G.R. No. 44111 August 10, 1989
MERCEDES T. RIVERA, JESUS F. LUNOD and EPIFANIA MANAHAN, petitioners, vs. COURT OF APPEALS, FELIZARDO M. MARTINEZ and VICTORIA MAGAYANES-MARTINEZ, respondents.

FACTS

The private respondents, spouses Martinez, were the owners of a bungalow in Marikina. On June 29, 1971, they executed a document titled “Deed of Absolute Sale” in favor of petitioner Mercedes T. Rivera for P20,000. The Martinez spouses alleged, however, that the true agreement was a loan secured by a mortgage, with the deed disguising a usurious transaction and containing a verbal pact allowing repurchase within four months. They claimed they received only P18,000, with P2,000 deducted as interest. Rivera later sold the property to the other petitioners, spouses Lunod. When the Lunods filed an ejectment case, the Martinez spouses filed a civil action seeking the annulment of the deeds of sale, alleging fraud and misrepresentation.
The trial court dismissed the complaint, finding insufficient evidence of fraud. On appeal, the Court of Appeals reversed the decision. It ruled that the transaction was not an absolute sale but an equitable mortgage, or alternatively, a sale with a right of repurchase (pacto de retro). The appellate court allowed the Martinez spouses to redeem the property within thirty days, holding that their prayer for annulment in the complaint inherently included a plea to recover or redeem the property, thus not constituting a change of theory on appeal.

ISSUE

Whether the Court of Appeals erred in allowing a change of theory on appeal by granting the right to redeem, when the private respondents’ complaint in the trial court solely prayed for the declaration of nullity of the deed of sale.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic is that no prohibited change of theory occurred. While the complaint prayed for annulment, its allegations detailed a transaction intended as a loan with security, coupled with an agreement to repurchase. The Court held that a prayer for annulment based on such facts inherently seeks to restore the parties to their original positions, which includes recovering the property. The private respondents’ appellate brief, which argued the trial court erred in “not annulling the sale and allowing the plaintiffs-appellants to repurchase,” was deemed a consistent elaboration of their core theory—that the deed did not reflect the true agreement. The Court emphasized that the nature of the contract was placed in issue by the pleadings. Applying Article 1606 of the Civil Code, the right to redeem, as a real right, was properly recognized. The subsequent sale to the Lunod spouses did not extinguish this right, as it may be exercised against any possessor deriving rights from the original vendee. The relief granted was within the scope of the general prayer for “just and equitable” relief and was necessary to avoid a legal vacuum, fulfilling the ultimate objective of the action.