G.R. No. 212381 - Jacomille vs. Abaya

On January 21, 1954, the defendant, Maria B. Vda. de Diaz, executed a deed of sale with pacto de retro in favor of the late Jose A. Arches for Lot No. 2706 of the Capiz Cadastral Survey.
The deed provided that, for the consideration of P12,500.00, the vendor reserved the right to repurchase the property within one (1) year.

On November 20, 1958, Jose A. Arches filed a petition in Cadastral Case No. 6 (L.R.C. Record No. 338) at the Court of First Instance of Capiz to consolidate ownership and title over Lot No. 2706.
The defendant opposed the petition, arguing that the true intention behind the deed was to create an equitable mortgage—thus serving as security for a loan—rather than a bona fide sale with repurchase rights.

The trial court, in its order dated March 8, 1960, denied the petition to consolidate ownership, effectively characterizing the deed of sale with pacto de retro as an equitable mortgage.
Jose A. Arches appealed the trial court’s decision, and on December 29, 1964, the Court of Appeals affirmed the trial court’s ruling.
Subsequently, Jose A. Arches sought certiorari from the Supreme Court, but his petition was dismissed on March 29, 1965, on the ground that the issues involved were primarily factual. The resolution became final and executory on May 29, 1965.

Beyond the principal sum, Jose A. Arches incurred additional expenses amounting to P1,543.70 in connection with reconstituting the title to Lot No. 2706 and paying real estate taxes for the years 1951 to 1960.
Before initiating any proceedings to collect these amounts, Jose A. Arches died on August 18, 1965.
On May 31, 1966, as forced heirs of the deceased, the plaintiffs demanded, via registered letter, the payment of P12,500.00 (the purchase price) along with reimbursement of P1,543.70. The defendant failed to comply with the demand.

Instead of answering the complaint, the defendant moved to dismiss it on two main grounds:

The recovery of P12,500.00 was barred by the statute of limitations.
The claim for reimbursement of P1,543.70 was outside the trial court’s jurisdiction.

Initially, the trial court overruled the plea of prescription by determining that the ten-year prescriptive period commenced on August 29, 1965 (the date the resolution dismissing Jose A. Arches’ petition for certiorari became final), rather than from January 21, 1955, as asserted by the defendant.
Subsequently, the defendant moved for reconsideration, alleging that the action should be dismissed on the grounds of res judicata and multiplicity of suits.
In its order dated September 8, 1966, the trial court set aside its previous order and dismissed the complaint, holding that by electing to consolidate title (thereby opting against foreclosure), the plaintiffs were barred from pursuing an alternative remedy to foreclose the mortgage or collect the indebtedness.

The forced heirs, as plaintiffs-appellants, brought the case on appeal, challenging the dismissal based on the improper invocation of res judicata and the exclusion of pursuing the foreclosure remedy.
The appeal raised issues concerning the waiver of res judicata and whether the earlier cadastral court’s decision, which characterized the sale as an equitable mortgage, precluded any separate action to enforce the mortgage.

Whether the trial court erred in dismissing the complaint on the grounds of res judicata and multiplicity of suits, particularly since the appellee failed to specify these objections in her initial motion attacking the pleading.
Whether the characterization of the deed of sale with pacto de retro as an equitable mortgage by the cadastral court effectively adjudicated the right to foreclose the mortgage or collect the indebtedness, thereby barring a separate action for the same.
Whether the election by Jose A. Arches to consolidate title and ownership, thereby forsaking the alternative remedy of foreclosure, should prevent the forced heirs from pursuing the recovery of the sums due.
Whether the trial court correctly determined the commencement of the prescriptive period for the claim, considering the relevant judicial resolution became final on August 29, 1965.