G.R. No. L-28120 - Nava vs. Peers Marketing Corp.

Petitioner-spouses Jaime and Marina Benos and respondent-spouses Gregorio and Janice Gail Lawilao executed a Pacto de Retro Sale on February 11, 1999.
The agreement involved the sale of a lot (covered by Tax Declaration No. 25300) and an existing building for ₱300,000.00, with payment split equally – one-half in cash to the Benos spouses and the other half directed to the bank to pay off the Benos’ secured loan.

The contract provided that the Benos spouses could redeem the property within 18 months by returning the full contract price; failure to do so would render the sale irrevocable and consolidate title in the name of the Lawilao spouses.
After the execution of the contract, the Lawilao spouses took immediate possession of the property and leased out the building.
Janice Lawilao restructured the bank loan twice instead of effecting its immediate payment, leading eventually to the loan becoming due and demandable.

On August 14, 2000, a son of the Benos spouses paid the bank ₱159,000.00 representing the principal and interest of the loan.
On the same day, the Lawilao spouses approached the bank to pay the loan, but the bank refused their offer.
Subsequently, the Lawilao spouses filed a petition for consignation in Civil Case No. 310 before the Municipal Circuit Trial Court, depositing ₱159,000.00; however, the petition was dismissed for lack of cause of action.

The Lawilao spouses filed a complaint in Civil Case No. 314 for consolidation of ownership of the property.
The Benos spouses moved to dismiss the case on grounds of lack of jurisdiction and lack of cause of action.
On November 14, 2002, the Municipal Circuit Trial Court rendered judgment in favor of the Benos spouses by dismissing the consolidation claim.
The Lawilao spouses appealed the Municipal Trial Court’s decision to the Regional Trial Court, which reversed the earlier decision and declared ownership consolidated in their favor.
The Court of Appeals affirmed the Regional Trial Court ruling on December 5, 2005.
Petitioners (the Benos spouses) then filed a petition for review under Rule 45 of the Rules of Court, raising issues on the consolidation of ownership and the true nature of the contract.

The Lawilao spouses had breached the contract by failing to pay the bank loan and thus forfeited their right to consolidate ownership.
The contract should be construed as an equitable mortgage because of the inadequacy of the consideration, and as such, the proper remedy would be foreclosure or recovery of the loan, not consolidation.

The Pacto de Retro Sale reflected the parties’ true agreement, evidencing a sale with a right of repurchase and not merely an equitable mortgage.
Their immediate possession and actions (including offering to pay the bank and filing a petition for consignation) confirmed their compliance with the contract.
The Benos spouses had failed to validly repurchase the property within the redemption period.

Whether the Lawilao spouses were entitled to consolidate ownership over the subject property despite the alleged breach regarding the payment of the bank loan.
Whether the Pacto de Retro Sale should be characterized as an equitable mortgage, which would have required a different remedy (foreclosure or recovery of the loan) rather than the consolidation of ownership.
Whether the Lawilao spouses complied with the legal requirements for a valid tender of payment and proper consignation as required by the Civil Code.
Whether the actions of the parties, including the filing of a petition for consignation and the counterclaims for judicial rescission advanced by the Benos spouses, properly satisfied the conditions for rescission under Articles 1191 and 1592 of the Civil Code.