñguni’t kung hindi ko naman matubos ito sa taning napanahon na aming
pinagkasunduan, ang dokumentong ito ay magkakaroon ng bisa alinsunod  sa ipinaguutos ng
Batas. Samakatuwid, ang lupaing ito ay
matutubos lamang ng NAGPABILI sa BUMILI simulang Desyembre 29, 1973 at
hindi lilipas sa Desyembre 29, 1975.

“x x x.”

Under Article 1602 of the Civil Code, the
contract shall be presumed to be an equitable mortgage, in any of the following
cases:

(1)  When the price of a sale with right to
repurchase is unusually inadequate;

(2)  When the vendor remains in possession as
lessee or otherwise;

(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;

(4)  When the purchaser retains for himself a part
of the purchase price;

(5)  When the vendor binds himself to pay the taxes
on the thing sold;

(6)  In any other case where it may be fairly
inferred that the real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other obligation.

Based on the evidence on record, none of the aforementioned
instances is present in this case. Rather, evident manifestations of a genuine sale with right to
repurchase exist. The price of the sale
is not unusually inadequate. The price
fixed in a pacto de retro sale is not necessarily the true
value of the land sold (De Ocampo, et al. v. Lim, 38 Phil. 579). The reason is that the vendor has the right
to repurchase the land. The practice is
to fix a relatively reduced price (but not a grossly inadequate one) in order
to afford the vendor a retro every facility to redeem the land, unlike
in an absolute sale where the vendor, in permanently giving away his property,
tries to get, as compensation, its real value (Feliciano v. Limjuco, et al., 41
Phil. 147; Claridad v. Novella, 105 Phil. 756; Vda. de Lacson, et al. v.
Granada, et al., 111 Phil. 477; Amigo, et al. v. Teves, 96 Phil. 252). Dominga Tabora Vda. de Macoy did not bind
herself to pay the real estate taxes on the land (see Vda. de Zulueta v.
Octaviano, et al., G.R. No. 55350, March 28, 1983, 121 SCRA 314). There is not even any proof that she paid
the real estate taxes thereon since the time of the sale. On the contrary, Exhibit “E” (p. 31,
Records) shows that private respondent Anatalia Elon paid the real estate taxes
thereon for the calendar years
1974-1977. Inasmuch as the document is
plainly a pacto de retro sale, it cannot be considered a
loan with mortgage (International Banking Corporation v. Martinez, et al., 10
Phil. 252). We reiterate that the
contract is the law between the parties. When the words of a contract are clear and readily understandable, there
is no room for construction (Dihiansan, et al. v. Court of Appeals, et al.,
G.R. No. L-49539, Sept. 14, 1987, 153 SCRA 712). The freedom of contract must be maintained and respected.

Article 1606, paragraph 3, of the Civil Code provides that:

However, the vendor may still exercise the right to repurchase
within thirty days from the time final judgment was rendered in a civil action
on the basis that the contract was a
true sale with right to repurchase.

Petitioners
invoke this provision as an alternative legal remedy in the event that the
document be finally declared a pacto de retro sale. But Our query is — can
they avail of this provision? The case
of Felicen, Sr., et al. v. Orias, et al. (supra), which was cited by
private respondents, supplies the answer. We were distinct in Our pronouncement therein that (at pp. 589-591):

“The application of the third paragraph of Article 1606 is
predicated upon the bona fides of the vendor a retro. It must appear that there was a belief on his part, founded on
facts attendant upon the execution of the sale with pacto de retro, honestly
and sincerely entertained, that the agreement was in reality a mortgage, one
not intended to affect the title to the property ostensibly sold, but merely to give it as security for a
loan or other obligation. In that
event, if the matter of the real nature of the contract is submitted for
judicial resolution, the application of the rule is meet and proper: that the vendor a retro be allowed to
repurchase the property sold within 30 days from rendition of final judgment
declaring the contract to be a true sale with right to repurchase. Conversely, if it should appear that the
parties’ agreement was really one of sale–transferring ownership to the
vendee, but accompanied by a reservation to the vendor of the right to
repurchase the property–and there are no circumstances that may reasonably be
accepted as generating some honest doubt as to the parties’ intention, the
proviso is inapplicable. The reason is
quite obvious. If the rule were
otherwise, it would be within the power of every vendor a retro to set at
naught a pacto de retro, or resurrect an expired right of repurchase, by simply
instituting an action to reform the contract–known to him to be in truth a
sale with pacto de retro–into an equitable mortgage. As postulated by the petitioner, ‘to allow herein private
respondents to repurchase the property by applying said paragraph x x to the case at bar despite the
fact that the stipulated redemption period had already long expired when they
instituted the present action, would in effect alter or modify the stipulation in the contract as to the definite and specific
limitation of the period for repurchase (2 years from date of sale or only
until June 25, 1958) thereby not simply increasing but in reality resuscitating
the expired right to repurchase x x and likewise the already terminated and extinguished obligation to
resell by herein petitioner.’ The rule would thus be made a tool to spawn,
protect and even reward fraud and bad faith, a situation surely never
contemplated or intended by the law.

“This Court has already had occasion to rule on the proper
interpretation of the provision in question. In Adorable v. Inacala, where the proofs established that there could be
no honest doubt as to the parties’ intention, that the transaction was clearly
and definitely a sale with pacto de retro, the Court adjudged the vender a
retro not to be entitled to the benefit
of the third paragraph of Article 1606.”

ACCORDINGLY, the petition is hereby DENIED. The decision of the Court of Appeals dated
September 4, 1990 and its resolution dated October 17, 1990 are hereby
AFFIRMED.

SO ORDERED.

Narvasa, C.J., (Chairman), Cruz, and
Grino-Aquino, JJ., concur.