David vs. David

In a sale with right to repurchase (pacto de retro), title and ownership are immediately vested in the vendee subject to the resolutory condition of repurchase by the vendor within the stipulated period; the right of repurchase is exercised not by mere intent but by payment or valid tender of the full redemption price within the period, and the deposit of sale proceeds to the vendee's account coupled with the vendee's partial return of the properties and excess funds constitutes sufficient exercise of such right.

Eduardo C. David and his brother Edwin, heirs to certain properties including a parcel of land in Baguio City and two International CO 9670 Truck Tractors with trailers, entered into a deed of sale with assumption of mortgage with their first cousin and former business partner Roberto R. David on July 7, 1995. The agreement conveyed the properties for ₱6,000,000.00, with ₱2,000,000.00 payable to the sellers and ₱4,000,000.00 to be assumed as mortgage debt to the Development Bank of the Philippines. The deed reserved to the vendors the right to repurchase the properties within three years at the agreed purchase price plus 12% interest per annum.

• The Deed of Sale with Assumption of Mortgage: On July 7, 1995, Eduardo C. David and his brother Edwin, acting for themselves and their co-heirs, executed a deed of sale with assumption of mortgage in favor of Roberto R. David covering a parcel of land in Baguio City (with improvements) and two units of International CO 9670 Truck Tractor with Mi-Bed Trailers. The consideration was ₱6,000,000.00, payable as ₱2,000,000.00 to the vendors and ₱4,000,000.00 to the Development Bank of the Philippines (DBP) to settle the mortgage obligation. The deed reserved to the vendors the right to repurchase the properties within three years from execution at the purchase price plus 12% interest per annum.
• The Memorandum of Agreement with Spouses Go: In April 1997, Roberto and Edwin executed a Memorandum of Agreement (MOA) with Spouses Marquez and Soledad Go for the sale of the Baguio City lot for ₱10,000,000.00. To save on taxes and because the property was mortgaged to DBP and previously sold to Roberto, the MOA stipulated that Edwin would execute the deed of absolute sale in favor of the Spouses Go in lieu of Roberto.
• Payment and Partial Return: The Spouses Go deposited ₱10,000,000.00 to Roberto's account. Roberto subsequently gave Eduardo ₱2,800,000.00 and returned one truck tractor and trailer. Eduardo demanded the return of the remaining truck tractor and trailer, which Roberto refused.
• The Replevin Suit: Eduardo instituted a replevin suit against Roberto, alleging exercise of the right to repurchase and entitlement to possession of the remaining vehicle and trailer. Roberto countered that the MOA had extinguished the original deed of sale by novation, negating the right to repurchase.

• Exercise of Right to Repurchase: Petitioner argued that the respondent failed to validly exercise the right to repurchase under the deed of sale, asserting that there was no express exercise of such right within the stipulated period.
• Novation: Petitioner maintained that the execution of the MOA and the subsequent sale of the Baguio City lot to the Spouses Go extinguished the obligations under the original deed of sale by novation, thereby nullifying the right to repurchase.

• Compliance with Redemption Requirements: Respondent argued that he had complied with the conditions for repurchase under Article 1616 of the Civil Code, as found by both the RTC and CA. The deposit of the ₱10,000,000.00 purchase price by the Spouses Go into petitioner's account constituted payment of the redemption price, and petitioner's subsequent return of ₱2,800,000.00 and one vehicle constituted tacit acknowledgment of the repurchase.
• No Novation: Respondent contended that the MOA was consistent with the original deed of sale and did not constitute novation, as the parties did not intend to extinguish the original obligation but merely to facilitate the sale to third parties to generate funds for the redemption.

• Exercise of Right to Repurchase: Whether Eduardo C. David validly exercised the right to repurchase under the deed of sale with assumption of mortgage.
• Novation: Whether the execution of the Memorandum of Agreement and sale to third persons constituted novation that extinguished the original deed of sale.
• Scope of Review: Whether the Supreme Court could disturb the factual findings of the lower courts in a petition for review on certiorari under Rule 45.

• Exercise of Right to Repurchase: The right to repurchase was effectively exercised. Under Article 1616 of the Civil Code, the vendor may exercise the right of redemption by returning the price of the sale, expenses of the contract, legitimate payments made by reason of the sale, and necessary and useful expenses. The deposit by the Spouses Go of ₱10,000,000.00 into petitioner's account, from which petitioner deducted the repurchase price (₱2,000,000.00 plus interest and expenses) and remitted the excess ₱2,800,000.00 to respondent, coupled with petitioner's return of one truck tractor and trailer, constituted sufficient tender of payment and exercise of the right to repurchase. Following Metropolitan Bank and Trust Company v. Tan, redemption is not a matter of intent but of payment or valid tender of the full redemption price within the period.
• Novation: No novation occurred. Novation requires a previous valid obligation, agreement to a new contract, extinguishment of the old contract, and a valid new contract. The MOA was merely a mechanism to sell the property to third parties to generate funds for the redemption and was consistent with the deed of sale. The lower courts correctly found that the parties did not intend to extinguish the original agreement.
• Scope of Review: The factual findings of the RTC, as affirmed by the CA, are binding on the Supreme Court in a petition for review on certiorari limited to questions of law. Whether the conditions for repurchase were satisfied is a question of fact that had been adequately determined by the lower courts.

• Sale with Right to Repurchase (Pacto de Retro): In a sale with right to repurchase, title and ownership of the property sold are immediately vested in the vendee, subject to the resolutory condition of repurchase by the vendor within the stipulated period. Upon compliance with the conditions for repurchase, ownership reverts to the vendor.
• Exercise of Right of Repurchase: The exercise of the right to repurchase is not merely a matter of intent but requires payment or valid tender of the full redemption price within the period allowed. A sincere tender of payment is sufficient to show the exercise of the right, constituting the seller's manifestation of his desire to repurchase with the offer of immediate performance.
• Requisites of Novation: Novation requires: (a) a previous valid obligation; (b) agreement of the parties to a new contract; (c) extinguishment of the old contract; and (d) a valid new contract. The determination of whether novation occurred involves questions of fact.
• Binding Nature of Factual Findings in Rule 45: In a petition for review on certiorari under Rule 45, which is limited to questions of law, the factual findings of the trial court when affirmed by the Court of Appeals are binding on the Supreme Court.

• "In a sale with right to repurchase, title and ownership of the property sold are immediately vested in the vendee, subject to the resolutory condition of repurchase by the vendor within the stipulated period." — Opening statement establishing the nature of conventional redemption.
• "Redemption within the period allowed by law is not a matter of intent but of payment or valid tender of the full redemption price within the period." — Principle governing the manner of exercising the right to repurchase.
• "A sincere tender of payment is sufficient to show the exercise of the right to repurchase." — Standard for determining valid exercise of redemption rights.
• "The issue of novation involves a question of fact, as it necessarily requires the factual determination of the existence of the various requisites of novation." — Classification of novation issues for purposes of appellate review.

• Metropolitan Bank and Trust Company v. Tan, G.R. No. 178449, October 17, 2008 — Cited for the principle that redemption is not a matter of intent but of payment or valid tender of the full redemption price within the period.
• Legaspi v. Court of Appeals, G.R. No. L-45510, May 27, 1986 — Cited for the rule that a sincere tender of payment is sufficient to show the exercise of the right to repurchase.
• Narvaez v. Alciso, G.R. No. 165907, July 27, 2009 — Cited for the binding nature of factual findings of the trial court when affirmed by the CA in petitions for review on certiorari limited to questions of law.
• Magdiwang Realty Corp. v. The Manila Banking Corp., G.R. No. 195592, September 5, 2012 — Cited for the requisites of novation.
• Lumayag v. Heirs of Jacinto Nemeño, G.R. No. 162112, July 3, 2007 — Cited for the nature of title in sales with right to repurchase.

• Article 1601, Civil Code — Defines conventional redemption as the vendor's reserved right to repurchase the thing sold, with the obligation to comply with Article 1616 and other agreed stipulations.
• Article 1616, Civil Code — Specifies that the vendor cannot avail himself of the right of repurchase without returning to the vendee: (1) the price of the sale; (2) the expenses of the contract and other legitimate payments made by reason of the sale; and (3) the necessary and useful expenses made on the thing sold.

Maria Lourdes P. A. Sereno (Chief Justice), Teresita J. Leonardo-De Castro, Martin S. Villarama, Jr., and Bienvenido L. Reyes.