LANUZA V. DE LEON
CA
20 SCRA 369 (1967)
Spouses Lanuza executed a deed of sale with a right to
repurchase to Reyes. Upon expiration of term to
repurchase, the time was extended without the wife of
Lanuza signing the document. A stipulation to the effect
that the ownership will only be passed to the vendee if
the vendor fails to repurchase the property was included.
The spouses then mortgage the property to respondent
to secure a debt. The debt was unpaid and respondent
filed a case to foreclose the mortgage which was
granted. Reyes filed a case for consolidation, claiming
she has the right to the property. Reyes claims the
ownership in the property automatically passes
immediately to him after the sale and not after the end of
the period to repurchase.
Issue: WON Reyes contention valid
Ruling: yes. a stipulation in a purported pacto de retro
sale that the ownership over the property sold would
automatically pass to the vendee in case no redemption
was effected within the stipulated period is contrary to
the nature of a true pacto de retro sale, under which the
vendee acquires ownership of the thing sold immediately
upon the execution of the sale, subject only to the
vendors rights of redemption. The said stipulation is a
pactum commissorium which enables the mortgagee to
acquire ownership of the mortgaged property without
need of foreclosure. It is void. Its insertion in the contract
is an avowal of the intention to mortgage rather than to
sell the property.
BUNDALIAN V. CA
129 SCRA 645 (1984)
FACTS:
In 1975, the petitioners purchased from the Estate of the
Deceased Agapita Sarao Vda. de Virata three
contiguous parcels of land in San Juan, Rizal.
The following day, in a contract denominated as Deed of
Sale with Right to Repurchase, they sold to the private
respondents the same three lots for the same amount.
One of the terms and conditions was that the repurchase
price would escalate month after month, depending on
when repurchase would be effected. It was also
stipulated that the vendor shall have the right to
possess, use, and build on, the property during the
period pending redemption.
In 1976, the petitioners filed for declaratory relief and/or
reformation of instrument before the CFI to declare the
Deed an equitable mortgage.
The private respondents, in turn, filed for the
consolidation of ownership on the ground that "more
than a year has elapsed since the execution of the
Deed.
CFI decided in favor of private respondents.
affirmed.
ISSUE: 
whether or not the deed of sale with right to repurchase
should be declared as an equitable mortgage.
HELD: YES
The statement in the Deed of Sale with Right to
Repurchase that vendors borrowed from the
vendees the funds used in buying the land from the
original owner made by the former confirms the real
intention of the parties to secure the payment of the
loan acquired by the petitioners from the private
respondents. The sale with the right to repurchase of
the three parcels of land was for P499,200.00, which
was exactly the same amount paid to the estate of the
deceased Vda. de Virata-.After having purchased the
three lots, the vendors should at least have earned a
little profit or interest if they really intended to resell the
lots the following day. Instead, they suffered a loss of
P25,000.00.The petitioners also bound themselves to
pay exceedingly stiff prices for the privilege of
repurchase.
Moreover, monthly escalation of repurchase price
indicates a loan transaction secured by equitable
mortgage. Its purpose is to secure the return of the
money invested with substantial profit or interest, a
common characteristic of loans.
The contract also provides that "it is agreed that the
vendor shall have the right to possess, use, and build
on, the property during the period of redemption." When
the vendee acknowledged the right of the vendor to
retain possession of the property the contract is one
of loan guaranteed by mortgage, not a conditional
sale or an option to repurchase. (Macoy vs. Trinidad,
et al., 95 Phil. 192).
Also, admission be the “vendor” that the contract is
a sale with right to repurchase is not a proper basis
for arriving at such conclusion. The Bundalians were
in the construction business and knew quite well l what
they were signing. But vendors covered by Article
1602 of the Civil Code are usually in no position to
bargain with the vendees and will sign onerous
contracts to get the money they need. It is precisely
this evil which the Civil Code guards against. It is not the
knowledge of the vendors that they are executing a
contract of sale pacto de retro which is the issue but
whether or not the real contract was one of sale or a
loan disguised as a pacto de retro sale.
The Bundalians also paid the real estate taxes on the
lots. As against the express provision of the contract
and the actual possession by the petitioners, the private
respondents come up with a far fetched argument that
since the titles to the lots were in their hands, they were
the ones in legal possession. Parenthetically, the titles in
their hands were still in the name of the estate of Agapita
Sarao Vda. de Virata, the original vendor-owner.

Hence, the deed of sale with right to repurchase is an

equitable mortgage. 

ROSALES V. YBOA,
120 SCRA 869 (1983)