Facts:

The case at bar involves Alfredo N. Aguila, Jr. (petitioner) and Felicidad S. Vda. de Abrogar (respondent). The events leading to the petition began in Marikina, Metro Manila, where Felicidad and her late husband, Ruben M. Abrogar, were the registered owners of a property covered by Transfer Certificate of Title No. 195101. On April 18, 1991, Felicidad, with her late husband’s consent, entered into a Memorandum of Agreement with A.C. Aguila & Sons, Co., a partnership managed by petitioner, for the sale of their property for P200,000.00. The agreement stipulates that Felicidad would have the option to repurchase the property within 90 days for P230,000.00, and if she did not exercise this option, she was to deliver possession of the property within 15 days thereafter.

A deed of absolute sale was executed on the same day, alongside a special power of attorney allowing petitioner to cancel the title and cause the issuance of a new title in the name of his partnership if Felicid

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Facts:

Background of the Parties

• Petitioner Alfredo N. Aguila, Jr. serves as the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending activities.
• Private respondent Felicidad S. Vda. de Abrogar, with her late husband Ruben M. Abrogar, was the registered owner of a house and lot in Marikina, Metro Manila (TCT No. 195101).

The Transaction and Documents Executed on April 18, 1991

• A Memorandum of Agreement was entered into by private respondent (with the consent of her late husband) and A.C. Aguila & Sons, Co., represented by petitioner.
• The agreement provided that the partnership would purchase the property from the respondent in exchange for P200,000.00.
• It granted the respondent a ninety (90) day option to repurchase the property for P230,000.00.
• It stipulated that failure to repurchase within the 90-day period would obligate the respondent to deliver possession within a 15-day grace period.
• Additional provisions covered non-filing of lis pendens, warranties of ownership, allocation of documentation expenses, and liquidated damages for delay.
• On the same day, a Deed of Absolute Sale was executed, formally transferring the property to A.C. Aguila & Sons, Co.
• A Special Power of Attorney, also dated April 18, 1991, empowered petitioner to cancel TCT No. 195101 and secure a new certificate of title in favor of the partnership should the respondent fail to redeem the property.

Failure to Redeem and Subsequent Actions

• The respondent did not exercise her option to repurchase the property within the stipulated 90-day period.
• Consequently, petitioner effected the cancellation of the original title and the issuance of a new title (TCT No. 267073) in the name of A.C. Aguila & Sons, Co.
• A letter dated August 10, 1991, from the partnership’s counsel, demanded that the respondent vacate the premises, failing which an ejectment suit would be initiated.
• An ejectment case was filed by A.C. Aguila & Sons, Co. in the Metropolitan Trial Court, Branch 76, Marikina, and the court ruled in favor of the partnership based on the respondent’s failure to redeem.

Petition for Declaration of Nullity and Subsequent Proceedings

• Dissatisfied with the outcomes in previous actions, the respondent filed a petition for declaration of nullity of the deed of sale in Regional Trial Court, Branch 273, Marikina, alleging that her late husband’s signature on the deed was a forgery because he had already died before execution.
• The RTC, in its decision dated April 11, 1995, dismissed the respondent’s claim by noting the simultaneous execution of the documents on April 18, 1991 and by emphasizing established business practices.
• On appeal, the Court of Appeals reversed the RTC’s dismissal. It recharacterized the transaction as an equitable mortgage (pactum commissorium) rather than a bona fide sale with a right to repurchase, citing:
• The unusually inadequate purchase price in light of the property’s market value.
• Retention of possession and payment of taxes by the respondent, indicating that she maintained control as if still the owner.
• The inherent nature of the transaction as a security for a loan, with stipulations enabling automatic appropriation upon default.
• The Court of Appeals, therefore, declared the deed of sale void under Article 2088 of the New Civil Code and ordered the cancellation of the title changes.

Petitioner’s Contentions on Appeal

• Petitioner argued that he was not the real party in interest; rather, A.C. Aguila & Sons, Co. should be the proper defendant in the nullity action.
• He also contended that the ejectment judgment should bar the respondent’s subsequent petition and that the contract was a pacto de retro sale rather than an equitable mortgage.
• The petitioner supported his argument by citing the requirement that every action must be prosecuted in the name of the real party in interest, as mandated by Rule 3, A2 of the Rules of Court (and later embodied in the 1997 Revised Rules of Civil Procedure).

Issue:

• Whether the transaction entered into by the parties should be characterized as a sale with a right to repurchase or as an equitable mortgage (pactum commissorium).
• Whether the judgment in the prior ejectment case precludes or bars the respondent’s subsequent complaint for the declaration of nullity of the deed of sale.
• Whether petitioner, as an individual, is the real party in interest, or whether the proper party is A.C. Aguila & Sons, Co., given the latter’s distinct juridical personality as a partnership.
• The impact of the alleged forgery (pertaining to the late husband’s signature) on the validity of the deed of sale.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)