Lucido vs. Calupitan

In a sale with the right of repurchase where the parties stipulate that the vendor cannot redeem the property until after a specified period, the four-year redemption period under Article 1508 of the Civil Code is counted from the expiration of the period during which the right to redeem could not be exercised, not from the date of the contract. The vendor's right to repurchase must necessarily imply a former ownership of the property, and a tender of the redemption price is sufficient compliance with Article 1518.

The case involves property that was regularly sold at an execution sale on February 10, 1903, to one Rosales, who transferred a one-half interest to Zolaivar. The execution sale was conducted pursuant to Sections 463-465 of the Code of Civil Procedure, which defined the execution purchasers' rights as ownership of the property sold, subject only to the right of redemption by the judgment debtor or a redemptioner within one year from the date of sale. The plaintiff Lucido was the judgment debtor whose property was sold at execution, and the defendant Calupitan was the party who ultimately acquired the property and against whom Lucido sought to exercise his right of redemption.

The plaintiff Leonard Lucido owned certain chattels and real estate that were regularly sold at an execution sale on February 10, 1903, to one Rosales, who the next day transferred a one-half interest in the property to Zolaivar. On March 30, 1903, a public document was executed and signed by all of the above parties and the defendant Gelasio Calupitan, wherein it was stated that Rosales and Zolaivar, with the consent of Lucido, sold all their rights and obligations pertaining to the property in question to Calupitan for the amount of the purchase price together with 1 per cent per month interest thereon up to the time of redemption, or 1,687 Mexican dollars, plus 33.74 Mexican dollars as interest. The computation of the transfer price was in accordance with section 465 of the Code of Civil Procedure.

On the same day, Lucido and Calupitan executed a document in which Calupitan certified that he had ceded to Lucido all the irrigated lands until such time as he might repurchase all said lands from him, as also the Vienna chairs, the five-lamp chandelier, a lamp stand, two wall tables, and a marble table, with no coconut tree on said irrigated land included. The document further stated that "our real agreement is to permit three (3) whole year to elapse, reckoned from the date of this instrument, which has been drawn up in duplicate, before he may redeem or repurchase them from me."

The plaintiff furnished $20 Mexican of the amount necessary to redeem the property from the execution purchasers, and Calupitan furnished the balance. The present action was instituted on February 17, 1910. The lower court found that Lucido had, prior to the institution of the action, offered the redemption price to the defendant, who refused it. The defendant Dorado purchased the land from his codefendant Calupitan subsequent to the tender of the redemption price to the latter by the plaintiff. Dorado himself testified that he purchased the property with the knowledge that Calupitan had purchased the property from Lucido subject to the right of redemption, and insisted that he purchased with the knowledge and consent of Lucido, which Lucido denied. The property was never registered by anyone, nor was the document of sale with the right to repurchase registered by either Calupitan or Lucido.

• Nature of the Transaction: The defendant-appellant assigned as error the lower court's ruling that the document constituted a sale with the right to conventional redemption, contending that the transaction was a simple assignment of the rights and obligations of the execution purchasers to a third person.
• Redemption Period: The defendant-appellant assigned as error the lower court's ruling that the redemption period had not expired, arguing that the four-year period under Article 1508 should be counted from the date of the contract.
• Sufficiency of Tender: The defendant-appellant assigned as error the lower court's finding that Lucido's offer of the redemption price was a sufficient compliance with Article 1518 of the Civil Code.

• Nature of the Transaction: The plaintiff-appellee argued that the transaction was a sale with the right to conventional redemption, pointing to the agreement between Lucido and Calupitan on the same day which distinctly stipulated that the right to redeem the property was preserved to Lucido, to be exercised after the expiration of three years.
• Admissibility of Original Answer: The plaintiff introduced in evidence Calupitan's original answer to the complaint, which expressly stated that the transaction was one of sale with the right to repurchase governed by the provisions of articles 1507 et seq. of the Civil Code, over the defendant's objection.
• Redemption Price: On appeal, the plaintiff alleged that the amount in Mexican currency exceeded what he actually owed by about P100, but rather than incur the expense of a new trial, he agreed to pay the defendant P1,600.74 Philippine currency as the redemption price.

• Nature of the Transaction: Whether the transaction between Lucido and Calupitan constituted a sale with the right to conventional redemption under Articles 1507 et seq. of the Civil Code.
• Computation of Redemption Period: Whether the four-year redemption period under Article 1508 of the Civil Code should be counted from the date of the contract or from the expiration of the three-year period during which redemption was prohibited.
• Sufficiency of Tender: Whether Lucido's tender of the redemption price to Calupitan was a sufficient compliance with Article 1518 of the Civil Code.
• Rights Against Subsequent Purchaser: Whether the defendant Dorado, who purchased the land from Calupitan with knowledge of the redemption right, was bound by the redemption.

• Nature of the Transaction: Yes. The transaction was a sale with the right to conventional redemption, as evidenced by the agreement between Lucido and Calupitan preserving the right to redeem after three years, Calupitan's original answer admitting the character of the transaction, and the fact that Lucido himself furnished part of the redemption money.
• Computation of Redemption Period: No. The four-year period was correctly computed from March 30, 1906, the expiration of the three-year period during which redemption was prohibited, following the ruling in Rosales vs. Reyes and Ordoveza (25 Phil. Rep., 495).
• Sufficiency of Tender: Yes. The tender of the redemption price was sufficient compliance with Article 1518, as discussed in Rosales vs. Reyes and Ordoveza.
• Rights Against Subsequent Purchaser: Yes. Article 1510 of the Civil Code applies, allowing the vendor to bring his action against every possessor whose right arises from that of the vendee, and the provisions of the Mortgage Law regarding third persons are not applicable to Dorado.

• Nature of the Transaction: Considerable doubt might arise as to the character of the transaction if the document executed by the execution purchasers and the parties stood alone, since it appeared that Calupitan acquired the rights and obligations of the execution purchasers as defined in the Code of Civil Procedure. However, the intervention of Lucido in the transfer would be wholly unnecessary if the transaction were merely a simple assignment of the execution purchasers' rights. Any doubt was removed by the agreement entered into between Lucido and Calupitan on the same day, which distinctly stipulated that the right to redeem the property was preserved to Lucido, to be exercised after the expiration of three years. The right to repurchase must necessarily imply a former ownership of the property. Further indication that Calupitan himself considered the transaction as a sale with the right to conventional redemption was found in his original answer to the complaint, which was properly admitted in evidence, especially since it was signed by Calupitan himself while acting as his own attorney. The uncontradicted testimony of the plaintiff showed that he furnished $20 Mexican of the amount necessary to redeem the property from the execution purchasers, demonstrating that the redemption was made by the plaintiff himself by means of a loan furnished by Calupitan, who took possession of the major portion of the land as security.

• Computation of Redemption Period: By the terms of the agreement, the plaintiff could not exercise his right to redeem the property within three years from March 30, 1903. The lower court computed the redemption period by counting five years from March 30, 1906, on the ground that there was no express agreement as to how long the right to repurchase, once available, should continue. Counsel for the appellant admitted in his brief that the complaint was filed forty-three days before the expiration of this period. Following the ruling in Rosales vs. Reyes and Ordoveza (25 Phil. Rep., 495), the Court held that this ruling was correct.

• Sufficiency of Tender: The Court examined the evidence of record and concurred with the lower court's finding that the plaintiff had actually tendered the redemption price to the defendant Calupitan. The legal sufficiency of such tender was discussed in Rosales vs. Reyes and Ordoveza, where it was held to be sufficient. This assignment of error was therefore unfounded.

• Rights Against Subsequent Purchaser: The defendants Oreta and Bueno had no interest in the subject matter of the action. The defendant Dorado purchased the land from his codefendant Calupitan subsequent to the tender of the redemption price to the latter by the plaintiff. The property was never registered by anyone, nor was the document of sale with the right to repurchase registered by either Calupitan or Lucido. Dorado testified that he purchased the property with knowledge that Calupitan had purchased it from Lucido subject to the right of redemption. Upon these facts, Article 1510 of the Civil Code was applicable, which provides that the vendor may bring his action against every possessor whose right arises from that of the vendee, even though in the second contract no mention should have been made of the conventional redemption, without prejudice to the provisions of the Mortgage Law with regard to third persons. The provisions of the Mortgage Law with regard to third persons were clearly not applicable to Dorado.

• Sale with Right to Conventional Redemption (Pacto de Retro) — Conventional redemption exists when the vendor reserves to himself the right to recover the thing sold, binding himself to comply with Article 1518. The Court applied this doctrine in finding that the transaction between Lucido and Calupitan constituted a sale with the right to repurchase, notwithstanding the form of the initial document as an assignment of execution purchasers' rights. The right to repurchase necessarily implies a former ownership of the property, and the agreement preserving the right to redeem after three years, coupled with Calupitan's own admission in his original answer, established the character of the transaction.

• Computation of Redemption Period Under Article 1508 — In default of an express stipulation as to the period of redemption, the right lasts four years counted from the date of the contract; when a stipulation exists, the term shall not exceed ten years. The Court applied this doctrine by holding that where the parties stipulated that redemption could not be exercised until after three years, the four-year period was counted from the expiration of that three-year period, following the ruling in Rosales vs. Reyes and Ordoveza.

• Tender of Redemption Price Under Article 1518 — A vendor cannot exercise the right of redemption without returning to the vendee the price of the sale, plus the expenses of the contract and any other legitimate payments made on account of the sale, and the useful and necessary expenses incurred on the thing sold. The Court applied this doctrine in affirming that Lucido's tender of the redemption price to Calupitan, who refused it, was a sufficient compliance with Article 1518.

• Rights Against Subsequent Possessors Under Article 1510 — The vendor may bring his action against every possessor whose right arises from that of the vendee, even though in the second contract no mention should have been made of the conventional redemption, without prejudice to the provisions of the Mortgage Law with regard to third persons. The Court applied this doctrine in holding that Dorado, who purchased with knowledge of the redemption right, was bound by the redemption, and that the Mortgage Law provisions regarding third persons were not applicable since the property was never registered.

• "The right to repurchase must necessary imply a former ownership of the property." — This passage states the essential logic supporting the Court's conclusion that the transaction was a sale with the right to conventional redemption, since the agreement between Lucido and Calupitan preserved the right to redeem after three years.

• "In this original answer it was expressly stated that the transaction was one of sale with the right to repurchase governed by the provisions of articles 1507 et seq. of the Civil Code." — This passage establishes the significance of Calupitan's original answer as an admission of the character of the transaction, which the Court found to be properly admitted in evidence.

• "It therefore appears beyond dispute that the redemption of the property from the execution purchasers was made by the plaintiff himself by means of a loan furnished by the defendant Calupitan, who took possession of the major portion of the land as his security for its redemption." — This passage summarizes the Court's finding that the transaction was in substance a sale with the right to repurchase, with Calupitan providing the funds for redemption and taking possession as security.

• "The vendor may bring his action against every possessor whose right arises that of the vendee, even though in the second contract no mention should have been made of the conventional redemption; without prejudice to the provisions of the Mortgage Law with regard to third persons." — This passage quotes Article 1510 of the Civil Code, which the Court applied in holding that Dorado, who purchased with knowledge of the redemption right, was bound by the redemption.

• Rosales vs. Reyes and Ordoveza, 25 Phil. Rep., 495 — Controlling precedent followed by the Court in this case. The Court relied on this decision for two propositions: (1) that the four-year redemption period under Article 1508 should be counted from the expiration of the period during which the right to redeem could not be exercised, and (2) that a tender of the redemption price is sufficient compliance with Article 1518.

• Article 1507, Civil Code — Defines conventional redemption as existing when the vendor reserves to himself the right to recover the thing sold, binding himself to comply with Article 1518. Applied to establish that the transaction between Lucido and Calupitan constituted a sale with the right to conventional redemption.

• Article 1508, Civil Code — Provides that the right of conventional redemption, in default of an express stipulation, shall last four years counted from the date of the contract, and that when a stipulation exists, the term shall not exceed ten years. Applied in computing the redemption period from the expiration of the three-year prohibition on redemption.

• Article 1510, Civil Code — Provides that the vendor may bring his action against every possessor whose right arises from that of the vendee, even though in the second contract no mention should have been made of the conventional redemption, without prejudice to the provisions of the Mortgage Law with regard to third persons. Applied in holding that Dorado was bound by the redemption.

• Article 1518, Civil Code — Provides that a vendor cannot exercise the right of redemption without returning to the vendee the price of the sale, plus the expenses of the contract and any other legitimate payments made on account of the sale, and the useful and necessary expenses incurred on the thing sold. Applied in finding that Lucido's tender of the redemption price was sufficient compliance.

• Sections 463-465, Code of Civil Procedure — Define the rights and obligations of execution purchasers as ownership of the property sold, subject only to the right of redemption on the part of the judgment debtor or a redemptioner within one year from the date of the sale. Applied in determining the nature of the rights that Calupitan acquired from the execution purchasers.

Arellano, C.J., Carson and Araullo, JJ., concurred.

• Moreland, J., dissenting — The dissent argued that the majority's decision effectively abrogated and repealed Article 1508 of the Civil Code by counting the four-year redemption period from the expiration of the three-year prohibition on redemption rather than from the date of the contract as the article expressly requires. The dissent contended that the parties cannot suspend the operation of the law applicable to their contract, and that permitting such suspension would allow parties to extend the redemption period indefinitely, destroying the law's purpose of preventing titles to real estate from remaining uncertain for extended periods. The dissent further argued that the four-year and ten-year limitations in Article 1508 are mutually exclusive and cannot both apply to the same contract, and that a stipulation prohibiting the vendor from repurchasing for a period of years changes the essential nature of the contract, converting it into a mere loan on security.