5/12/2017 Sps Alvaro vs Sps Ternida : 166183 : January 20, 2006 : J.

Ynares-Santiago : First Division : Decision

FIRSTDIVISION


SPS.TITOALVAROG.R.No.166183
andMARIAVALELO,
Petitioners,Present:
Panganiban,C.J.(Chairman),
versusYnaresSantiago,
AustriaMartinez,
Callejo,Sr.,and
ChicoNazario,JJ.
SPS.OSMUNDOTERNIDAand
JULITARETURBAN,COURTPromulgated:
OFAPPEALS,
Respondents.January20,2006

xx


DECISION


YNARESSANTIAGO,J.:


AssailedinthispetitionforreviewoncertiorariunderRule45oftheRulesofCourtare
[1]
the July 30, 2004 Decision of the Court of Appeals in CAG.R. CV No. 61985 and the
[2]
November3,2004Resolution whichdeniedpetitionersmotionforreconsideration.

Theantecedentfactsareasfollows:

RespondentspousesOsmundoTernidaandJulitaReturbanaretheownersofthecontested
property, an 8,450 sq. m. parcel of nonirrigated riceland situated at Barangay Labney, San
Jacinto,Pangasinan.

OnMay26,1986,JulitamortgagedthelandtothespousesSalvadordeVeraandJuanita
[3]
OrinionforP28,000.00.Astestified to by Julita, she was made to sign a Deed of Pacto de

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[4]
Retro Sale with Salvador who explained to her that what she signed was a mortgage
document.As worded, the document provided that Julita has three years from the date of the
executionofthedocumenttorepurchasetheland.

[5]
Afterayear,SalvadorexecutedaDeedofTransferofMortgage infavorofthespouses
JoseCalpitoandZoraidaValeloforaconsiderationofP32,000.00.Thereafter,Julitarequested
[6]
fromthelatterforanadditionalamountofP3,000.00,atwhichpoint,shewasasked tosigna
[7]
DeedofSalewithRighttoRepurchase.

OnMay22,1990,JulitaagainaskedforanadditionalamountofP1,000.00butshewas
informedbyJoseCalpitothattheyhavetransferredthemortgagetothespousesTitoAlvaroand
MariaValelo,hereinpetitioners.Julitathuswenttothepetitionerswhogavehertheadditional
amount of P1,000.00. Julita claimed that petitioners asked her to sign a document that she
[8]
believedwasamortgagedocumentbutlateronturnedouttobeaDeedofAbsoluteSale over
thecontestedproperty.

When Julita tried to redeem the property from the petitioners, the latter refused and
claimedthattheyhadpurchasedthepropertyandwereinfactissuedTaxDeclarationNo.2747.
[9]

Consequently,onOctober1,1997,respondentsfiledacomplaintforAnnulmentofDeed
of Sale Documents and Tax Declaration No. 2747 with the Regional Trial Court of Dagupan
[10]
City, docketed as Civil Case No. 9701876D. After trial on the merits, the trial court
[11]
dismissed the complaint for lack of cause of action. Respondents filed a motion for
[12]
reconsiderationwhichwashoweverdenied.

Onappeal,theCourtofAppealsreversedthedecisionofthetrialcourt,thus:

WHEREFORE,theappealisgrantedandtheDecisiondatedSeptember10,1998ofthe
trial court is reversed and set aside. The Deed of Absolute Sale dated May 22, 1990 between
plaintiffappellantJulitaReturbananddefendantsappelleesspousesTitoAlvaroandMariaValelo
shallbeconstruedasanequitablemortgageandtheTaxDeclaration2747issuedinthenameof
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spousesTitoAlvaroandMariaValeloisannulled.Consequently,plaintiffsappellantsareentitled
to redeem the property which shall be effected upon payment of their mortgage debt to
defendantsappellees.

[13]
SOORDERED.

Hencethispetitionforreviewonthefollowinggrounds:

1. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN LAW
WHEN IT DECLARED THE TRANSACTION BETWEEN THE PARTIES AS
EQUITABLEMORTGAGEANDNOTANABSOLUTESALE

2. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN LAW
WHEN IT DECLARED THE ANNULMENTOFTAXDECLARATION2747INTHE
NAMESOFTHEPETITIONERS

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN LAW
WHEN IT FAILED TO APPLY THE JURISPRUDENTIAL RULE LAID DOWN IN
ABILLAVS.GOBONSENG,JR.,374SCRA51

4. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN LAW
WHENITFAILEDTOAPPLYTHEPRINCIPLEOFLACHESANDESTOPPEL

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN LAW
[14]
WHENITFAILEDTOAWARDDAMAGESINFAVOROFTHEPETITIONERS.

Primarily, petitioners contend that the Court of Appeals erred when it declared the
transactionbetweenthepartiestobeanequitablemortgageinsteadofanabsolutesale.

Thepetitionlacksmerit.

An equitable mortgage is defined as one which although lacking in some formality, or
formorwords,orotherrequisitesdemandedbyastatute,neverthelessrevealstheintentionof
the parties to charge real property as security for a debt, and contains nothing impossible or
[15]
contrarytolaw. Forthepresumptionofanequitablemortgagetoarise,tworequisitesmust
concur: (1) that the parties entered into a contract denominated as a sale and (2) that their
[16]
intentionwastosecureanexistingdebtbywayofamortgage.

Consequently, the nonpayment of the debt when due gives the mortgagee the right to
foreclosethemortgage,sellthepropertyandapplytheproceedsofthesaletothesatisfactionof

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[17]
theloanobligation.

We find no merit in petitioners contention that in the Deed of Absolute Sale executed
between them and Julita, the latter totally conveyed her ownership over the disputed property.
Wehaveconsistentlydecreedthatthenomenclatureusedbythecontractingpartiestodescribea
contractdoesnotdetermineitsnature.Thedecisivefactoristheintentionofthepartiestothe
contractasshownbytheirconduct,words,actionsanddeedspriorto,duringandafterexecuting
[18]
theagreement.

Whilethereisnosingleconclusivetesttodeterminewhetheradeedabsoluteonitsfaceis
[19]
really a simple loan accommodation secured by a mortgage, however, the Civil Code
enumerates several instances when a contract is clothed with the presumption that it is an
equitablemortgage,towit:

Article1602.Thecontractshallbepresumedtobeanequitablemortgage,inanyofthe
followingcases:

(1)Whenthepriceofasalewithrighttorepurchaseisunusuallyinadequate

(2)Whenthevendorremainsinpossessionaslesseeorotherwise

(3) When upon or after the expiration of the right to repurchase another instrument
extendingtheperiodofredemptionorgrantinganewperiodisexecuted

(4)Whenthepurchaserretainsforhimselfapartofthepurchaseprice

(5)Whenthevendorbindshimselftopaythetaxesonthethingsold

(6) In any other case where it may be fairly inferred that the real intention of the
partiesisthatthetransactionshallsecurethepaymentofadebtortheperformanceofany
otherobligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to the usury
laws.(Emphasisadded)


It is an established rule that the presence of even one of the circumstances set forth in
Article 1602 is sufficient to declare a contract of sale with right to repurchase an equitable
[20]
mortgage. Thus,underthewise,justandequitablepresumptioninArticle1602,adocument
which appears on its face to be a sale absolute or with pacto de retro may be proven by the
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vendor or vendoraretro to be one of a loan with mortgage. In such case, parol evidence
becomes competent and admissible to prove that the instrument was in truth and in fact given
merelyasasecurityforthepaymentofaloan.Anduponproofofthetruthofsuchallegations,
thecourtwillenforcetheagreementorunderstandinginconsonancewiththetrueintentofthe
[21]
partiesatthetimeoftheexecutionofthecontract.

Applyingtheforegoingconsiderationstotheinstantcase,wefindthatthetrueintentionof
thepartiesintheexecutionoftheDeedofAbsoluteSalewasnevertoconveytheownershipof
thedisputedpropertybutmerelytosecuretheloanobtainedbyJulita.Ascorrectlyobservedby
[22]
theCourtofAppeals:

The circumstances surrounding the execution and performance of the terms of the
contracts which plaintiffappellant Julita Returban was made to sign involving the subject
property,areinconsistentwiththetheorythatthepropertywassold.

When plaintiffappellant Julita Returban first mortgaged the land in favor of spouses
SalvadordeVeraandJuanitaOrinionfortheamountofP28,000.00,shewasmadetosignaDeed
ofPactodeRetroSale.SalvadordeVerahimselfwasawarethatthesubjectpropertywasmerely
mortgaged,notsold,becausehehimselfsubsequentlyexecutedaDeedofTransferMortgagein
favorofspousesJoseCalpitoandZoraidaValeloxxx:

xxxx

When plaintiffappellant went to spouses Jose Calpito and Zoraida Valelo to request an
additionalP3,000.00,shewasmadetosignaDeedofSalewithRighttoRepurchaseinfavorof
JoseCalpitoandZoraidaValeloforapurportedconsiderationofP35,000.00.Butitwasadmitted
bydefendantappelleeMariaValeloduringherdirectexaminationthat:

ATTY.DEJESUS:

Q.YousaidthattheamountofP35,000.00wasgiventoJoseCalpitoand
ZoraidaValeloasredemptionpriceofthelandmortgagedbyJulitaReturban?

A:Yes,sir.(Underliningsupplied.)

Actually, plaintiffappellant Julita Returban was given P28,000.00 at first and
subsequently, she was given the additional amounts of P3,000.00 by Jose Calpito and Zoraida
ValeloandP1,000.00byTitoAlvaroandMariaValelo.TheSupremeCourt,inananalogouscase,
saidthat:

Ifthetransactionswereatruepactoderetro,thepurchasepricehadbeen
fixed (at P3,600.00) not a centavo more and respondents giving of additional
amounts on (three) different occasions to be aggregated to the redemption price
wasabsolutelyinconsistentwiththeconceptofatruesalewithpactoderetro.

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For her part, Julita testified that during all the times that she was asked to sign a document
evidencing the release of additional sums of money to her, she always believed, as she was
[23]
madetobelieve,thatshewassigningamortgagedocument.

Verily, the conduct of Julita before, during and after the mortgage of the disputed property
negates petitioners allegation that she intended to sell the land in their favor. Otherwise, she
wouldhavenotexertedearnesteffortstoredeemthesame.

The conditions which give rise to a presumption of equitable mortgage, as set out in Article
1602 of the Civil Code, apply with equal force to a contract purporting to be one of absolute
sale.Moreover,thepresenceofevenoneofthecircumstancesinArticle1602issufficientbasis
todeclareacontractasoneofequitablemortgage.Thisisinconsonancewiththerulethatthe
[24]
lawfavorstheleasttransmissionofrights.

WHEREFORE,thepetitionisDENIED.TheassailedDecisiondatedJuly30,2004of
the Court of Appeals in CAG.R. CV No. 61985 and its November 3, 2004 Resolution, are
AFFIRMED.

SOORDERED.

CONSUELOYNARESSANTIAGO
AssociateJustice

WECONCUR:



ARTEMIOV.PANGANIBAN
ChiefJustice


MA.ALICIAAUSTRIAMARTINEZROMEOJ.CALLEJO,SR.
AssociateJusticeAssociateJustice

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MINITAV.CHICONAZARIO
AssociateJustice



CERTIFICATION


PursuanttoSection13,ArticleVIIIoftheConstitution,itisherebycertifiedthattheconclusions
intheaboveDecisionwerereachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.



ARTEMIOV.PANGANIBAN
ChiefJustice

[1]
Rollo, pp. 6677. Penned by Associate Justice Fernanda Lampas Peralta and concurred in by Associate Justices Conrado M.
Vazquez,Jr.andJosefinaGuevaraSalonga.
[2]
Id.at101102.
[3]
SeeTSN,February3,1998,pp.89.
[4]
SeeExhibitC,folderofexhibits,p.3.
[5]
SeeExhibitD,folderofexhibits,p.4.
[6]
SeeTSN,February3,1998,pp.1011.
[7]
SeeExhibitE,folderofexhibits,p.5.
[8]
Rollo,p.47.
[9]
Id.at48.
[10]
RTCrecords,pp.13.
[11]
Id.at62.PennedbyJudgeErnaFalloranAliposa.
[12]
Id.at73.
[13]
Rollo,p.76.
[14]
Id.at1617.
[15]
Matanguihanv.CourtofAppeals,341Phil.379,389390(1997).
[16]
SanPedrov.Lee,G.R.No.156522,May28,2004,430SCRA338,347.
[17]
Ramosv.Sarao,G.R.No.149756,February11,2005,451SCRA103,113.
[18]
Id.
[19]
Lorbesv.CourtofAppeals,G.R.No.139884,February15,2001,351SCRA716,725726.

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[20]
Oleav.CourtofAppeals,317Phil.328,338(1995).
[21]
Matanguihanv.CourtofAppeals,supranote15at390391.
[22]
Rollo,pp.7172.
[23]
SeeTSN,February3,1998,pp.814.
[24]
Oroncev.CourtofAppeals,358Phil.616,637(1998).

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