Mate vs. Court of Appeals

A deed of sale with right of repurchase is valid and binding where consideration exists at the time of its execution, even if the purchase price is not paid by the vendee-a-retro to the vendor-a-retro and the checks issued by a third person for the repurchase price are later dishonored. Consideration may consist of the vendor's accommodation of a third person, receipt of a check as fee or interest, and the vendee's waiver of his right to collect from or prosecute that third person.

Fernando T. Mate owned lots in Tacloban City. Inocencio Tan held bounced checks issued by Josefina R. Rey and her family amounting to P4,432,067.00 and was poised to file criminal cases against them for violation of B.P. 22. Josefina, a cousin of Mate's wife, sought Mate's help to stave off that prosecution.

On October 6, 1986, Josefina R. Rey, cousin of petitioner Fernando T. Mate's wife, and private respondent Inocencio Tan went to Mate's residence in Tacloban City. Josefina solicited Mate's help to stave off prosecution by Tan for violations of B.P. 22 arising from rubber checks issued by Josefina, her mother, sister, and brother to Tan amounting to P4,432,067.00. She requested Mate to cede his three lots in Tacloban City to Tan to placate him. Mate initially rejected because he owed Tan nothing, was under no obligation to convey his properties, and his lots were not for sale.

Josefina explained that Mate was in no danger of losing his properties because he would merely execute a simulated document transferring them to Tan, but she would redeem them with her own funds. After a long discussion, Mate agreed to execute a fictitious deed of sale with right of repurchase covering his lots, subject to conditions: (a) the amount stated would be P1,400,000.00 with interest at 5% per month; (b) the properties would be repurchased within six months or on or before April 4, 1987; (c) although Mate would appear as vendor, Josefina would provide the redemption money from her own funds; and (d) the titles would be delivered to Tan, but the sale would not be registered in the Register of Deeds or annotated on the titles. To assure Mate that Josefina would redeem the properties, she issued two BPI checks postdated December 15, 1986: one for P1,400,000.00 supposedly for the selling price and another for P420,000.00 corresponding to interest for six months.

Mate prepared the Deed of Sale with Right of Repurchase (Exh. A); after it was signed and notarized, it was given to Tan together with the titles of the properties. Tan did not register the transaction in the Register of Deeds as agreed. On January 14, 1987, Mate deposited the P1,400,000.00 check (Exh. B) in his account at United Coconut Planters Bank and the P420,000.00 check (Exh. D) in his account at METROBANK preparatory to redeeming his properties. Both checks were dishonored by the drawee bank for having been drawn against a closed account.

Realizing he was swindled, Mate sent Josefina a telegram; when she failed to respond, he went to Manila to look for her but could not find her. He returned to Tacloban City and filed Criminal Cases Nos. 8310 and 8312 against her for violation of B.P. 22, but the cases were later archived because Josefina could not be found, having gone into hiding. To protect his interest, Mate filed Civil Case No. 7396 in the Regional Trial Court of Leyte, Branch VII, entitled "Fernando T. Mate vs. Josefina R. Rey and Inocencio Tan" for Annulment of Contract with Damages. Josefina was declared in default and the case proceeded against Tan.

During trial, the RTC asked Tan to file an action for consolidation of ownership of the properties subject of the sale; Tan filed Civil Case No. 7587, which was consolidated with the earlier case. The lower courts found that consideration existed at the time Mate executed the deed: he accommodated Josefina so she would not be criminally charged by Tan; he received the P420,000.00 check and held the P1,400,000.00 postdated check for repurchase; and Tan waived his right to collect from Josefina by virtue of the pacto de retro sale.

• Lack of Consideration: Petitioner argued that the Deed of Sale with Right of Repurchase was null and void for lack of consideration because no money changed hands when he signed it and the checks issued for redemption of the properties were dishonored by the drawee bank for having been drawn against a closed account.
• Alleged Condition Nullifying the Sale: Petitioner claimed that the pacto de retro sale was subject to the condition that if the checks given by Josefina Rey for repurchase were dishonored, the document would be declared null and void for lack of consideration.
• Equitable Maxim / Innocence: Petitioner invoked Singson vs. Isabela Sawmill, 88 SCRA 633, 643, arguing that it was illegal and immoral to require him to repurchase his own properties with his own money when he did not derive any benefit from the transaction, and that where one of two innocent persons must suffer, the one who gave occasion for the damage must bear the consequences.
• Fraud / Deceit: Petitioner insinuated that private respondent Tan deceived him into signing the deed of sale with right of repurchase.

• Validity of the Deed of Sale with Right of Repurchase: Whether the Deed of Sale with Right of Repurchase executed on October 6, 1986 is null and void for lack of consideration because no money changed hands when petitioner signed it and the checks issued for redemption were dishonored for having been drawn against a closed account.
• Effect of Dishonored Checks / Alleged Condition: Whether the dishonor of the checks issued by Josefina R. Rey for the repurchase price rendered the pacto de retro sale null and void for lack of consideration or under an alleged condition that the document would be declared null and void if the checks were dishonored.
• Fraud / Deceit: Whether private respondent Inocencio Tan deceived petitioner into signing the deed of sale with right of repurchase.

• Validity of the Deed of Sale with Right of Repurchase: Valid. Consideration existed at the time of execution; the non-receipt of the P1.4 Million purchase price from Tan and the dishonor of Josefina Rey's checks did not establish lack of consideration.
• Effect of Dishonored Checks / Alleged Condition: No. The dishonor of the checks did not nullify the pacto de retro sale; petitioner's cause of action was to file criminal actions against Josefina Rey under B.P. 22, which he did.
• Fraud / Deceit: No. The evidence and petitioner's own statement of facts did not show that Tan employed any devious scheme; Tan merely signed the contract.

• Validity of the Deed of Sale with Right of Repurchase: The Court found consideration existed. The respondent court observed that in preparing and executing the deed and delivering the titles to Tan, Mate accommodated Josefina so she would not be charged criminally by Tan. To ensure he could repurchase his lots, Mate got a P1,400,000.00 check from her; by allowing his titles to be in Tan's possession for six months, he secured another check for P420,000.00. Consideration existed at execution; it was not only Mate's kindness to Josefina, his cousin, but also his receipt of P420,000.00 from her that impelled him to execute the contract. While Mate did not receive the P1.4 Million purchase price from Tan, he had a postdated check from Josefina in an equivalent amount precisely to repurchase the lots on or before the sixth month. Josefina assumed the responsibility of paying the repurchase price on behalf of Mate to Tan. The two checks were worthless and dishonored, but there was no basis to annul the pacto de retro sale for lack of consideration. Mate's cause of action was criminal under B.P. 22, which he pursued; filing the criminal cases was a tacit admission that consideration existed.
• Effect of Dishonored Checks / Alleged Condition: The Court was not persuaded by the claim that the sale was subject to a condition that the document would be null and void if Josefina's checks were dishonored. Tan was already poised to file criminal cases against Josefina and her family, and it would not be logical for Tan to agree to the conditions allegedly imposed by Mate. Mate knew he was bound by the deed, as evidenced by his filing criminal cases against Josefina when the checks bounced.
• Fraud / Deceit: The claim of false pretenses was not borne out by the evidence or by Mate's own statement of facts. The respondent court observed that it was at a loss why Mate ascribed false pretenses to Tan, who merely signed the contract. Tan did not employ any devious scheme; he waived his right to collect from Josefina by virtue of the pacto de retro sale. In turn, Josefina gave Mate a postdated check for P1.4 Million to ensure he would not lose his lots. Mate, a lawyer, should have known the transaction was fraught with risks since Josefina and family had a history of issuing worthless checks. Had Mate not agreed, Tan would not have waived prosecution of Josefina. Mate's greed for a huge profit impelled him to accede to the scheme. A contract is a contract; once agreed upon and provided all essential elements are present, it is valid and binding between the parties. Mate had no one to blame but himself. His reliance on Singson was misplaced because he was not an innocent person; he gave occasion for the damage by preparing and signing the deed. Under the equitable maxim, between two innocent parties, the one who made it possible for the wrong to be done should bear the resulting loss.

• Consideration in a Sale with Right of Repurchase (Pacto de Retro) — Consideration must exist at the time of execution of the contract; it need not be actual payment of the purchase price by the vendee-a-retro to the vendor-a-retro. It may consist of the vendor's accommodation of a third person, the vendor's receipt of a check representing a fee or interest, and the vendee's waiver of his right to collect from or prosecute the third person. In this case, consideration existed despite Mate's claim that no money changed hands and despite the dishonor of Josefina Rey's checks.
• Dishonor of Third-Party Checks Does Not Necessarily Nullify a Pacto de Retro Sale — Where consideration existed at the time of execution, the subsequent dishonor of checks issued by a third person for the repurchase price does not render the sale void for lack of consideration. The vendor's remedy is to pursue criminal liability under B.P. 22 against the third person, not to annul the pacto de retro sale against the vendee. The filing of such criminal cases may be taken as a tacit admission that consideration existed.
• Contract Validity and Binding Effect — A contract is valid and binding between the parties once agreed upon and all essential elements are present. In this case, the Deed of Sale with Right of Repurchase was upheld, and because the redemption period expired, ownership consolidated by operation of law in Tan.
• Equitable Maxim Between Two Innocent Parties — Between two innocent parties, the one who made it possible for the wrong to be done should bear the resulting loss. The Court applied this against Mate because he was not innocent; as a lawyer, he prepared and signed the deed that gave occasion for the damage. His reliance on Singson vs. Isabela Sawmill was therefore misplaced.
• Fraud Must Be Established by Evidence — A claim that a party was deceived into signing a contract must be supported by evidence. The Court found no devious scheme by Tan, who merely signed the contract, and held that Mate's own statement of facts did not support the charge of false pretenses.

• "It is plain that consideration existed at the time of the execution of the deed of sale with right of repurchase. It is not only appellant’s kindness to Josefina, being his cousin, but also his receipt of P420,000.00 from her which impelled him to execute such contract." — This passage, quoted from the Court of Appeals, states the ratio for finding consideration despite no direct payment from Tan.
• "Petitioner’s cause of action was to file criminal actions against Josie Rey under B.P. 22, which he did. The filing of the criminal cases was a tacit admission by petitioner that there was a consideration of the pacto de retro sale." — This passage identifies the proper remedy for dishonored checks and treats the criminal filing as an admission that consideration existed.
• "However, a contract is a contract. Once agreed upon, and provided all the essential elements are present, it is valid and binding between the parties." — This passage states the controlling rule on validity and binding effect.
• "Thus, there is the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss." — This passage supports the rejection of Mate's invocation of Singson and the holding that he was not innocent.

• Singson vs. Isabela Sawmill, 88 SCRA 633, 643 — Cited by petitioner for the rule that where one of two innocent persons must suffer, the one who gave occasion for the damage must bear the consequences; the Court held the reliance misplaced because petitioner was not innocent and had prepared and signed the deed.
• Bacaltos Coal Mines vs. Court of Appeals, 245 SCRA 460 — Cited in support of the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should bear the resulting loss.

• Batas Pambansa Blg. 22 (Bouncing Checks Law) — The decision refers to violations of B.P. 22 arising from rubber checks issued by Josefina R. Rey and her family to Inocencio Tan, and to the criminal cases Mate filed against Josefina when her checks were dishonored. The Court held that Mate's cause of action for the dishonored checks was criminal under B.P. 22, not an action to annul the pacto de retro sale for lack of consideration.

Regalado (Chairman), Melo, Puno, and Mendoza, JJ., concur.