Villarica vs.

Court of Appeals
26 scra 189
November 29, 1968.
FACTS:
Spouses Villarica sold a parcel of land in Davao with an area of 1,174 sq. meters for P35,000 to
spouses Consunji and Montaverde. The instrument of absolute sale and vendors’ transfer of certificate of title
was delivered to the vendees. On the same day, Spouses Consunji executed another instrument granting the
spouses Villarica an option to buy the same property within one year for P37, 750.00. The spousces Consunji
registered the absolute deed of sale and a new certificate was issued in their names. The Spouses Consunji
then sold the lot to Jovito Francisco for P47, 000.00 by means of a public instrument which was registered and
issued a new title. The spouses Villarica brought an action for the reformation of the instrument of absolute
sale between Spouses Consunji and Francisco into an equitable mortgage as a security for a usurious loan of
P28,000.00 alleging that such was the real intention of the parties. Spouses Villarica contended that it should
be presumed as an equitable mortgage on the grounds that (1) the price of P35,000 was unusually
inadequate; (2) the vendors remained in possession of the property sold; (3) the period of one year for
repurchase granted in the instrument was extended for one month; and (4) the vendors pay the taxes on the
land sold.

ISSUE: WON the public instrument between the spouses Villarica and Spouses Consunji is one of absolute sale
or equitable mortgage.

HELD:

The instrument thereof was one of absolute sale. The court found Spouses Villarica’s contentions
unmeritorious on the grounds that the price was not inadequate; Spouses Consunji does not remain in
possession of the property but instead were allowed to collect monthly rents; the taxes paid were back taxes
which a vendor has an obligation to pay as they sell the land free from all liens; and said option to buy is
different and distinct from the right of repurchase.

In the latter basis, it was discussed that the right of repurchase is not a right granted the vendor by
the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale
as one of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the
right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument
cannot be a right of repurchase but some other right like the option to buy in the instant case. Once the
instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any
right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase
but some other right like the option to buy in the instant case.