Gardner v. Court of Appeals (Nov.

29, 1997) 80 SCRA 395 Facts: Petitioner obtained on credit from the grocery store of private respondents some petty cash and a variety of consumer goods such as groceries, toiler articles, rice and other necessities for home use. To pay for the debt, she executed Deed of Sale with right to repurchase for a parcel of Secano Land with all the improvements therein. The land total was P2, 150, the debt: P7,000 Petitioner continued her credit line and her obligation grew. She issued another instrument to increase the amount involved in the previous instrument. It seems that within the 10 year period to repurchase the land, she offered and tendered payment to the respondents on various occasions but it was repeatedly turned down because of the two children of the the private respondents who demanded payment for P50,000 later reduced to P45,000. Lawyer of the petitioner sent notice for deposit for consignation of the total amount due to CFI Laguna. They agreed later on to give respondent a preferential right to buy the lot for P1,500 per hectar but Gardner sold it to one, Sally Lopez for P5,000. Private respondents contended that they allegedly made improvements on the land a total of not less than P30,000. LC declared it was a contract of equitable mortgage and not a contract of sale with right to repurchase. CA affirmed validly made consignation but declared Gardener guilty of breach of contract. Issue: WON it was an equitable mortgage? WON the respondents were entitled to reimbursement of the improvements? Held: The deed of Sale with pacto de retro having been declared by the TC and CA as equitable mortgage was sold as security of the loan. The mortgage was merely an accessory to the principal obligation; there is no other consideration for the stipulation inserted in the instrument denominated Deed of Sale with right to repurchase stipulation null and void. Since it was a mortgage, the mortgagee who is in possession of the mortgaged property and introduces improvements therein is not entitled to reimbursement for the value thereof upon the redemption of the mortgage, which could have been anytime before expiration of the redemption period. Art. 2125 NCC The persons in whose favor the law establishes a mortgage have no other right than to demand execution and recording of the document in which the mortgage is formalized. To hold otherwise would render redemption oppressive and onerous to the ownerredemptioner as the mortageee can just make a lot of improvements as to make the owner financially incapable of redeeming the mortgage.