Heirs of Jose Reyes, Jr. namely: Magdalena C. Reyes, et al. vs. Amanda S.

Reyes et
al., G.R. No. 158377, August 13, 2010
Statement of the Case:
On September 2, 1994, respondents Magdalena Reyes, et al. initiated a suit for
quieting of title and reconveyance in the RTC alleging that their predecessor Alejandro had
acquired ownership of the property by virtue of the deed Pagsasaayos ng Pag-aari at
Pagsasalin executed on August 11, 1970 by the heirs of Sps. Francia. The RTC ruled in
favor of respondents declaring that Alejandro had acquired ownership of the property by
operation of law upon the failure of the petitioners repurchase of property; that the joint
affidavit executed by Alejandro, Leoncia, Jose, Jr. and Jose, Sr., extending the period of
redemption was inefficacious; and that the heirs of Potenciana who had predeceased her
parents had no successional rights.
Aggrieved, petitioners appealed to the CA assailing RTCs disposition, except the
dismissal of the complaint as against Potencianas heirs. The CA held that the appellants
(petitioners herein) failure to file an action for the reformation of the Kasulatan ng Biling
Mabibiling Muli within 10 years from the deeds execution already barred them from
claiming the transaction executed between Leoncia and her children on one hand, and the
Sps. Francia on the other hand, was an equitable mortgage. The CA likewise agreed with
the RTC that the Magkalakip na Salaysay did not effectively extend the period for Leoncia
and her children to repurchase the property.
Petitioners appealed to the CA, but the latter affirmed RTCs Decision.

Facts of the Case

Antonio Reyes and his wife, Leoncia Reyes (Leoncia) were owners of a parcel
residential land with an area of 442 square meters in Pulilan, Bulacan, where they
constructed their dwelling. The couple had four children: Jose, Sr., Teofilo, Jose, Jr., and
Potenciana. Antonio Reyes died intestate, and was survived by Leoncia and their three sons
and Potenciana. Potenciana having predeceased her father also died intestate, survived by
her children.
On July 9, 1955, Leoncia and her three sons executed a deed denominated
Kasulatan ng Biling Mabibiling Muli, whereby they sold the land and its existing
improvements to the Sps. Francia for the amount of P500.00, subject to the vendors right to
repurchase for the same amount oras na silay makinabang. Potencianas heirs did not
assent to that deed, and Teofilo and Jose, Jr. and their respective families remained in
possession of the property and paid real property taxes thereon.
The Sps. Francia both died intestate, without Leoncia and her children paying the
amount of P500.00. Alejandro, son of Jose, Sr., paid said amount to Sps. Francia. The heirs
of Sps. Francia then, transferred and conveyed to Alejandro all the rights and interests to
Alejandro.
On August 21, 1970, Alejandro executed a Kasulatan ng Pagmeme-ari declaring that
he had acquired all the rights and interests of the heirs of the Sps. Francia after the

vendors failed to repurchase within the given period, and paid realty property taxes from
then on.
On October 17, 1970, Alejandro, Leoncia and Jose, Sr. executed a Magkalakip na
Salaysay, acknowledging the right of Leoncia, Jose, Jr. and Jose, Sr. to repurchase the
property at any time for the same amount. Leoncia died intestate and was survived by
Jose, Sr., Teofilo, Jose, Jr. and the heirs of Potenciana. Alejandro likewise died intestate
survived by his wife, Amanda Reyes and her children.

Issues:
1. Whether or not the CA erred in finding that petitioners were already barred from
claiming that the transaction entered into by their predecessors-in-interest was an
equitable mortgage and not a pacto de retro sale.
2. Whether or not the CA erred in affirming the findings of the court a quo that the
Magkasanib na Salaysay (Joint Affidavit), executed by Alejandro, Leoncia and Jose,
Jr., wherein Leoncia and her children were granted by Alejandro the right to
repurchase the property at anytime for the amount of P500.00, was of no legal
significance.

Ruling:
Ruling No. 1
Yes. While the CA correctly concluded that the true agreement of the party vis-a-vis
the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage not a pacto de retro
sale, it erred when it concluded that petitioners are barred from claiming the transaction as
such by their failure to redeem the property for a long period of time.
It was undisputed that the purported vendors had continued in possession of the
property even after the execution of an agreement, and that said property remained
declared for taxation purposes under Leoncias name, with the real taxes due paid by her.
Paragraphs, 2 and 5 of Article 1602 of the Civil Code states that, The contract shall be
presumed to be an equitable mortgage, in any of the following cases: (2) When the vendor
remains in possession as lessee or otherwise; (5) When the vendor binds himself to pay the
taxes on the thing sold. The existence of any one of the conditions under Article 1602, not
the concurrence of all or of a majority thereof suffices to the presumption it is an equitable
mortgage.
Petitioners in this case are not barred from claiming that the transaction under the
Kasulatan ng Biling Mabibiling Muli was an equitable mortgage by their failure to redeem
the property for a long period of time. Considering the period of redemption stated in the
Kasulatan ng Biling Mabibiling Muli, which is sa oras na silay makinabang, signified
that no definite period had been stated pursuant to Articles 1142 and 1144 of the Civil
Code. The full redemption price should have been paid by July 9, 1955 and foreclosed said

mortgage upon expiration of 10-year period, but the mortgagees Sps. Francias or their heirs
did not do so. Instead, they accepted Alejandros payments until the debt was fully satisfied.
The acceptance of payments even beyond the 10-year period of redemption estopped the
mortgagees heirs from insisting the period to redeem the property had already expired.

Ruling No. 2

No. The provisions of the Civil Code governing equitable mortgages disguised as sale
contracts, like the one herein, are primarily designed to curtail the evils brought about by
contracts of sale with right to repurchase, particularly the circumvention of the usury law
and pactum commissorium. Courts have taken judicial notice that contracts of sale with a
right to repurchase have been frequently resorted to. It is the reality that grave financial
distress, which are left without a choice to obtain much-needed loan from unscrupulous
money-lenders. This is precisely explained in paragraph 3, Article 1602 of the Civil Code,
where the contract shall be presumed to be an equitable mortgage when upon or after the
expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed.
The law clearly allows the new period of redemption to be agreed upon even after the
expiration of the equitable mortgagors right to repurchase, and treats such extension as
one of the indicators that the true agreement between the parties is an equitable mortgage,
not a sale with right to repurchase. It was indubitable, therefore, that the Magkasanib na
Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within
which to pay to Alejandro the redemption price of 500.00.