G.R. No. 218731 - Augusto vs. Dy

The dispute involves two lots (Lots 4399 and 4400) covered by Transfer Certificate of Title No. T-19232, originally registered in the names of Leona C. vda. de Alfonso, and the co-owners Ernesto Alcantara with Rebecca Desamito and Gerondina Alcantara.
The title was derived from a prior title (TCT No. (38601) 4821) and bears annotations regarding extrajudicial settlements and subsequent transactions.

On September 7, 1983, Leona C. vda. de Alfonso executed a pacto de retro sale (sale con pacto de retro) in favor of the private respondents, for a consideration of P100,000.00.
The contract contained the right to repurchase, which the vendor-a-retro failed to exercise within the prescribed three-month period.
Evidence shows that the original owner’s duplicate of TCT No. T-19232 was delivered to the private respondents after the repurchase period expired, confirming the consummation of the sale.

Prior to the execution of the pacto de retro sale, Leona C. vda. de Alfonso had initiated negotiations with the private respondents regarding the sale of her share in the lots, despite the property being mortgaged to a third party.
Subsequent to the sale, the parties held several meetings and conferences, agreeing to partition the property. A geodetic engineer was even hired, and a subdivision plan was executed to reflect the intended partition between the private respondents (beneficiaries of the pacto de retro sale) and the other co-owners.
The partition agreement, in the form of a Deed of Extra-Judicial Partition, was executed under separate documentation but was later found to be defective as an instrument of conveyance due to the lack of the required sale document and proper registration procedures.

The pacto de retro sale was registered on October 27, 1987, although the extrajudicial partition was registered earlier (November 16, 1983), which raised issues regarding the proper order of registration and its legal effect on the transfer of title.
The registration of the partition agreement proved insufficient to transfer ownership, as it merely mentioned the alleged sale without the required surrender of the title and payment of registration fees per Section 57 of P.D. 1529.
No effective registration of a deed of sale was presented by the petitioners, making the partition registration an “idle ceremony” as it failed to operate legally as a conveyance.

The private respondents (beneficiaries of the pacto de retro sale) claimed ownership over the one-half share of the lot as a result of the valid sale, emphasizing that all evidence pointed to a bona fide sale transaction and not a collateral loan or mere equitable mortgage.
The petitioners argued several issues, including the contention that the pacto de retro sale was in reality an equitable mortgage, that Leona C. vda. de Alfonso lacked absolute ownership at the time of execution, and that the partition agreement, being registered earlier, should prevail.
Additional assertions by the petitioners involved demands for the declaration of the sale as void, entitlement to quiet title or damages, reimbursement of property income from the time of sale, and the award of attorney’s fees.

Whether the executed pacto de retro sale is a valid contract constituting a real sale con pacto de retro or merely an equitable mortgage, given that the vendor-a-retro was never in possession of the property.
Whether the contractual elements and the intention to convey title were present despite the absence of certain formalities typically required in a mortgage scenario.

Whether the later registration of the pacto de retro sale (October 27, 1987) should prevail over the earlier registered extrajudicial partition (November 16, 1983), particularly when the partition did not satisfy the requirements for transferring ownership under the Torrens system.
Whether the registration of a partition agreement without the necessary deed of sale and surrender of the transfer certificate of title can operate as a valid conveyance of ownership.

Whether the petitioners are entitled to declare the contract void on the ground that the vendor-a-retro lacked absolute ownership at the time of the sale.
Whether the petitioners’ claims that the pacto de retro sale was nothing more than a collateral arrangement in a loan transaction (or an equitable mortgage) hold merit.
Whether the petitioners should be required to reimburse one-half of the income derived from the property post the repurchase period.

The admissibility and weight of documentary evidence presented, including the absence of a genuine deed of sale for the extrajudicial partition and the reliance on the original title document delivered after the repurchase period.
Whether proper legal formalities and statutory requirements under the Land Registration Law were complied with in the transfer of interest in the property.