374 SCRA 51 January 17, 2002

RONALDO P. ABILLA AND GERALDA A.

DIZON, PETITIONERS,
VS.
CARLOS ANG GOBONSENG, JR. AND THERESITA
MIMIE ONG, RESPONDENTS.
FACTS:
Spouses Abilla Spouses Gobonseng
action for specific
performance, recovery of
sum of money and damages
reimbursement of the
expenses they incurred in
the preparation and
registration of 2 public
instruments
Deed
of Sale
Option
to Buy
DEFENSE:
contended that the
transaction
covered by the
instruments was a
mortgage.
Spouses Abilla
declared that the transaction
between the parties was not an
equitable mortgage
October 29, 1990 Trial Court
Favored
Spouses Gobonseng
On appeal by
respondents, the
Court of Appeals ruled
that the transaction
between the parties
was a pacto de
retro sale, and not an
equitable mortgage.
stating that it was a sale
giving Spouses
Gobonseng until Aug.
31, 1983 within which to
buy back the 17
lots subject of the sale
February 23, 1999
Spouses Gobonseng
filed with the RTC an urgent
motion to repurchase the
lots with tender of payment
DENIED
after the judge inhibited
himself from the case, it
was re-raffled to a
different branch
granted the
motion to
repurchase
ISSUE:
Whether or not the vendors in a sale judicially declared as
a pacto de retro may exercise the right of repurchase under
Article 1606, third paragraph, of the Civil Code, after they
have taken the position that the same was an equitable
mortgage.
RULING:
It was held that the said provision was inapplicable.
Sellers in a sale judicially-declared as pacto de retro may NOT
exercise the right to repurchase within the 30-day period provided
under Art. 1606, although they have taken the position that the same
was an equitable mortgage, if it shown that there was no honest belief
thereof since:
(a) none of the circumstances under Art. 1602 were shown to exist
to warrant a conclusion that the transaction was an equitable
mortgage;
(b) that if they truly believed the sale to be an equitable mortgage,
as a sign of good faith, they should have consigned with the trial
court the amount representing their alleged loan, on or before the
expiration of the right to repurchase.
In the case at bar, both the trial court and the Court of Appeals were of
the view that the subject transaction was truly a pacto de retro sale;
and that none of the circumstances under Article 1602 of the Civil
Code exists to warrant a conclusion that the transaction subject of the
Deed of Sale and Option to Buy was an equitable mortgage.
The Court of Appeals correctly noted that if respondents really
believed that the transaction was indeed an equitable mortgage, as a
sign of good faith, they should have, at the very least, consigned with
the trial court the amount of P896,000.00, representing their alleged
loan, on or before the expiration of the right to repurchase on August
21, 1983.
Clearly, therefore, the declaration of the transaction as a pacto de
retro sale will not, under the circumstances, entitle respondents to the
right of repurchase set forth under the third paragraph of Article 1606
of the Civil Code.

FALLO:
WHEREFORE, in view of all the foregoing, the instant petition
is GRANTED and the January 14, 2001 Order of
the Regional Trial Court of Dumaguete City, Branch 41, in Civil Case
No. 8148, is REVERSED and SET ASIDE.
SO ORDERED.