G.R. No. 7063 - Tuazon vs. Goduco

Plaintiffs/Appellants: Tomas, Enrique, and Alejandra Tuazon, who were the original owners of a parcel of land in the barrio of Santa Cruz, Gapan, Nueva Ecija.
Defendants/Appellees: Ismael Goduco and Esteban Goduco, with Ismael being the immediate purchaser of the land and Esteban subsequently acquiring rights from him.

In or about 1897, the Tuazon siblings executed a contract with Ismael Goduco involving the mortgaging of their land; the stated condition allowed them to redeem the land within twenty years after the contract’s execution.
The contract, written in Tagalog and translated into Spanish, was intended to be one of sale with a right of repurchase (pacto de retro), as evidenced by the language “we have sold as by mortgage” and further stipulations that provided for redemption or, failing that, the creditor’s right to sell the land.
Specific stipulations within the contract included:

Tomas Tuazon’s undertaking to cultivate the land using his own resources.
An agreement to share crop yields equally and for the Tuazons to transport the creditor’s share to their warehouse.
A condition that, if the covenants were breached or if the Tuazons were unable to redeem the land, the creditor could eject them and subsequently sell the land to a third party without any claim from the sellers.

Ismael Goduco took possession of the land in 1897 without the consent of the plaintiffs and continued to hold it, allegedly causing damages estimated at P50 per annum due to the loss of rental value.
Around mid-May 1910, the plaintiffs attempted to redeem the land by offering the agreed redemption price of P60, but Ismael Goduco refused, claiming he had already sold the property to Esteban Goduco.

Annulment of the sale to Esteban Goduco and an order compelling Ismael Goduco to return the land upon payment of P60, as well as the cancellation of the mortgage; or
A declaration cancelling the mortgage instrument with a condemnation of the damages at P50 per annum from 1897 until the filing date, plus court costs.

Denied the majority of the plaintiffs’ allegations except a few admitted facts regarding possession and sale.
Asserted a special defense that the plaintiffs had, in fact, sold the land to Ismael Goduco under a pacto de retro on May 23, 1897, with no stipulated redemption term.
Claimed that by April 1908, Ismael Goduco had sold the land to Esteban Goduco, who had taken actual possession as absolute owner, and further contended that the plaintiffs’ right of redemption had prescribed.

During the trial held on October 21, 1910, documentary evidence was presented, and subsequently, the trial court rendered a judgment on December 21, 1910, dismissing the plaintiffs’ complaint with costs imposed on them.
The plaintiffs appealed that judgment, and despite motions for rehearing and exceptions, the appellate process advanced the issue for consideration on the basis of the contract’s terms.

The instrument (page 20 in the record) contained the contract terms, including the description of the land, boundaries, the price dynamics in terms of palay (rice), and the mechanics of cultivation and revenue sharing.
The language of the contract unmistakably indicated the intention to create a sale with a right of repurchase through statements such as “we have sold” and by elaborating on obligations in case of nonfulfillment.
The contract, being a private instrument, was not recorded in the property registry, an essential requirement for constituting a mortgage in legal form, thereby reinforcing the interpretation as a pacto de retro.

Whether the contract is to be construed as a sale with a right of repurchase (pacto de retro) rather than a conventional mortgage.

The interpretation hinges on the precise language of the instrument, notably the terms “we have sold” and conditions that permit remedy through redemption or, failing that, sale to a third party.

Whether the plaintiffs’ right to redeem the mortgaged land has prescribed under the statutory periods provided by the Civil Code.

Examination of the time lapse from the execution of the contract (May 23, 1897) to the filing of the suit (May 23, 1910) in light of Article 1508 of the Civil Code.
Consideration of whether the absence of an express redemption period coupled with the statutory limits (four years without express agreement and maximum of ten years if agreed upon) precludes the plaintiffs from exercising their right to repurchase.

Whether the subsequent sale by Ismael Goduco to Esteban Goduco was legally effective given the consolidation of possession and the lapse of the right of redemption.

Determining if the purchaser (Ismael Goduco) acquired full dominion over the property, thereby legitimizing his disposal of the same in compliance with relevant Civil Code provisions.