Case Summary (G.R. No. L-38745)
Petitioner
Arador Valdehueza and Rediculo Valdehueza
Respondent
Lucia Tan
Key Dates
May 6, 1955 – Public auction and issuance of Certificate of Sale (Annex B)
March 15, 1955 – First deed of pacto de retro executed and registered (Annex E)
August 5, 1955 – Second deed of pacto de retro executed but unregistered (Annex D)
July 24, 1957 – Filing of injunction suit (Civil Case No. 2002)
May 22, 1963 – Dismissal of injunction suit for failure to prosecute
August 15, 1966 – Interest commencement date fixed by trial court
August 6, 1975 – Decision rendered by the Supreme Court (use 1935 Constitution as governing charter)
Applicable Law
1935 Philippine Constitution
Civil Code of 1889 (Old)
Civil Code of 1950 (New), particularly Articles 2125 (effect of non-registration) and 1956 (interest stipulation)
Rules of Court, Rule 17, Section 3 (effect of dismissal for failure to prosecute)
Stipulated Facts and Trial Court Judgment
The parties admitted Lucia Tan’s capacity to sue; the identity of the land in the first cause of action; the details of the auction sale, non-redemption by Arador Valdehueza, and subsequent absolute deed of sale (Annex C); the prior injunction case (Civil Case No. 2002); and the execution of two pacto de retro deeds (Annex E registered; Annex D unregistered) for ₱1,500. The Valdehuezas remained in possession and paid taxes.
The trial court declared Tan absolute owner of the auctioned land, ordered the Valdehuezas dispossessed, treated Annex E as an equitable mortgage requiring payment of ₱1,200 plus 6% interest from August 15, 1966, treated Annex D as a mere loan secured by the land requiring ₱300 plus 6% interest from the same date, and awarded Tan attorney’s fees of ₱1,000 plus costs.
Issues on Appeal
- Whether the dismissal of the injunction suit (Civil Case No. 2002) barred the present action by res judicata.
- Whether both deeds of pacto de retro should be treated as equitable mortgages regardless of registration.
- Whether legal interest on the mortgage obligations may be imposed absent an express stipulation.
Res Judicata Principle and Its Inapplicability
Under Rule 17, Section 3, a dismissal for failure to prosecute operates as an adjudication on the merits. However, case No. 2002 sought injunctive relief to prevent entry and harvesting of nuts (possession of fruits), whereas case No. 2574 seeks declaration of ownership and recovery of possession (title and possession). The two causes of action are not identical, and there is no inconsistency between a denial of injunction and a later declaration of title. Consequently, res judicata does not apply.
Characterization of Pacto de Retro Transactions
Article 1875 of the Old Civil Code required registration for validity even between parties, but Article 2125 of the New Civil Code removes this requirement: “If the instrument is not recorded, the mortgage is nonetheless binding between the parties.” Both the registered (Annex E) and unregistered (Annex D) deeds, coupled with the Valdehuezas’ continued possession and payment of taxes, give rise to equitable mort
Case Syllabus (G.R. No. L-38745)
Factual Background
- On May 6, 1955, the parcel in the first cause of action was sold at public auction in Oroquieta, Misamis Occidental; Lucia Tan was the highest bidder and obtained a Certificate of Sale.
- Defendant Arador Valdehueza failed to redeem within one year, prompting the Ex-Officio Sheriff to execute an Absolute Deed of Sale in favor of Lucia Tan.
- Defendants Arador and Rediculo Valdehueza executed two Deeds of Pacto de Retro Sale (Annex D dated August 5, 1955, unregistered; Annex E dated March 15, 1955, registered) for portions of another unregistered parcel, for a total consideration of ₱1,500.
- After execution of the pacto de retro deeds, the Valdehuezas remained in possession of the land and paid the realty taxes.
Procedural History
- Civil Case No. 2002 (July 24, 1957): Lucia Tan sought an injunction to prevent the Valdehuezas from entering and gathering nuts on the first parcel; the case and counterclaim were dismissed May 22, 1963 for failure to prosecute.
- Civil Case No. 2574: Filed by Lucia Tan in the Court of First Instance, Misamis Occidental, seeking (1) declaration of ownership and recovery of possession of the first parcel; and (2) consolidation of ownership of the two pacto de retro portions.
Stipulation of Facts
- Parties admitted Lucia Tan’s capacity to sue and the identity of all Valdehueza siblings as defendants; Arador and Rediculo’s answer stood for Pacita, Concepcion, and Rosario.
- The parties agreed on the identity of the first cause parcel and the validity of Annexes A (Notice of Sheriff’s Sale), B (Certificate of Sale), and C (Absolute Deed of Sale).
- They confirmed that Tan and the Valdehuezas were the same parties in Case No. 2002, with the complaint, answer, and order marked as Exhibits 1–3.
- They ac