Alojado vs. Lim Siongco

A contract is a sale with the right of repurchase, not an antichresis, where its terms convey land and reserve to the vendor the right to repurchase and do not give the creditor the right to receive fruits with the obligation to apply them to interest and principal; failure to redeem within the ten-year maximum period under Article 1508 of the Civil Code consolidates title in the purchaser, and the nullity of the redemption stipulation does not invalidate the sale.

Juana Mabaquiao was the original owner of the land described in the complaint. Nicolas Alegata acquired it from her, and after his death the property passed to his heirs and then through Lim Ponso & Co. to Lim Siongco and Lim Kingko. After Mabaquiao's death, Ambrosio T. Alojado was appointed administrator of her intestate estate. The statutory backdrop is Article 1508 of the Civil Code, which limits the period of redemption in a sale with the right of repurchase.

On October 12, 1907, Juana Mabaquiao sold the land described in the complaint to Nicolas Alegata for P7,744. After Alegata's death, proceedings for the settlement of his estate were instituted, and on October 23, 1913, his property, including the land purchased from Mabaquiao, was adjudicated to Lim Kang Sang and Lim Eng Teeng, his only heirs. On November 11, 1913, they sold the land to Lim Ponso & Co., with the right to repurchase for one year; the period expired without the right having been exercised. On February 15, 1918, Lim Ponso & Co. transferred the land unconditionally to Lim Siongco and Lim Kingko.

Upon Juana Mabaquiao's death, proceedings for the settlement of her intestate estate were instituted, and Ambrosio T. Alojado was appointed administrator. In January 1922, fifteen years after the 1907 contract, Alojado, in that capacity, brought this action against Lim Sionco, Lim Kingko, and Lim Ponso & Co., praying that he be declared absolute owner of the land with its improvements, that the defendants restore and respect his right of ownership, possession, and usufruct, and that other pronouncements be made as prayed for in the complaint.

At trial, Eulogia Espanola, Juana Mabaquiao's granddaughter, testified that she was present when the contract between Mabaquiao and Alegata was entered into and that the agreement was that Mabaquiao or any of her heirs might recover possession of the land at any time upon payment of P7,744, while the land remained in Alegata's possession with the obligation to deliver one-fifth of the products to Mabaquiao. Vicente Gomez, who also stated that he was present when the contract was entered into, contradicted Eulogia's testimony and further stated that she was not present at that time.

The trial court absolved the defendants from the complaint, and the plaintiff appealed from that judgment. The contract itself fixed the period for the exercise of the right of redemption until Juana Mabaquiao or her heirs had the means to pay.

• Nature of Contract: Petitioner-appellant contended that the contract executed by Juana Mabaquiao with Nicolas Alegata on October 12, 1907 was not a contract of sale with the right to repurchase but a contract of antichresis, invoking De la Vega vs. Ballilos (34 Phil., 683).
• Conflict with Nature of Sale with Right of Repurchase: Petitioner argued that because it was never the intention of the parties that, after a certain period, the land could not be repurchased by the vendor, the contract could not be one of sale with the right of repurchase, as this conflicts with the nature of that contract, the essential feature of which is the purchaser's right to consolidate title immediately after the redemption period has passed.
• Effect of Nullity of Redemption: Petitioner maintained that if the right of redemption in this case is considered null after ten years, that nullity must likewise affect the sale itself.

• Nature of Contract: Whether the contract executed by Juana Mabaquiao with Nicolas Alegata on October 12, 1907 was a contract of antichresis rather than a sale with the right of repurchase.
• Consolidation of Title: Whether title to the land conveyed by Juana Mabaquiao consolidated in Nicolas Alegata or his heirs because the right of redemption was not exercised within the applicable period.
• Effect of Nullity of Redemption Stipulation: Whether the nullity of the right of redemption after ten years affected the validity of the sale itself.
• Alteration of Written Terms: Whether the testimony of Eulogia Espanola justified altering the clear terms of the written contract as a sale.

• Nature of Contract: No. The contract is clearly a sale with the right of repurchase; antichresis requires the creditor to acquire the right to receive the fruits of the debtor's property with the obligation to apply them to interest and then to principal, which is absent.
• Consolidation of Title: Yes. Under Article 1508 of the Civil Code, if no redemption period is fixed it lasts four years, and if fixed it cannot exceed ten years; failure to redeem within ten years consolidated title in Nicolas Alegata or his heirs.
• Effect of Nullity of Redemption Stipulation: No. The stipulation to repurchase is accidental to a sale; its nullity cannot affect the sale itself, which could be made without the stipulation.
• Alteration of Written Terms: No. The evidence was not of such a character as to justify altering the clear terms of the document expressing a contract of sale.

• Nature of Contract: The contract speaks unequivocally of a sale and the conveyance of land with the right to repurchase, and its character is that of a sale with the right of repurchase. Although the contract is defective in wording, especially as to the period for exercising the right, it appears as a whole that the parties intended that the vendor could repurchase the land without delay when she had the means to pay. Antichresis is characterized by the creditor acquiring the right to receive the fruits of the debtor's property with the obligation to apply them to interest, if any is due, and then to the principal of the credit; no such character appears in the contract. De la Vega vs. Ballilos is not applicable because there the contract, though called a mortgage, stipulated that the debtor assigned and transferred ownership and possession of the land to the creditor for management and enjoyment as profit from the amount mortgaged, an agreement absent here.
• Consolidation of Title: The action was brought in January 1922, fifteen years after the contract was entered into. The contract fixed the period for exercising the right of redemption until Juana Mabaquiao or her heirs had the means. Whether or not this is considered a period, the title transmitted to Nicolas Alegata was consolidated. Under Article 1508 of the Civil Code, when no period of redemption is fixed it lasts four years, and if fixed it cannot exceed ten years. Because the right of redemption was not exercised within the ten-year period, the title of Nicolas Alegata or his heirs was consolidated by that fact alone.
• Effect of Nullity of Redemption Stipulation: Petitioner argued that because the parties never intended that the land could not be repurchased after a certain period, the contract could not be a sale with the right of repurchase, since that would conflict with the purchaser's essential right to consolidate title after the redemption period; petitioner further argued that if the right of redemption is null after ten years, the nullity must affect the sale itself. These questions were resolved in Yadao vs. Yadao, where the contract allowed the vendor to repurchase any time he had the money but not after ten years; after the period lapsed, the sale was considered valid and the title acquired under it consolidated, notwithstanding the declaration that the right of redemption after ten years was null. The stipulation to repurchase is accidental to a sale and may be made at the will of the parties; an absolute sale may be made without it. If the stipulation is made and declared null, its nullity cannot affect the sale, since the sale might have been entered into without the stipulation.
• Alteration of Written Terms: Eulogia Espanola testified that the real agreement allowed Mabaquiao or her heirs to recover possession at any time upon payment of P7,744, with Alegata remaining in possession and delivering one-fifth of the products. Vicente Gomez contradicted her testimony and stated that she was not present when the contract was entered into. The evidence was not of such a character as to justify altering the clear terms of the document expressing a contract of sale.

• Sale with Right of Repurchase vs. Antichresis — A contract of antichresis is characterized by the creditor acquiring the right to receive the fruits of the debtor's property with the obligation to apply them to the payment of interest, if any, and then to the principal of the credit. Where the contract instead conveys land and reserves to the vendor the right to repurchase, without any such fruit-application obligation, it is a sale with the right of repurchase, not an antichresis. The Court applied this by examining the terms of the 1907 contract and finding no antichresis character.
• Article 1508 Redemption Period and Consolidation of Title — Under Article 1508 of the Civil Code, when no period of redemption is fixed it shall last four years, and if fixed it shall not exceed ten years. Failure to exercise the right of redemption within the ten-year maximum period consolidates title in the purchaser. The Court applied this because the action was brought fifteen years after the contract and the right had not been exercised within ten years.
• Accidental Nature of the Redemption Stipulation — The stipulation to repurchase is accidental to a sale and may be made at the will of the parties; an absolute sale may be made without it. If the stipulation is made and declared null, its nullity cannot affect the sale itself. The Court applied this to hold that even if the right of redemption after ten years was null, the sale remained valid and title consolidated.
• Clear Terms of a Written Contract — Evidence of an alleged oral agreement is insufficient to alter the clear terms of a written contract where the testimony is contradicted and not of such a character as to justify the alteration. The Court applied this in rejecting Eulogia Espanola's testimony as a basis for changing the written contract of sale.

• "What characterizes a contract or 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 interests, if any is due, and then to the principal of his credit." — This passage defines the essential character of antichresis and is the basis for rejecting petitioner's claim that the 1907 contract was an antichresis.
• "According to article 1508 of the Civil Code, when no period of redemption is fixed it shall last four years, and it is fixed, it shall not exceed ten years." — This states the statutory redemption period applied to consolidate title in the purchaser after the right was not exercised within ten years.
• "The stipulation to repurchase is accidental to a sale and may be made at the will of the parties. A contract of absolute sale may be made without this stipulation. It seems logical that if this stipulation is made and it is declared, null, its nullity cannot affect the sale first since the latter might be entered into without said stipulation." — This is the ratio for holding that the nullity of the redemption stipulation does not invalidate the sale itself.
• "The evidence is of such a character as not to justify in any manner the alteration of the clear terms of the document in the sentence that it expresses a contract of sale." — This passage explains why the oral testimony of Eulogia Espanola could not change the written contract's character as a sale.

• De la Vega vs. Ballilos, 34 Phil., 683 — Invoked by petitioner but distinguished. The contract there was called a mortgage but was held to be an antichresis because it stipulated that the debtor assigned and transferred ownership and possession of the land to the creditor for management and enjoyment as profit from the amount mortgaged; no such stipulation existed in the instant case.
• Yadao vs. Yadao, 20 Phil., 260 — Controlling precedent. It resolved the same questions: where the contract allowed repurchase any time the vendor had money but not after ten years, and the right was not exercised, the sale was considered valid and the title acquired under it consolidated, notwithstanding the declaration that the right of redemption after ten years was null.

• Article 1508, Civil Code — Provides that when no period of redemption is fixed it shall last four years, and if fixed it shall not exceed ten years. Applied because the right of redemption was not exercised within ten years, so the title of Nicolas Alegata or his heirs was consolidated.

Johnson, Street, Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ. concur.