Clara Badayo v. The Court of Appeals

Summary

This case involves a dispute over the interpretation of a pacto de retro sale contract executed on March 9, 1973, between Clara Badayo and spouses Lisondra. The key issue was whether Badayo's right to repurchase should be exercised within or after the stipulated two-year period. The spouses filed for consolidation of ownership in 1975, claiming the redemption period had expired. Badayo consigned the repurchase price on August 11, 1975, arguing the contract allowed repurchase after, not within, two years. The Supreme Court ultimately ruled in Badayo's favor, holding that the contract language was clear in allowing repurchase 'after two years' from execution. Since no specific period was set for exercising this right thereafter, Article 1606 of the Civil Code applied, providing a four-year period from when the right became exercisable. The Court emphasized that literal interpretation of clear contract terms must control, and Badayo's timely consignation constituted valid exercise of her repurchase right.