Paterno D. Escudero v. Judge Ceferino E. Dulay

Summary

The Supreme Court reversed lower court decisions in a property dispute involving spouses Escudero and Amistad over whether a transaction was a sale with pacto de retro or an equitable mortgage. The Escuderos had executed a deed of sale with right to repurchase for P42,350.00, but claimed it was actually a loan with the land as collateral. Their original counsel abandoned the equitable mortgage defense and agreed it was a sale, relying on Article 1606 of the Civil Code for post-judgment redemption rights. Both lower courts ruled against the Escuderos. The Supreme Court found the transaction was indeed an equitable mortgage based on gross inadequacy of price compared to property value and documentary evidence showing the true nature of the transaction. The Court applied an exception to the general rule that clients are bound by counsel's mistakes, finding that the counsel's negligence deprived petitioners of due process and substantive rights. The decision demonstrates the Court's willingness to look beyond technicalities to prevent manifest injustice and protect property rights when clear evidence supports a party's position despite procedural missteps by counsel.