G.R. No. 98920 - Ignacio vs. Court of Appeals

Case Summary (G.R. No. 98920)

Factual Background

On December 24, 1987, Jesus F. Ignacio purchased for P1,000,000.00 a house and lot described as 624 square meters at No. 13 Narra Street, Valle Verde III, Pasig, under a written Deed of Sale Under Pacto de Retro executed by petitioner and respondent Renato G. Yalung with the marital consent of respondent Marina T. Yalung. The deed reserved to the vendor the right to repurchase within ninety days from December 24, 1987 for the same price plus five percent interest. The property was covered by Transfer Certificate of Title No. 64873 issued the same day in the name of “Renato G. Yalung xxx married to Marina Toledano.” Respondents failed to repurchase within the ninety-day period and a five-day extension.

Trial Court Proceedings

On April 19, 1988, Jesus F. Ignacio filed with the Regional Trial Court, Branch 151, Pasig, a petition titled “In Re: Petition to Consolidate Ownership Under Pacto de Retro Sale,” docketed as LRC Case No. R-3936. Respondents manifested the execution and genuineness of the Deed of Sale Under Pacto de Retro but alleged that the instrument was intended as an equitable mortgage to secure a loan, citing Articles 1602(1) and (2) and 1603 of the Civil Code, and asserted that they had remained in actual possession. The trial court conducted a full hearing, received documentary and testimonial evidence, and on August 9, 1988 rendered judgment granting the petition, declaring the deed a valid pacto de retro sale, ordering cancellation of TCT No. 64873, and directing issuance of a new transfer certificate in favor of Jesus F. Ignacio.

Court of Appeals Ruling

On appeal, the Court of Appeals reversed the trial court by Decision dated March 4, 1991. The appellate court held that the Regional Trial Court sitting as a land registration court lacked jurisdiction over a petition for consolidation of ownership, which the Court of Appeals characterized as an ordinary civil action under Article 1607 of the Civil Code. The Court of Appeals dismissed the land registration case without prejudice to filing another action with the proper court and denied reconsideration on April 29, 1991.

Issues Presented

The principal issues were whether the Regional Trial Court, sitting as a land registration court, had jurisdiction to resolve the petition for consolidation of ownership under the facts; and whether the instrument between the parties constituted a sale under pacto de retro or an equitable mortgage.

Parties' Contentions

Jesus F. Ignacio contended that the trial court properly resolved the dispute in the land registration proceeding, that both parties had submitted the matter to the court and had been afforded full opportunity to litigate, and that the instrument was a valid pacto de retro sale. Respondents Renato G. Yalung and Marina T. Yalung argued that the deed was in substance an equitable mortgage, that they remained in actual possession, that the contract’s terms evidenced a mortgage rather than a sale, and that the land registration court lacked jurisdiction to entertain an action for consolidation of ownership.

Supreme Court Ruling

The Court granted the petition for certiorari under Rule 45, Rules of Court, reversed and set aside the Court of Appeals Decision dated March 4, 1991 and its Resolution dated April 29, 1991, and reinstated the Regional Trial Court decision dated August 9, 1988 in LRC Case No. R-3936. The Court found that respondents waived the jurisdictional objection by submitting to the land registration proceeding and by litigating the merits, and that under P.D. No. 1529 the former strict distinction between the general jurisdiction of the Regional Trial Court and its limited jurisdiction as a land registration court had been removed.

Legal Basis and Reasoning

The Court first observed that although an action for consolidation of ownership is generally an ordinary civil action, a Regional Trial Court exercising its land registration function may properly resolve such controversies when the parties acquiesce and have full opportunity to present evidence, and hence respondents were estopped from belatedly challenging jurisdiction. The Court relied on precedents recognizing waiver where defendants litigate the substantive issues in a land registration proceeding. The Court further held that P.D. No. 1529 amended the scope of the land registration court so that Regional Trial Courts could hear petitions filed after original registration and decide controversial questions arising therefrom, thereby supporting the trial court’s exercise of jurisdiction. On the merits, the Court concluded that the instrument was a sale with a right of repurchase rather than an equitable mortgage. The Court explained that a reduced price in a pacto de retro sale does not convert the transaction into an equitable mortgage, that the vendor’s continued possession is a relevant but not exclusive cri

Case Syllabus (G.R. No. 98920)

Parties and Procedural Posture

JESUS F. IGNACIO, PETITIONER brought a petition for review on certiorari under Rule 45 of the Revised Rules of Court to review the decision of the Court of Appeals.
THE HON. COURT OF APPEALS (FORMER FIRST DIVISION), RESPONDENTS reversed the Regional Trial Court decision and dismissed the land registration case for lack of jurisdiction.
RENATO G. YALUNG AND MARINA T. YALUNG, RESPONDENTS appealed to the Court of Appeals after the Regional Trial Court consolidated title in favor of the petitioner.
The petition to consolidate ownership was docketed as LRC Case No. R-3936 in the Regional Trial Court, Branch 151, Pasig.

Key Factual Allegations

Petitioner purchased a house and lot measuring 624 square meters at No. 13 Narra Street, Valle Verde III, Pasig, by a public instrument entitled "Deed of Sale Under Pacto de Retro" for P1,000,000.00 paid on December 24, 1987.
The property was covered by Transfer Certificate of Title No. 64873 issued in the name of "Renato G. Yalung xxx married to Marina Toledano" on the same day the deed was executed.
The deed expressly granted the vendors the right to repurchase the property within 90 days from December 24, 1987 for the same price plus five percent interest.
Respondents failed to repurchase within the 90-day period despite a five-day extension.
Respondents alleged in the Regional Trial Court that the instrument was intended as an equitable mortgage and that they remained in actual possession of the property and that the interest rate was unconscionable.

Trial Court Proceedings

The Regional Trial Court, sitting as a land registration court, conducted a full trial with documentary and testimonial evidence and found that the parties intended a sale under pacto de retro, not an equitable mortgage.
The trial court rendered judgment on August 9, 1988 consolidating title in favor of Petitioner, declaring TCT No. 64873 null and void, and ordering issuance of a new transfer certificate in the name of Petitioner.
Respondents did not move to dismiss the petition for lack of jurisdiction before the trial court and instead filed a Manifestation and defended on the merits.

Court of Appeals Ruling

The Court of Appeals, in its decision dated March 4, 1991, reversed the Regional Trial Court and held that the land registration court lacked jurisdiction because a petition for consolidation of ownership arising from failure to redeem is an ordinary civil action under Article 1607 of the Civil Code.
The Court of Appeals dismissed the land registration case without prejudice to the filing of another action in the proper court.
The Court of Appeals denied reconsideration in a resolution dated April 29, 1991.

Issues

Whether the Regional Trial Court sitting as a land registration court had jurisdiction to hear and decide the petition for consolidation of ownership.
Whether the instrument titled "Deed of Sale Under Pacto de Retro" was a valid sale with right of repurchase or an equitable mortgage under Articles 1602 and 1603 of the Civil Code.

Contentions of the Parties

Petitioner contended that the parties intended a va