Facts:

The case involves the late Pedro A. Felicen, Sr., represented by his widow Beatriz Lanuevo and their children Eleuterio, Pedro, Jr., Clarita, Fernando, and Jose Maria Felicen (collectively referred to as "petitioners") against Severino Orias, Milagros Orias de Lim, and the Court of Appeals (collectively referred to as "respondents"). The events unfolded in Salcedo, Samar, where, on June 25, 1956, a Deed of Sale With Right to Repurchase was executed. In this transaction, the private respondents sold a 7.8-hectare parcel of land to the petitioner for ₱3,000. The deed explicitly reserved the right to repurchase the land within a period of two years. As this two-year period lapsed without any proposal to repurchase from the respondents, the vendors a retro (Severino and Milagros) commenced a civil action in the Court of First Instance eight years later to compel the petitioners to resell and return the property to them. The Trial Court ultimately determined that

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Facts:

Parties and Property

• The petitioner, Pedro A. Felicen, Sr., acquired a 7.8-hectare parcel of land located in the Municipality of Salcedo, Province of Samar, from the respondents.
• The respondents included Severino Orias and Milagros Orias de Lim, who, by deed, reserved the right to repurchase (pacto de retro) the property.

Terms of the Sale and the Right to Repurchase

• The deed of sale expressly provided that the respondents had a right to repurchase the property within a stipulated period of two (2) years.
• The contract was clearly drawn as a sale with a right of conventional redemption, wherein the vendor agreed to repurchase under specified conditions.
• The agreed repurchase period duly expired without any timely exercise or offer by the respondents.

Subsequent Legal Action and Proceedings

• Approximately eight (8) years after the sale, the respondents (vendors a retro) filed an action in the Court of First Instance seeking to compel the petitioner to resell and reconvey the property to them.
• The Trial Court, after due proceedings, found that the sale was bona fide a sale with pacto de retro, noting that the repurchase period had expired.
• Despite the expiration, the Trial Court invoked the third paragraph of Article 1606 of the Civil Code which allows a vendor to repurchase “within thirty (30) days from the time final judgment was rendered” provided that the contract is adjudged a true sale with a right to repurchase.
• The Court of Appeals affirmed the decision of the Trial Court, particularly upholding the finding that the contract was unmistakably a sale with pacto de retro and not to be construed as a disguised mortgage or as a loan.

Legal and Factual Controversies Raised

• The respondents contended that they had attempted to exercise their repurchase right within the specified period, though such assertions were found to lack detailed, persuasive evidence.
• A key issue emerged on whether the respondents could legitimately invoke the third paragraph of Article 1606 to revive their repurchase right, notwithstanding the expiration of the explicitly stipulated two-year period.
• The contention further included a debate on whether the transaction should be reinterpreted as a loan secured by a mortgage, rather than a conventional sale, based on the parties’ conduct and the nature of the contractual terms.

Issue:

Whether the transaction in question was truly a sale with a pacto de retro or could be construed as a loan secured by a mortgage.

• The determination hinges on the parties’ true intentions as evidenced by the explicit terms of the deed.

Whether the respondents (vendors a retro) acted with bona fides sufficient to invoke the third paragraph of Article 1606.

• The issue examines if there was an honest belief, supported by the circumstances at the time of execution, that the contract was merely a mortgage intended to secure a debt.

Whether the third paragraph of Article 1606 should be applied to allow the exercise of the right to repurchase after the expiration of the stipulated repurchase period.

• This involves assessing if judicial reformation of the contract can legitimately resurrect an expired contractual privilege.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)