Facts:

In the case of Ronaldo P. Abilla and Geralda A. Dizon vs. Carlos Ang Gobonseng, Jr. and Theresita Mimie Ong, petitioners Abilla and Dizon brought a petition against respondents Gobonseng and Ong regarding a real estate transaction that turned contentious. The origins of the dispute trace back to a loan transaction on April 1, 1997, where Gobonseng borrowed PHP 550,000 from Abilla, secured by a real estate mortgage on two parcels of land under Transfer Certificates of Title (TCT) Nos. 13607 and 13535. Due to a default in payment, which led to the loan amount ballooning to PHP 700,000, Gobonseng attempted to renew the loan by issuing two postdated checks totaling PHP 700,000. However, one check was dishonored.

Gobonseng sought to borrow from the State Investment House, Inc. to pay off his debt to Abilla but was required to secure the loan with collateral. As a result, Gobonseng obtained the titles of the properties back from Abilla, who had to cancel the existing mortgage. Despite

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Facts:

Parties and Underlying Transaction

• Petitioners: Ronaldo P. Abilla and Geralda A. Dizon.
• Respondents: Carlos Ang Gobonseng, Jr. and Theresita Mimie Ong.
• The dispute originated from a loan transaction wherein respondent secured a loan of P550,000.00 from petitioner with two parcels of real estate (TCT Nos. 13607 and 13535) as collateral.
• The original loan defaulted, resulting in an outstanding obligation amounting to P700,000.00.

Execution of Agreements and Subsequent Developments

• Following the default, respondent sought a renewal of the loan and issued postdated checks—one for P10,000.00 and another for P690,000.00—which ultimately led to complications when the larger amount’s check was dishonored by the drawee bank.
• Respondent promised to settle the P690,000.00 upon approval of his pending loan application with the State Investment House, Inc.
• In connection with the requirement of collateral for the new loan, respondent borrowed the titles (TCT Nos. 13607 and 13535) from petitioner to mortgage them to the lending institution, leading petitioner to cancel the original mortgage and deliver the titles to respondent.

Deed of Sale, Option to Buy, and Controversy

• When respondent failed to pay his outstanding obligation despite the bank’s loan approval, he executed a deed of absolute sale over seventeen lots in Dumaguete City in favor of petitioner.
• On the same day, the parties executed an Option to Buy, allowing respondent to repurchase the lots within a six-month period.
• Respondent did not exercise the repurchase option within the stipulated six months, prompting petitioners to initiate an action for specific performance—seeking that respondent pay associated fees for the transfer of title.

Lower Court Proceedings and Classification of the Transaction

• The Regional Trial Court (Branch 42, Dumaguete City) rendered judgment in favor of petitioner on October 29, 1990, declaring the Option to Buy null and void due to non-exercise within the prescribed period.
• On appeal, the Court of Appeals affirmed the trial court’s decision but reclassified the transaction as a pacto de retro sale, rather than a mere sale with an option.
• A subsequent motion for reconsideration was denied, and the decision eventually became final on February 8, 1999, with the judgment duly entered in the Book of Entries of Judgments.

Post-Finality Events and the Motion for Reconsideration

• On February 27, 1999, respondent filed a motion in the court of origin to repurchase the lots with tender of payment, which was initially denied.
• Later, the trial court issued an Order granting respondent’s motion for reconsideration, allowing him to repurchase the lots within thirty (30) days from finality of the earlier decision.
• Petitioners then brought the instant petition for review, challenging the revised repurchase period.

Jurisprudential and Statutory Considerations

• Respondent based his claim on the third paragraph of Article 1606 of the Civil Code, which permits the vendor (vendor a retro) to repurchase within thirty days from the finality of the decision declaring the contract a sale with the right to repurchase if he honestly believed the transaction was an equitable mortgage.
• The Supreme Court had to determine whether this provision applied to the case at bar, given the factual and contextual nuances of the parties’ contractual arrangement.

Issue:

Applicability of Article 1606

• Whether the third paragraph of Article 1606 of the Civil Code applies to the instant case.
• Whether the provision can be invoked by respondent based on his bona fide belief that the transaction was in reality an equitable mortgage.

Determination of the Correct Repurchase Period

• Whether the thirty-day period for repurchase should commence from the finality of the judgment dated February 8, 1999 (when the transaction was declared a pacto de retro sale) or from another later order (i.e., the Order dated January 14, 2001) issued by the trial court.

True Nature of the Transaction

• Whether the deed of absolute sale and the accompanying option to buy constitute a true sale with a right of repurchase (pacto de retro sale) or merely an equitable mortgage used as security for an indebtedness.

Impact of Prior Jurisprudence

• Whether and how the earlier rulings, particularly in Vda. de Macoy v. Court of Appeals and Felicen, Sr. v. Orias, should control the interpretation and application of Article 1606 in determining the parties’ rights and obligations.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)