Catangcatang vs. Legayada

Non-payment of a portion of the purchase price in a sale with pacto de retro does not suspend the running of the stipulated redemption period where the deed contains no such condition, and the vendor a retro must effect redemption within the period by an actual and simultaneous tender of payment or by consignation with the court; failure to do so entitles the vendee a retro to consolidation of ownership.

Salvacion A. Catangcatang (petitioner) was the vendee a retro and Paulino Legayada (respondent) was the vendor a retro in a deed of sale with right of repurchase executed on May 19, 1952, over a parcel of land in Lambunao, Iloilo. The deed stipulated a total consideration of P1,400, of which P1,200 was paid upon execution and P200 was covered by a promissory note payable at a later date, with a five-year redemption period running from the date of the deed. The relationship between the parties was defined solely by this contractual arrangement, and the dispute arose from the interplay between the unpaid balance, the area discrepancy in the land delivered, and the vendor's attempt to repurchase within the redemption period.

On May 19, 1952, Paulino Legayada executed a deed of sale with pacto de retro in favor of Salvacion A. Catangcatang over a parcel of land situated in Lambunao, Iloilo, with a stated area of 8.8272 hectares, for a total consideration of P1,400. Of this amount, P1,200 was paid upon execution of the deed, and the balance of P200, covered by a promissory note, was agreed to be payable at a later date. The deed stipulated a five-year period of redemption from the date of its execution, providing that if the vendor paid the purchase price together with expenses of repurchase within that period, the sale would be annulled; otherwise, it would become definite and irrevocable.

Subsequently, Catangcatang discovered that the land actually delivered to her was only 5.0779 hectares, a deficiency of more than three hectares from the stated area. On January 22, 1957, she instituted Civil Case No. 2635 against Legayada in the Court of First Instance of Iloilo, seeking recovery of the area allegedly withheld. In his answer, Legayada filed a counterclaim seeking rescission of the deed on the ground that Catangcatang had failed to pay the P200 balance on the due date. On May 10, 1957, while Civil Case No. 2635 was still pending, Legayada forcibly took back possession of the land from Catangcatang. On the same date, his counsel allegedly wrote a letter informing Catangcatang that the redemption money was already in counsel's hands, but the letter never reached her and was returned, reportedly because she could not be found at her former residence in Lambunao.

On June 17, 1957, the Court of First Instance dismissed the complaint in Civil Case No. 2635, finding that the land was described by metes and bounds per Tax Declaration No. 4156 and had an actual area of 5.0779 hectares notwithstanding the stated area of 8.8272 hectares. The counterclaim was likewise dismissed. The decision became final, neither party having appealed. On May 19, 1957, the five-year redemption period expired. On June 29, 1957, Catangcatang filed Civil Case No. 4464 for consolidation of title and restoration of possession. In his answer, Legayada admitted executing the deed but denied that he failed to repurchase, claiming that the redemption amount was already deposited with his counsel.

The Court of First Instance found that Legayada had not effected repurchase within the stipulated period and rendered judgment consolidating title in favor of Catangcatang, ordering Legayada to deliver possession of the land plus 100 cavanes of palay or their value at P10.00 per cavan for every year from May 10, 1957 until actual delivery, with costs. Legayada appealed to the Court of Appeals, which reversed the trial court. The Court of Appeals held that the failure to pay the P200 balance suspended the running of the redemption period, so that the five-year period never commenced to run, and accordingly dismissed the petition for consolidation of title while ordering Legayada to pay Catangcatang P1,079.55 (P1,200 less P120.45 in land taxes unpaid by Catangcatang during her possession). Catangcatang then elevated the case to the Supreme Court by way of certiorari.

• Suspension of Redemption Period: Petitioner contended that the Court of Appeals erred in holding that the failure to pay the remaining P200.00 suspended the running of the period for redemption, arguing that the sale was perfected upon consent and partial payment and that nothing in the deed conditioned the redemption period on full payment.
• Res Judicata: Petitioner argued that the P200.00 balance was now unenforceable by reason of res judicata, as it had been litigated and dismissed as a counterclaim in Civil Case No. 2635, whose judgment had become final.
• Reformation of Sale: Petitioner maintained that the decision in Civil Case No. 2635 operated in legal effect to reform the sale so as to make its actual consideration only P1,200.00, which was fully paid upon execution of the deed.
• Consolidation of Title: Petitioner argued that title to the land had consolidated in her favor by reason of respondent's failure to validly effect repurchase within the stipulated period.
• Affirmance of Trial Court: Petitioner asserted that the decision of the Court of First Instance of Iloilo should have been affirmed in toto.

• Suspension of Redemption Period: Respondent relied on the Court of Appeals' ruling that the failure to pay the P200.00 balance suspended the running of the redemption period, so that the five-year period never commenced to run.
• Valid Offer to Redeem: Respondent claimed that on May 10, 1957, he took possession of the property and his counsel wrote a letter to petitioner informing her that the redemption amount was already deposited with counsel, constituting a valid offer to redeem within the period.

• Suspension of Redemption Period: Whether the non-payment of the P200.00 balance of the purchase price suspended the running of the five-year period for repurchase stipulated in the deed.
• Res Judicata: Whether the issue of the unpaid P200.00 balance is barred by res judicata by virtue of the final judgment in Civil Case No. 2635, where it was raised as a counterclaim and dismissed.
• Valid Exercise of Redemption: Whether respondent validly effected redemption of the property within the stipulated period, entitling petitioner to consolidation of ownership.

• Suspension of Redemption Period: No. The sale was perfected upon consent and partial payment, and nothing in the deed conditioned the redemption period on full payment of the purchase price; the five-year period ran from the date of execution of the deed.
• Res Judicata: Yes. The P200.00 balance was litigated as a counterclaim in Civil Case No. 2635 and the decision dismissing both the complaint and counterclaim became final without appeal, barring relitigation of the issue.
• Valid Exercise of Redemption: No. Respondent's alleged offer to redeem, communicated through a letter that never reached petitioner, was unaccompanied by any actual and simultaneous tender of payment or consignation with the court, and was therefore insufficient to exercise the right of repurchase within the stipulated period.

• Suspension of Redemption Period: The sale was consummated upon the execution of the deed and delivery of the land to the vendee. It was a perfectly valid agreement, and non-payment of the balance could not suspend the efficacy of its provisions. The sale was perfected from the moment Legayada consented to sell and Catangcatang agreed to purchase for P1,400, with partial performance by both parties—P1,200 paid and possession delivered. Nothing in the deed indicated that the parties intended to suspend the running of the redemption period until full payment; on the contrary, the period was expressly agreed to be five years from the date of execution. The Court relied on Puato vs. Mendoza for the proposition that failure to pay part of the consideration does not suspend the contract's efficacy.

• Res Judicata: The P200.00 balance had been litigated in Civil Case No. 2635, where respondent presented it as a counterclaim seeking rescission of the deed. When the complaint was dismissed, the counterclaim was likewise dismissed, and the decision became final without either party appealing. The principle of res judicata therefore bars the reopening of this issue in the present proceedings, reinforcing the conclusion that the redemption period was not suspended by the unpaid balance.

• Valid Exercise of Redemption: Pursuant to Article 1616 of the Civil Code, the vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale and the expenses and legitimate payments made by reason of the sale. The records showed that on May 10, 1957, respondent took possession of the property without petitioner's knowledge. His counsel's letter informing petitioner that the redemption money was in counsel's possession never reached her and was returned, with respondent claiming she could not be found—a finding the trial court deemed unworthy of credence. No further effort to effect redemption was made. Respondent could have deposited the redemption amount with the court but did not. The Court held that a mere manifestation of desire to repurchase is insufficient; the statement of intention must be accompanied by an actual and simultaneous tender of payment, which constitutes the legal exercise of the right. Relying on Laserna vs. Javier & Cruz, Paez vs. Magno, Rivero vs. Rivero, and Rumbaoa vs. Arzaga, the Court held that where the vendee is absent, the vendor should file a suit and consign the redemption amount with the court. The redemption period having lapsed without valid redemption, petitioner was entitled to consolidation of ownership.

• Perfection of Sale with Pacto de Retro — A sale with right of repurchase is perfected upon the consent of the parties to sell and purchase for a determined price, coupled with partial performance (payment of a portion of the price and delivery of the property). Non-payment of a portion of the purchase price does not suspend the efficacy of the contract's provisions, including the stipulated redemption period, absent an express stipulation to that effect in the deed.

• Exercise of the Right of Repurchase — The right of repurchase must be exercised by an actual and simultaneous tender of payment to the vendee a retro; a mere statement of intention to redeem, unaccompanied by tender or consignation, is insufficient. Where the vendee is absent, the vendor may preserve his right by filing a suit against the vendee and consigning the redemption amount with the court. Consignation is not legally essential to preserve the right of redemption—a tender suffices—but the tender does not relieve the vendor of the obligation to pay the price.

• Res Judicata in Pacto de Retro Litigation — Where the unpaid balance of the purchase price has been litigated as a counterclaim in a prior case and the judgment dismissing both the complaint and counterclaim has become final, res judicata bars the relitigation of that issue in subsequent proceedings involving the same contract.

• "The sale was consummated upon the execution of the document and the delivery of the land subject matter thereof to the vendee, petitioner herein. It was a perfectly valid agreement, and the non-payment of the balance of the purchase price could not have the effect of suspending the efficacy of the provisions thereof." — This passage states the ratio decidendi on the first issue: that partial non-payment does not suspend the redemption period in the absence of an express stipulation.

• "In the exercise of the right to repurchase, it is not sufficient that the vendor a retro manifests his desire to repurchase. This statement of intention must be accompanied with an actual and simultaneous tender of payment which constitutes the legal exercise of the right to repurchase." — This defines the canonical formulation of the requirement for valid exercise of the right of repurchase, frequently cited in subsequent jurisprudence.

• "The vendor could and should have exercised his right of redemption against the vendee by filing a suit against him and making a consignation with the court of the amount due for the redemption." — This establishes the proper remedy available to the vendor a retro when the vendee is absent or cannot be located, preserving the right of redemption through judicial consignation.

• Puato vs. Mendoza, 64 Phil. 457 — Cited for the proposition that failure to pay part of the consideration of a contract does not suspend the efficacy of its provisions.
• Laserna vs. Javier & Cruz, 110 Phil. 172 — Cited for the rule that the right to repurchase requires an actual and simultaneous tender of payment, not merely a manifestation of intent.
• Paez vs. Magno, 83 Phil. 403 — Cited for the principle that while consignation is not necessary to preserve the right of redemption—a tender suffices—the tender does not relieve the vendor of the obligation to pay the price.
• Rivero vs. Rivero, 80 Phil. 802 — Cited for the rule that in case of the vendee's absence, the vendor may exercise redemption by filing suit and consigning the redemption amount with the court.
• Rumbaoa vs. Arzaga, 84 Phil. 812 — Cited for the principle that the vendor should deposit the full redemption amount in court when the amount is already due and payable, to fulfill his obligation and terminate the vendee's rights over the property.
• Villarosa vs. Villamor, 53 Phil. 350 — Cited by the Court of Appeals for the proposition that failure to pay the full purchase price suspends the running of the redemption period; the Supreme Court rejected this application.

• Article 1616, Civil Code of the Philippines — Provides that the vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, plus expenses of the contract and other legitimate payments made by reason of the sale, and necessary and useful expenses made on the thing sold. Applied to require respondent to tender the full redemption price as a condition for exercising his right of repurchase.

Fernando (Chairman), Barredo, Concepcion, Jr., and Santos, JJ., concurred.

• Aquino, J. — Justice Aquino dissented, voting to affirm the Court of Appeals with modification. He reasoned that the discrepancies in the transaction—failure of the vendee to pay the full P1,400 price and failure of the vendor to deliver the full 8.8 hectares sold—transformed the contract from a true pacto de retro sale into a loan secured by the delivery of the land to the creditor, constituting a sort of antichresis wherein the creditor's enjoyment of the land's fruits served as payment of interest on the loan. Under this view, the redemption period was properly suspended, and Legayada's attempted redemption on May 10, 1957 was timely. Justice Aquino would have affirmed the Court of Appeals but with the modification that Legayada should pay six percent interest on the net amount of P1,079.55 from May 11, 1957 until payment.