Facts:

In the case entitled Benedicto Baluyot, et al. vs. Eulogio E. Venegas, (G.R. No. L-22968, January 31, 1968), the plaintiffs, who are the heirs of Crisanto Baluyot, initiated legal proceedings against the defendant, Eulogio E. Venegas. The conflict arose from a contract executed on July 24, 1951, in which Baluyot sold a parcel of land to Venegas. The contract included a clause for repurchase which outlined that after ten years from October 1, 1951, the vendor or his successors-in-interest had the right to repurchase the property for the same price of PHP 4,000.00. On July 18, 1963, the plaintiffs filed a complaint in the Court of First Instance of Bataan, seeking to compel Venegas to reconvey the land to them in accordance with the option to repurchase specified in the contract. They claimed they had made previous attempts to exercise their right of repurchase, which were unsuccessful. The trial court ultimately ruled in favor of the plaintiffs, ordering the defendant to execute

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Facts:

Background of the Transaction

• Plaintiffs, the heirs of Crisanto Baluyot, are involved in a dispute arising from a sale of a parcel of land executed in July 1951.
• The defendant, Eulogio E. Venegas, purchased the property under a contract that included a repurchase or “option” clause.

Terms of the Sale Contract

• The contract, executed on July 24, 1951, stipulated a specific repurchase option whereby:
• The vendor (or his heirs or successors-in-interest) was granted the right to repurchase the land after the expiration of a ten-year period computed from October 1, 1951.
• The repurchase price was fixed at P4,000.00.
• It was expressly agreed that the right to repurchase would only commence “after the expiration of the period of ten (10) years.”

Initiation of Legal Action

• On July 18, 1963, the plaintiffs initiated an action before the Court of First Instance of Bataan seeking to compel the defendant to reconvey the land based on the contractual provision.
• Plaintiffs asserted that their previous offers to exercise the repurchase right had been unavailing.
• The lower court ruled in favor of the plaintiffs, ordering the defendant to execute the deed of conveyance upon payment of P4,000, and to pay attorneys’ fees amounting to P500.

Defendant’s Defense and Legal Challenge

• The defendant appealed the decision, arguing that the repurchase option clause was void and contrary to law.
• The defense was primarily based on the contention that the clause violated Article 1606 of the Civil Code, which limits the contractual exercise of the right of repurchase to a maximum period of ten years from the date of the contract.
• The central argument was that by stipulating that the repurchase right may only be exercised after the expiration of ten years (i.e., after October 1, 1951), the contract effectively suppressed the vendor’s right to repurchase during the period when the law would have permitted it.

Issue:

Validity of the Repurchase Option Clause

• Does the provision in the sale contract—that allows the vendor to exercise the repurchase option only after the lapse of ten years—contravene Article 1606 of the Civil Code?
• Is such a stipulation legally enforceable when it limits the exercise of the repurchase right beyond the maximum period allowed by law?

Timing and Applicability of the Right of Repurchase

• Given that the right to repurchase was to be exercised only after the ten-year period from October 1, 1951, does the repurchase right even arise legally?
• Can the repurchase option be lawfully exercised in 1963, which is twelve years after the sale?

Nature of the Defendant’s Defense

• Is the defendant’s reliance on Article 1606 a valid substantive argument (rather than an issue of prescription or time-bar) affecting the enforceability of the repurchase clause?
• Does the law mandate that contractual stipulations cannot override or nullify the statutory limitations on the right of repurchase?

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)