Froilan Dala v. Editha A. Auticio

Summary

This case involved a dispute over whether a document titled 'Deed of Sale under Pacto de Retro' was actually a sale with right of repurchase or an equitable mortgage. Froilan Dala borrowed money from known money lender Editha Auticio and executed the deed for P32,000.00 with a 6-month redemption period. When Dala failed to redeem within the period, Auticio sought to consolidate ownership. The Supreme Court reversed lower court decisions, ruling the transaction was an equitable mortgage based on three key factors: the parties' intent to use the land as loan security, Dala's continued possession and tax payments, and the presence of a void pactum commissorium provision. The Court ordered cancellation of Auticio's tax declaration and allowed Dala to redeem the property upon payment of the loan with legal interest, emphasizing the law's policy to protect vulnerable borrowers from circumvention of usury laws.