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VICTORIA CLARAVALL v. RICARDO LIM

FACTS:

The respondents filed a complaint for Consolidation of Ownership of Real Properties against the petitioner. They alleged that the petitioner executed a Deed of Sale with the Right of Repurchase, selling a commercial lot and a dwelling house to the respondents. The sale was for a consideration of P250,000. The conditions of the sale were that the petitioner reserved the right to repurchase the properties within two years and that she was obligated to give written notice to the respondents if she intended to repurchase. The petitioner failed to give written notice and failed to repurchase the properties, thus the respondents claimed that they are entitled to the consolidation of their ownership. The petitioner denied the allegations and raised special and affirmative defenses in her answer with counterclaim. After the trial, the RTC rendered a decision in favor of the respondents, declaring them as the absolute owners of the properties and ordering the petitioner to pay attorney's fees and costs. The petitioner appealed the decision to the CA, but it affirmed the RTC's decision. Hence, this petition for review on certiorari was filed before the Supreme Court.

ISSUES:

  1. Whether the contract entered into by the petitioner and respondents is an equitable mortgage.

  2. Whether the petitioner's right to repurchase has expired.

  3. Whether the respondents failed to pay the full amount of the purchase price.

  4. Whether the contract is a sale with right of repurchase or an equitable mortgage.

  5. Whether the petitioner is entitled to the benefit of the third paragraph of Article 1606 of the Civil Code.

  6. Whether or not the dismissal of the case by the Court of Appeals based on the ground of prescription is in order.

  7. Whether or not the failure to exhaust administrative remedies is sufficient ground to dismiss the case.

RULING:

  1. The Court finds that the petitioner's arguments are without merit. It upholds the findings of the Court of Appeals and the Regional Trial Court that the contract between the petitioner and respondents is a sale with right of repurchase, not an equitable mortgage. The Court also rules that the petitioner's right to repurchase has expired and that the respondents have paid the full amount of the purchase price.

  2. The Court found that the contract between the parties is a sale with right of repurchase. The petitioner failed to present any competent evidence to support her claim that the contract is an equitable mortgage. The Court also noted that the petitioner's claim of equitable mortgage appears to be an afterthought, as she only raised this argument when she realized that she could not repurchase the property within the stipulated period.

  3. The Court held that since the transaction is a sale with right of repurchase, the petitioner is not entitled to the benefit of the third paragraph of Article 1606 of the Civil Code. The Court emphasized that the provision is only applicable when there is an honest doubt as to the parties' intention and if the agreement was really a mortgage and not a sale. In this case, there was no doubt as to the intention of the parties and the transaction was clearly a sale with right of repurchase.

  4. No, the Court of Appeals erred in dismissing the case based on prescription. The filing of an administrative case for the same cause of action tolls the running of the prescriptive period for filing an action in court. Therefore, the filing of the administrative case by the petitioner effectively suspended the prescriptive period for filing the instant case.

  5. No, the failure to exhaust administrative remedies should not be deemed sufficient to dismiss the case. Exhaustion of administrative remedies is generally required; however, there are exceptions to this rule. In the present case, the issues involved are purely legal and do not require the resolution of factual issues by the administrative agency. Thus, the petitioner was not required to exhaust administrative remedies before seeking judicial intervention.

PRINCIPLES:

  • In a petition for review on certiorari under Rule 45, only questions of law may be raised and passed upon by the Court.

  • The Court does not normally undertake the re-examination of the evidence presented by the parties during the trial.

  • Having possession of the property, the validity of the right to repurchase, the full payment of the purchase price, and the nature of the contract are questions of fact.

  • The person in actual possession of the property at the time of the execution of a deed of sale with right of repurchase is relevant in determining the nature of the contract.

  • Any extension for the exercise of the right to repurchase must be expressly provided in another document to give rise to the presumption of equitable mortgage.

  • A contract of sale with right of repurchase can be considered valid if it is executed in accordance with the formalities required by law and its contents are clear and unambiguous.

  • The burden of proof lies on the party alleging a fact.

  • Mere allegation is not considered as evidence.

  • The application of the third paragraph of Article 1606 of the Civil Code is predicated upon the good faith belief of the vendor-a-retro that the contract is an equitable mortgage.

  • The benefit of the third paragraph of Article 1606 is not applicable when there is no honest doubt as to the parties' intention and if the agreement was really a sale with right of repurchase.

  • The filing of an administrative case for the same cause of action tolls the running of the prescriptive period for filing an action in court.

  • The failure to exhaust administrative remedies is generally required, but there are exceptions to this rule, particularly when the issues involved are purely legal and do not require the resolution of factual issues by the administrative agency.