LUISA
BRIONES-VASQUEZ, petitioner, vs. COURT OF APPEALS and HEIRS OF MARIA MENDOZA
VDA. DE OCAMPO, respondents
G.R. No.
144882 | February 4, 2005
FACTS:
Under an agreement denominated as a pacto de retro sale,
Maria Mendoza Vda. de Ocampo acquired a parcel of land from Luisa Briones. The
latter thereunder reserved the right to repurchase the parcel of land up to
December 31, 1970.
Maria Mendoza Vda. De Ocampo passed away on May 27, 1979. 2
On June 14, 1990, the heirs of Maria Mendoza Vda. De Ocampo, filed a petition
for consolidation of ownership, alleging that the seller was not able to
exercise her privilege to redeem the property on or before December 31, 1970.
The RTC rendered a decision declaring the sale as a true
pacto de retro sale and that Briones can still redeem the property within 30
days from the finality of this judgment, subject to the provisions of Art. 1616
of the New Civil Code.
Private respondents appealed the RTC Decision to the CA who
set aside the RTC’s ruling and declared that the sale was one of an equitable
mortgage and not a sale with right of repurchase.
ISSUE:
Whether consolidation of ownership is proper in cases of equitable
mortgage
RULING:
Since the contract is characterized as a mortgage, the
provisions of the Civil Code governing mortgages apply. Article 2088 of the
Civil Code states:
“The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary is null
and void.”
The Court has interpreted this provision in the following
manner:
The essence of pacto commissorio, which is prohibited by
Article 2088 of the Civil Code, is that ownership of the security will pass to
the creditor by the mere default of the debtor. The only right of a mortgagee
in case of non-payment of a debt secured by mortgage would be to foreclose the
mortgage and have the encumbered property sold to satisfy the outstanding
indebtedness. The mortgagor’s default does not operate to vest in the mortgagee
the ownership of the encumbered property, for any such effect is against public
policy, as enunciated by the Civil Code.
Applying the principle of pactum commissorium specifically
to equitable mortgages, in Montevirgen v. CA, the Court enunciated that the
consolidation of ownership in the person of the mortgagee in equity, merely
upon failure of the mortgagor in equity to pay the obligation, would amount to
a pactum commissorium. The Court further articulated that an action for
consolidation of ownership is an inappropriate remedy on the part of the
mortgagee in equity. The only proper remedy is to cause the foreclosure of the
mortgage in equity. And if the mortgagee in equity desires to obtain title to
the mortgaged property, the mortgagee in equity may buy it at the foreclosure
sale.
The private respondents do not appear to have caused the
foreclosure of the mortgage much less have they purchased the property at a
foreclosure sale. Petitioner, therefore, retains ownership of the subject
property. The right of ownership necessarily includes the right to possess,
particularly where, as in this case, there appears to have been no availment of
the remedy of foreclosure of the mortgage on the ground of default or
non-payment of the obligation in question
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