Labasan vs Lacuesta 86 SCRA 16

The conflicting terminologies in a document create doubt as to whether it is a mere

loan with security or a pacto de retro sale but the circumstances reveal the real
nature of the contract

Facts:
In 1927, S executed a document, which stated that needing money, he thought of
selling a piece of land to B for P225, that the land could be reconveyed in 10 years,
and that in the meantime S, would be responsible for all tenancy matters over the
land. In 1948, S filed a complaint for the reconveyance of the property. B claimed
that S had failed to exercise the right to repurchase within 10 years and, therefore,
as vendee a retro, he had become the owner of the land.

Issue:
Is the contention of B tenable?

Held:
No. In view of the ambiguity caused by conflicting terminologies in the
document(viz: urgent necessity for money,selling the land,ownership,I will be
responsible for all tenancy matters,this receipt is made as security.)w/c are
sufficient to create doubt as to what the document truly purports, it becomes
necessary to inquire into the reason behind the transaction and other circumstances
accompanying it so as to determine the intent of the parties.
In the case at bar, the collective weight of the following considerations supported
the findings and conclusion that the document is a mere loan w/ security and not a
pacto de retro sale
First, the reason behind its execution was that S was in urgent necessity for money
and had to secure a loan of P225 from B for which the Riceland was given as
security.
Second, the amount of P225, even in 1927, was too inadequate for a purchase price
of an irrigated Riceland with an alleged perimeter of 240 meters and an area of
1, 269 sqm
Third, although symbolically, the possession of the property was transferred to B, it
was S, the supposed vendor, who continued to be in physical possession of the
property, took charge of its cultivation, and all tenancy matters.

Fourth, B, the supposed vendee a retro never declared the property in his name for
taxation purposes nor did he pay the taxes due thereon; and
Fifth, B failed to take any step to consolidate his alleged ownership over the land by
the mere registration of an affidavit of consolidation, a judicial order not being
necessary under the old Civil Code which is required now under Art 1607 of the New
Civil Code