On December 4, 1928, the spouses Laureano Marquez and Eugenia Capiral leased to defendant Vicente Valencia the herein mentioned fishpond for a period of ten years, expiring December 31, 1938. The stipulated yearly rental was P1, 000, payable every month of January. Valencia held the fishpond and paid the rents for the years 1929, 1930 and 1931. According to plaintiffs, Valencia could make a net profit of P2, 000 every year. Before July, 1931, Laureano Marquez had a litigation with Fortunato Santiago, and to settle it, he got that month seven thousand pesos (P7,000) from Vicente Valencia who did not want to give it “unless Laureano Marquez signed the document Exhibit E.” Although Marquez actually received the amount of P7,000 only, the document Exhibit B listed the, sum of P11,290 as purchase and repurchase price. The distress for money under which he then was, places him in the same condition as other borrowers, in numerous cases reported in the books, who have submitted to the dictation of the lender under the pressure of their wants. Necessitous men are not, truly speaking, free men; but, to answer a present emergency, will submit to any terms that the crafty may impose upon them.” (Villa vs. Santiago, 38 Phil., 157, 164.)

Now, it is easy to understand (a) why the petitioners were required to pay the land taxes; (b) why they were charged compound interest at the rate of ten per cent; (c) why they received only P7,000, when the alleged purchase and repurchase price was P11,290; (d) why the amount actually received by the petitioners coincided with the total rental for the unexpired term of the lease, Exhibit A; (e) why the respondent Vicente Valencia spoke of “the amount of P7,000, the capital;” and (f) why the sum actually received by the petitioners, or even the alleged-purchase and repurchase price of P11,290, was much below the assessed value.


WON the payment of the Vicente Valencia will close the existence of a Pacto de retro sale.


No, the Supreme Court reversed the ruling of the Court of appeals because, neither the payment by the vendor of the land tax, interest, or other additional charge, nor the fact that the amount actually received by the vendor is different from the purchase or repurchase price and such below the assessed value, nor the circumstances that the vendee spoke of the purchase price as the capital, taken singly, will preclude the existence of a pacto de retro sale, and stipulations essentially not germane to a sale may be legally or morally acceptable, the collective weight of such consideration reveals, as in this case, the intention of the parties to enter into a loan agreement with security, or equitable mortgage.

Digest Credit: Karl Mark Felizardo Dayawon


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