Tan v Valdehueza (Credit Transactions)

TAN v VALDEHUEZA G.R. No. L-38745 August 6, 1975  

FACTS: 

A parcel of land was the subject matter of the public auction sale held on May 6, 1955 at the Capitol Building in Oroquieta, Misamis Occidental, wherein the plaintiff was the highest bidder and as such a Certificate of Sale was executed by MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff in favor of LUCIA TAN the herein plaintiff. Due to the failure of defendant Arador Valdehueza to redeem the said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA TAN.  

DECISION OF LOWER COURTS: 

* Trial court: declared tan as the absolute owner. appeal was certified to SC by the Court of Appeals as involving questions purely of law.  

ISSUES & RULING: 

1. WON the subject land subject of pacto de retro is actually an equitable mortgage  

Yes, it is an equitable mortgage.  

The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions are presumed to be equitable mortgages, whether registered or not, there being no third parties involved.  

Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect since August 30,1950), this is no longer so.  

If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125, 2nd sentence).  

2. WON the imposition of legal interest on the amounts subject of the equitable mortgages, P1,200 and P300, respectively  

It is without legal basis, for, "No interest shall be due unless it has been expressly stipulated in writing." (Article 1956, new Civil Code) Furthermore, the plaintiff did not pray for such interest; her thesis was a consolidation of ownership, which was properly rejected, the contracts being equitable mortgages.