Short answer. Yes. Article 1365 of the Civil Code says that where the parties agreed on a mortgage or pledge but the instrument states the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper. The paper is corrected to say what you actually agreed.
What the law says
If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper.
Civil Code, Article 1365 — Mortgage/Pledge Stated as Sale. Read the full provision →
The Civil Code names this exact situation
You are not arguing from general principle here. The article addresses your facts directly: If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper. Both forms are covered — a deed of absolute sale and a sale with a right to buy back. And it covers land as well as movables. What the provision does is restore the true character of the transaction: a loan secured by property, which the borrower redeems by paying, rather than a transfer of ownership that leaves him with nothing but a lapsed option.
Why the difference is worth fighting over
Under a mortgage, the creditor who is not paid must go through foreclosure, the property is sold and any surplus above the debt belongs to the debtor. Under a sale with a right of repurchase, missing the repurchase date can consolidate ownership in the buyer, and the whole value of the property is lost however small the unpaid balance. That is precisely why these arrangements get papered as sales in the first place. Reformation puts the transaction back in the category the parties actually chose, with the borrower's right to redeem and to any excess value intact.
What the evidence usually looks like
Courts examining this look past the title of the document to how the parties behaved. Several things recur in genuine cases: the price recited is far below the property's real value; the supposed seller stayed in possession, and kept paying the real property taxes and the utilities; payments were made and recorded as interest, or in round monthly amounts unrelated to any purchase price; there was an existing debt that the transfer was meant to secure; and the parties talked about the arrangement in messages as a loan. Collect all of that — receipts, tax declarations and payment records, valuations, and the message thread — because the written deed is what you are asking a court to look behind.
Limits, and moving quickly
Reformation corrects the instrument; it does not cancel the debt or excuse repayment. It also presupposes that both sides really did agree on a security arrangement, so if the other party genuinely bought the property and you now regret selling, this is not your remedy. The action does not stay open indefinitely, and delay is dangerous for another reason: if the holder of the deed sells or mortgages the property to someone who deals with him in good faith and relies on the registered title, your position becomes far harder. Take the documents to a lawyer promptly and ask about steps that put third parties on notice of your claim.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Sps. Firmo S. Rosario and Agnes Annabelle Dean-Rosario vs. Priscilla P. Alvar, G.R. No. 212731, September 6, 2017 — read the decision on LawPhil →
- Benjamin G. Navalta vs. Marcelo S. Muli, G.R. No. 150642, October 23, 2006 — read the decision on LawPhil →
- Alfonso D. Zamora vs. Court of Appeals, et al, G.R. No. 102557, July 30, 1996 — read the decision on LawPhil →