G.R. No. 125272 - Amil vs. Court of Appeals

Candido C. Amil (petitioner) and the spouses Ernesto T. Gador and Nila A. Gador (private respondents) entered into a transaction involving a parcel of land covered by Transfer Certificate of Title No. 14021 in Calindagan, Dumaguete City, Negros Oriental.
On November 14, 1987, the parties executed a Deed of Pacto de Retro Sale.

The instrument stipulated that for the sum of P30,000.00, petitioner sold, transferred, and conveyed the land to the Gador spouses.
A reservation was made by petitioner (Vendor A-Retro) for the right to redeem or repurchase the property within three years.
The conveyance was to become an absolute and irrevocable sale if petitioner failed to exercise his repurchase right within the fixed period, without needing further judicial or administrative consolidation.

On December 12, 1987, the parties executed an “Addendum to Deed of Pacto de Retro Sale.”

This document described that the Gador spouses were the mortgagees of the parcel, while petitioner was the mortgagor, in consideration of the same P30,000.00.
It provided that an additional P1,800.00 was to be paid to cover costs for Capital Gains Tax and Documentary Stamps, thereby raising the total sum to P31,800.00.
The Addendum contained terms and language—such as references to mortgage—that introduced ambiguity regarding the true nature of the transaction (sale with right to repurchase versus mortgage).

After the redemption period expired, the Gador spouses filed a petition for the consolidation of their ownership over the property.
Petitioner was declared in default because his counsel, Atty. Reynaldo PiAero, failed to file an answer to the petition within the reglementary period.
The trial court, Branch 36, Dumaguete City, on October 26, 1993, rendered a judgment declaring the Gador spouses as the absolute owners of the property after petitioner’s default.

Following the judgment by default, petitioner, through new counsel, filed a motion for new trial, which was denied by the trial court.
Petitioner then appealed to the Court of Appeals, which, in its decision dated January 29, 1996, affirmed the trial court’s denial of a new trial.
The Court of Appeals upheld the view that petitioner was bound by his counsel’s inaction and agreed that the addendum did not alter the evident intention of a sale with right to repurchase.

The lower court erred in denying the motion for new trial due to the gross negligence of his former counsel, which deprived him of his day in court.
The contract should be interpreted as an equitable mortgage rather than a pacto de retro sale, given the facts and the language of the addendum.

Whether the trial court’s and the Court of Appeals’ denial of petitioner’s motion for new trial—on the ground that his failure to file an answer, attributable to his counsel’s negligence, was not excusable—was proper.
Whether the contract's true nature is that of an equitable mortgage rather than a pacto de retro sale, particularly considering the addendum’s language and the inadequacy of the purchase price, which would invoke the provisions of Arts. 1602 and 1603 of the Civil Code.