Dorado Vda. de Delfin vs. Dellota

A contract of sale with right of repurchase is not presumed to be an equitable mortgage solely based on the alleged inadequacy of the purchase price, because in a pacto de retro sale, the price need not equal the exact value of the thing sold absent corroborative evidence of gross inadequacy.

Dionisia Dorado Delfin was the registered owner of Lot No. 1213 in Panitan, Capiz. Over time, she alienated portions of the property: in 1929, she sold a 50,000-square-meter portion with a pacto de retro to spouses Ildefonso Dellota and Patricia Delfin, which she failed to redeem. In 1949, she sold another 50,000-square-meter portion to Gumersindo Deleña via a notarized "Deed of Sale with Right of Redemption" for P5,300.00, which she also never redeemed. In 1956, she executed a "Deed of Mortgage and Promise To Sell" over a 90,000-square-meter portion to respondent Salvador Dellota, without specifying whether it included the portion previously sold to Gumersindo.

• Original Ownership and 1929 Sale: Dionisia Dorado Delfin owned Lot No. 1213 (143,935 sq m). In 1929, she sold a 50,000 sq m portion with pacto de retro to spouses Ildefonso Dellota and Patricia Delfin, but failed to exercise her right of redemption.
• 1949 Sale to Gumersindo: In 1949, Dionisia sold another 50,000 sq m portion to Gumersindo Deleña for P5,300.00 via a notarized "Deed of Sale with Right of Redemption." She never redeemed this portion. Salvador Dellota leased this area from Gumersindo.
• 1956 Mortgage to Salvador: In 1956, Dionisia executed a "Deed of Mortgage and Promise To Sell" over a 90,000 sq m portion to Salvador Dellota, without specifying if it included the portion sold to Gumersindo.
• 1964 Complaint and Tax Payments: On June 8, 1964, Dionisia filed a complaint for recovery of possession and damages against Salvador Dellota. Records showed that real estate taxes from 1955 to 1963 were paid by Dionisia only on December 27, 1963, barely six months before filing the complaint.

• Equitable Mortgage: Petitioner argued that the 1949 Deed of Sale with Right of Redemption executed between Dionisia and Gumersindo was an equitable mortgage under Article 1602 of the Civil Code.
• Inadequacy of Price: Petitioner insisted that the P5,300.00 price for a five-hectare portion was grossly inadequate, demonstrating that the real intention of the parties was to secure a debt rather than to effect an absolute sale, invoking the ruling in Santos v. Court of Appeals.

• Validity of Pacto de Retro Sale: Respondent maintained that the 1949 contract was a true sale with right of repurchase, and ownership over the 50,000-square-meter portion had consolidated in Gumersindo's estate due to failure to redeem.
• Adequacy of Price: Respondent argued that the purchase price was not unusually inadequate, as the price in a pacto de retro sale need not reflect the exact value of the property, the vendor retaining the right to repurchase.

• Nature of the Contract: Whether the 1949 Deed of Sale with Right of Redemption is an equitable mortgage under Article 1602 of the Civil Code due to the alleged inadequacy of the purchase price.
• Prescription of Redemption: Whether petitioner's failure to redeem the property for 15 years bars her claim, even assuming the contract was an equitable mortgage.

• Nature of the Contract: The contract was not an equitable mortgage. In sales denominated as pacto de retro, the price agreed upon should not generally be considered the just value of the thing sold absent corroborative evidence, because the vendor's right to repurchase makes the exact price immaterial, and the vendee does not acquire the property irrevocably. Petitioner failed to prove that the P5,300.00 price in 1949 was unusually inadequate. There was no evidence that Dionisia did not understand the contract or was forced into it, and courts cannot extricate parties from bad bargains absent legal incompetence.
• Prescription of Redemption: Even assuming the contract was an equitable mortgage, the right to redeem had prescribed. From 1949 to the filing of the complaint in 1964, 15 years lapsed without redemption. Furthermore, tax receipts per se are not conclusive evidence of ownership, and the timing of the tax payments—made barely six months before filing the complaint—indicated they were paid in preparation for litigation rather than as an exercise of ownership or redemption.

• Equitable Mortgage (Article 1602, Civil Code) — A contract that, although lacking some formality, reveals the intention of the parties to charge real property as security for a debt. The essential requisites are: (1) the parties enter into what appears to be a contract of sale, and (2) their intention is to secure an existing debt by way of mortgage. The presence of even one of the circumstances enumerated in Art. 1602 suffices to convert a purported contract of sale into an equitable mortgage. However, alleged inadequacy of price in a pacto de retro sale does not automatically trigger this presumption absent corroborative evidence.
• Purchase Price in Pacto de Retro Sales — In sales denominated as pacto de retro, the price agreed upon should not generally be considered the just value of the thing sold, absent other corroborative evidence. The right to repurchase makes the exact price immaterial to the vendor, while the vendee does not acquire the thing irrevocably but pins his hope on the expectancy of acquiring it absolutely at a favorable price should the vendor fail to redeem.

• "In sales denominated as pacto de retro, the price agreed upon should not generally be considered as the just value of the thing sold, absent other corroborative evidence."
• "Courts are not guardians of persons who are not legally incompetent."
• "Settled is the rule that tax receipts per se are not conclusive evidence of land ownership absent other corroborating evidence."

• De Ocampo and Custodio v. Lim, 38 Phil. 579 (1918) — Followed. Held that in pacto de retro sales, the price agreed upon should not generally be considered the just value of the thing sold, absent corroborative evidence.
• Buenaventura v. Court of Appeals, G.R. No. 126376, November 20, 2003 — Followed. Held that there is no requirement in sales that the price be equal to the exact value of the thing sold.
• Aguilar v. Ribato and Gonzales Vila, 40 Phil. 570 (1919) — Followed. Defined gross inadequacy in price as existing if a reasonable man would not agree to dispose of his property.
• Santos v. Court of Appeals, G.R. No. 83664, November 13, 1989 — Cited by petitioner to support the claim of equitable mortgage; distinguished based on the facts and applicable doctrine on pacto de retro pricing.

• Article 1602, Civil Code — Enumerates the circumstances under which a contract is presumed to be an equitable mortgage, including when the price of a sale with right to repurchase is unusually inadequate. Applied to determine if the contract was an equitable mortgage; the Court found the inadequacy of price was not proven.
• Section 3(d), Rule 131, Revised Rules of Court — Provides the presumption that a person takes ordinary care of his concerns. Applied to presume that Dionisia understood the ramifications of signing the deed.

Reynato S. Puno (Chief Justice, Chairperson), Renato C. Corona, Adolfo S. Azcuna, Teresita J. Leonardo-De Castro.