Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 162365 January 15, 2014

ROBERTO R. DAVID, Petitioner,

vs.
EDUARDO C. DAVID, Respondent.

DECISION

BERSAMIN, J.:

In a sale with right to repurchase, title and ownership of the property sold are immediately vested in the vendee, subject to the resolutory condition of repurchase by the vendor within the
stipulated period.

The Case

Under review at the defendant's instance is the decision promulgated on October 10, 2003,1 whereby the Court of Appeals (CA) affirmed the judgment rendered on December 5, 2001 by
the Regional Trial Court (RTC), Branch 61, in Baguio City ordering him to return to the plaintiff the motor vehicle and trailer subject of the complaint, or to pay their value of ₱500,000.00
should the return not be effected, and to pay the plaintiff ₱20,000.00 as litigation expenses, ₱50,000.00 as attorney's fees, and the costs of suit.2

Antecedents

Respondent Eduardo C. David (Eduardo) initiated this replevin suit against Roberto R. David (Roberto), his first cousin and former business partner, to recover the possession of one unit
of International CO 9670 Truck Tractor and Mi-Bed Trailer.

It appears that on July 7, 1995, Eduardo and his brother Edwin C. David (Edwin), acting on their own and in behalf of their co-heirs, sold their inherited properties to Roberto, specifically:
(a) a parcel of land with an area of 1,231 square meters, together with all the improvements existing thereon, located in Baguio City and covered by Transfer Certificate of Title No. T-
22983 of the Registry of Deeds of Baguio City (Baguio City lot); and (b) two units International CO 9670 Truck Tractor with two Mi-Bed Trailers.3 A deed of sale with assumption of
mortgage (deed of sale)4 embodied the terms of their agreement, stipulating that the consideration for the sale was ₱6,000,000.00, of which ₱2,000,000 was to be paid to Eduardo and
Edwin, and the remaining ₱4,000,000.00 to be paid to Development Bank of the Philippines (DBP) in Baguio City to settle the outstanding obligation secured by a mortgage on such
properties. The parties further agreed to give Eduardo and Edwin the right to repurchase the properties within a period of three years from the execution of the deed of sale based on the
purchase price agreed upon, plus 12% interest per annum.

In April 1997, Roberto and Edwin executed a memorandum of agreement (MOA)5 with the Spouses Marquez and Soledad Go (Spouses Go), by which they agreed to sell the Baguio City
lot to the latter for a consideration of ₱10,000,000.00. The MOA stipulated that "in order to save payment of high and multiple taxes considering that the x x x subject matter of this sale is
mortgaged with DBP, Baguio City, and sold [to Roberto], Edwin will execute the necessary Deed of Absolute Sale in favor of [the Spouses Go], in lieu of [Roberto]."6 The Spouses Go
then deposited the amount of ₱10,000,000.00 to Roberto’s account.7
After the execution of the MOA, Roberto gave Eduardo ₱2,800,000.00 and returned to him one of the truck tractors and trailers subject of the deed of sale. Eduardo demanded for the
return of the other truck tractor and trailer, but Roberto refused to heed the demand.

Thus, Eduardo initiated this replevin suit against Roberto, alleging that he was exercising the right to repurchase under the deed of sale; and that he was entitled to the possession of the
other motor vehicle and trailer.

In his answer, Roberto denied that Eduardo could repurchase the properties in question; and insisted that the MOA had extinguished their deed of sale by novation.

Judgment of the RTC

On December 5, 2001,8 the RTC rendered judgment in favor of Eduardo, holding that the stipulation giving Eduardo the right to repurchase had made the deed of sale a conditional sale;
that Eduardo had fulfilled the conditions for the exercise of the right to repurchase; that the ownership of the properties in question had reverted to Eduardo; that Roberto’s defense of
novation had no merit; and that due to Roberto’s bad faith in refusing to satisfy Eduardo’s claim, Eduardo should be awarded litigation expenses and attorney’s fees. The dispositive
portion of the judgment reads:

WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and against the defendant ORDERING the latter to return to the former the motor vehicle and trailer
subject matter of the case or to pay its value in the amount of ₱500,000 in case manual delivery can not be effected; to pay plaintiff the amount of ₱20,000 as litigation expenses; the
amount of ₱50,000 as attorney's fees and the costs of this suit.

SO ORDERED.9

Roberto appealed to the CA.

Ruling of the CA

On October 10, 2003,10 the CA promulgated its decision affirming the RTC. It opined that although there was no express exercise of the right to repurchase, the sum of all the relevant
circumstances indicated that there was an exercise of the right to repurchase pursuant to the deed of sale, that the findings of the RTC to the effect that the conditions for the exercise of
the right to repurchase had been adequately satisfied by Eduardo, and that no novation as claimed by Roberto had intervened.

On February 16, 2004,11 the CA denied Roberto’s motion for reconsideration.12

Hence, this petition for review on certiorari.

Issues

Roberto seeks a reversal, claiming that the CA erred:

x x x IN HOLDING THAT THE RESPONDENT HAS EXERCISED THEIR RIGHT TO REPURCHASE;

x x x IN HOLDING THAT THERE WAS NO NOVATION OF THE DEED OF SALE WITH ASSUMPTION OF MORTGAGE WHEN THE PARTIES EXECUTED A MEMORANDUM OF
AGREEMENT FOR THE SALE OF THE SUBJECT HOUSE AND LOT AND, THEREAFTER SOLD THE SAID PROPERTY TO THIRD PERSONS;
x x x IN RESOLVING THE INSTANT CASE IN FAVOR OF RESPO[N]DENT. 13

Ruling of the Court

The petition for review has no merit.

A sale with right to repurchase is governed by Article 1601 of the Civil Code, which provides that: "Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon." Conformably with Article 1616,14 the
seller given the right to repurchase may exercise his right of redemption by paying the buyer: (a) the price of the sale, (b) the expenses of the contract, (c) legitimate payments made by
reason of the sale, and (d) the necessary and useful expenses made on the thing sold.

The deed of sale entered into by Eduardo and Roberto contained the following stipulation on the right to repurchase, to wit:

x x x the Vendors are given the right to repurchase the aforesaid described real property, together with the improvements thereon, and the two (2) motor vehicles, together with their
respective trailers from the Vendee within a period of three (3) years from the execution of this document on the purchase price agreed upon by the parties after considering the amount
previously paid to the Vendors in the amount of TWO MILLION PESOS (₱2,000,000.00), Philippine Currency, with an interest of twelve percent (12%) per annum and the amount paid
with the Development Bank of the Philippines with an interest of twelve percent (12%) per annum.15

The CA and the RTC both found and held that Eduardo had complied with the conditions stipulated in the deed of sale and prescribed by Article 1616 of the Civil Code. Pertinently, the
CA stated:

It should be noted that the alleged repurchase was exercised within the stipulated period of three (3) years from the time the Deed of Sale with Assumption of Mortgage was executed.
The only question now, therefore, which remains to be resolved is whether or not the conditions set forth in the Deed of Sale with Assumption of Mortgage, i.e. the tender of the purchase
price previously agreed upon, which is Php2.0 Million, plus 12% interest per annum, and the amount paid by the defendant to DBP, had been satisfied.

From the testimony of the defendant himself, these preconditions for the exercise of plaintiff's right to repurchase were adequately satisfied by the latter. Thus, as stated, from the Php10
Million purchase price which was directly paid to the defendant, the latter deducted his expenses plus interests and the loan, and the remaining amount he turned over to the plaintiff. This
testimony is an unequivocal acknowledgement from defendant that plaintiff and his co-heirs exercised their right to repurchase the property within the agreed period by satisfying all the
conditions stipulated in the Deed of Sale with Assumption of Mortgage. Moreover, defendant returned to plaintiff the amount of Php2.8 Million from the total purchase price of Php10.0
Million. This only means that this is the excess amount pertaining to plaintiff and co-heirs after the defendant deducted the repurchase price of Php2.0 Million plus interests and his
expenses. Add to that is the fact that defendant returned one of the trucks and trailers subject of the Deed of Sale with Assumption of Mortgage to the plaintiff. This is, at best, a tacit
acknowledgement of the defendant that plaintiff and his co-heirs had in fact exercised their right to repurchase.16 x x x

Considering that the factual findings of the trial court, when affirmed by the CA, are binding on the Court,17 the Court affirms the judgment of the CA upholding Eduardo’s exercise of the
right of repurchase. Roberto could no longer assail the factual findings because his petition for review on certiorari was limited to the review and determination of questions of law only. A
question of law exists when the doubt centers on what the law is on a certain set of undisputed facts, while a question of fact exists when the doubt centers on the truth or falsity of the
alleged facts.18Whether the conditions for the right to repurchase were complied with, or whether there was a tender of payment, is a question of fact. With both the RTC and the CA
finding and holding that Eduardo had fulfilled the conditions for the exercise of the right to repurchase, therefore, we conclude that Eduardo had effectively repurchased the properties
subject of the deed of sale.

In Metropolitan Bank and Trust Company v. Tan,19 the Court ruled that a redemption within the period allowed by law is not a matter of intent but of payment or valid tender of the full
redemption price within the period. Verily, the tender of payment is the seller’s manifestation of his desire to repurchase the property with the offer of immediate performance.20 As we
stated in Legaspi v. Court of Appeals,21 a sincere tender of payment is sufficient to show the exercise of the right to repurchase. Here, Eduardo paid the repurchase price to Roberto by
depositing the proceeds of the sale of the Baguio City lot in the latter’s account. Such payment was an effective exercise of the right to repurchase.

On the other hand, the Court dismisses as devoid of merit Roberto’s insistence that the MOA had extinguished the obligations established under the deed of sale by novation.

The issue of novation involves a question of fact, as it necessarily requires the factual determination of the existence of the various requisites of novation, namely: (a) there must be a
previous valid obligation; (b) the parties concerned must agree to a new contract; (c) the old contract must be extinguished; and (d) there must be a valid new contract.22 With both the
RTC and the CA concluding that the MOA was consistent with the deed of sale, novation whereby the deed of sale was extinguished did not occur. In that regard, it is worth repeating that
the factual findings of the lower courts are binding on the Court.

In sales with the right to repurchase, the title and ownership of the property sold are immediately vested in the vendee, subject to the resolutory condition of repurchase by the vendor
within the stipulated period.23 Accordingly, the ownership of the affected properties reverted to Eduardo once he complied with the condition for the repurchase, thereby entitling him to the
possession of the other motor vehicle with trailer.

WHEREFORE, the Court AFFIRMS the decision promulgated on October 10, 2003; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 92248 December 9, 1992

VICENCIO T. TORRES and SOCORRO S. TORRES, petitioners,

vs.
COURT OF APPEALS, CEFERINO ILLUSCUPIDES, ARACELI ILLUSCUPIDES and EMILIO OLORES, respondents.

G.R. No. 93390 December 9, 1992

CEFERINO ILLUSCUPIDES and ARACELI CAMACHO-ILLUSCUPIDES, petitioners,

vs.
COURT OF APPEALS, VICENCIO T. TORRES and SOCORRO S. TORRES, respondents.

NOCON. J.:

Before Us is the petition for review on certiorari of petitioners Ceferino Illuscupides and Araceli Camacho-Illuscupides in G.R. No. 93390 from the decision of the Court of Appeals dated
January 18, 1990. The petition for review on certiorari in G.R. No. 92248, Vivencio T. Torres, et al. vs. Court of Appeals, et al., was dismissed by the Court on June 18, 1990 1 for failure to
show that a reversible error was committed by the Court of Appeals, and no motion for reconsideration was taken therefrom.

The facts are undisputed: the Illuscupideses are the owners of two (2) adjoining parcels of lands located in the Tapuac District, Dagupan City. The parcels are covered by TCT Nos.
14874 and 15167, and have a combined area of 465 square meters. The said properties were mortgaged to the Government Service Insurance System (GSIS).

Sometime in 1965, the Illuscupideses contracted Emilio Olores for the construction of a nine (9) door apartment on the parcels of land for the sum of P79,400.00. While construction was
going on, another door was added, thereby increasing the cost of the construction to P97,000.00. However, the Illuscupideses could only pay Olores P54,390.51, thus compelling the
latter to sue them for the balance before the Court of First Instance of Pangasinan in Civil Case No. D-1955. On November 1969, judgment was rendered in favor of Olores for the unpaid
balance with interests and costs. The Illuscupideses then appealed the decision to the Court of Appeals.

Meanwhile, the Illuscupideses received a notice from the GSIS that it was going to foreclosure the mortgage for their failure to pay the loan when the same became due. To stave off the
foreclosure, the Illuscupideses sold the properties to Vivencio Torres and Socorro Torres (petitioners in G.R. No. 92248), as evidenced by the Deed of Sale dated October 19, 1973 2 for
P130,000.00, of which the vendees paid the vendors P10,000.00, P6,000.00 and P3,000.00. The vendees likewise paid P51,498.97 to the GSIS. The aforesaid payments were in
accordance to the schedule found in the promissory note executed by the parties on October 19, 1973, 3 which provided —

Downpayment (paid on October 1973) .......... P10,000.00

 Payment to the GSIS
(assumption of mortgage) .......... 51,000.00

Cash payment upon issuance of

title in the name of vendee ......... 25,000.00

Balance payable as follows:

Dec. 30, 1974 .................... 11,000.00

Dec. 30, 1975 .................... 11,000.00
Dec. 30, 1976 .................... 11,000.00
Dec. 30, 1977 .................... 11,000.00

Provided that no installment

shall be paid until after the
final adjudication of claim of
Engr. E. Olores against vendor .................... 44,000.00

—————
P130,000.00

The parties also executed on the same day an agreement 4 whereby the Torreses would "RESELL, RETRANSFER, and RECONVEY" to the Illuscupideses "that certain building, more
particularly designated as a ten-door concrete apartment."

Olores found out about the transaction and, fearing that he would not be able to collect from the Illuscupideses, in case the Court of Appeals would uphold the decision of the trial court in
his favor, filed a new case for rescission of the sale against the Illuscupideses and the Torreses. The Illuscupideses filed a counter-claim against Olores, and a cross-claim against the
Torreses, alleging that the Deed of Sale was a pacto de retro sale.

In 1977, the Court of Appeals upheld the decision in the collection case for the unpaid balance of the construction costs in favor of Olores. When said judgment became final and
executory. Olores tried to execute the same but was unable to do so.

Meanwhile, trial in the rescission case continued until judgment was rendered on October 7, 1986, 5 the dispositive portion of which provided:

WHEREFORE, premises considered, by preponderance of evidence, judgment is hereby rendered:

1. Dismissing the complaint for rescission filed by plaintiff;

2. Ordering the dismissal of the cross-claim and counterclaims of defendants Illuscupides against defendants Torres and plaintiff;

3. Ordering defendants Illuscupides and/or Torres to deliver the P41,000.00 withheld by them as part of the purchase price of the lots and apartments for the satisfaction
of the claim of plaintiff;
 4. Ordering defendants Illuscupides to pay plaintiff and defendants Torres the sum of P5,000.00 as attorney's fees each; (and)

5. Ordering the defendants Illuscupides to pay the costs.

Olores and the Illuscupides then appealed to the Court of Appeals, where the case was docketed as CA-G.R. CV No. 14779. On January 18, 1990, the appellate court rendered a
decision, 6 the dispositive portion of which reads as follows:

WHEREFORE, the decision dated October 7, 1986 is hereby AFFIRMED insofar as the dismissal of the complaint of plaintiff-appellant Olores, the cross-claim and
counter-claim of defendants-appellants Illuscupides, and the counter-claim of defendant-appellees Torres; REVERSED insofar as Nos. 3, 4 and 5 of the dispositve portion
of the Decision are concerned; and the defendants-appellees spouses Vivencio Torres and Socorro Torres are ordered to reconvey in favor of the defendants-cross-
claimants spouses Ceferino Illuscupides and Socorro Illuscupides "that certain building more particularly designated as a ten-door apartment in the Deed of Sale executed
by and between the above-named parties on October 19, 1973." Without pronouncement as to costs.

With regard to the appeal of the Illuscupideses, the Court of Appeals did not agree with their contention that the sale of the properties to the Torreses was actually a pacto de retro sale,
since the terms of the Deed of Sale did not provide for the redemption of the property by the vendors. However, the appellate court discovered that the land and the apartment were sold
separately, and only the land appears to have been fully paid. And since the Agreement (Annex "F") provided that the apartment should be resold to the Illuscupideses, the appellate
court held that the Torreses should reconvey the apartment to the Illuscupideses.

The Illuscupideses filed a motion asking that the Court of Appeals rule upon the apartment rentals collected by Torreses, since it had ruled that the apartment be reconveyed to them. The
appellate court denied the motion on the ground that the matter of the rentals was not raised as assignment of error in their brief.

From said resolution, the Illuscupideses elevated the case to this Court on a petition for review for certiorari. The Torreses filed a separate petition for review on certiorari, but the same
was dismissed by this Court on June 18, 1990. The dismissal of the Torreses' petition is now final in view of their failure to file a timely motion for reconsideration.

In their petition, the Illuscupideses allege that the Court of Appeals erred in (1) not construing the Deed of Sale of October 19, 1973 to be a pacto de retro sale; and (2) in not ruling upon
the rentals collected by the Torreses from the apartment after it had ordered the reconveyance of the apartment to the Illuscupides.

The petition is totally devoid of merit.

The Court of Appeals was correct in construing the Deed of Sale as an absolute sale inasmuch as the terms thereof are clear on the matter. The Illuscupideses argue, however, that the
appellate court should have taken into account the circumstances surrounding the execution of the deed, particularly the fact that an Agreement to resell the apartment was executed on
the very same day as the deed of sale.

The argument is unavailing. Even if this Court were to agree with the Illuscupideses that parole evidence may be allowed to add to the terms of the deed of sale, this Court has held in the
case of Villarica, et al. vs. Court of Appeals, et al., 7 that —

[t]he right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as
one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter
granted the vendor by the vendee in a separate instrument cannot be a right to repurchase but some other right like an option to buy in the instant case. 8

As with regard to the Illuscupideses' second contention, the Court of Appeals acted correctly in not passing upon the rentals collected by the Torreses since the Illuscupideses did not ask for the same in their original cross-claim.
WHEREFORE, the decision appealed from is hereby AFFIRMED in toto. Costs against petitioners Illuscupideses.

SO ORDERED.
 THIRD DIVISION

SPS. CARLOS AND EULALIA G.R. No. 171250

RAYMUNDO and SPS. Present:
ANGELITO AND JOCELYN
BUENAOBRA, YNARES-SANTIAGO, J.,
Petitioners, Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
- versus - NACHURA, JJ.

Promulgated:
SPS. DOMINADOR and ROSALIA
BANDONG, July 4, 2007
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners Spouses Carlos and Eulalia Raymundo and
Spouses Angelito and Jocelyn Buenaobra seeking the reversal and setting aside of the Decision[1] of the Court of Appeals dated 26 September 2005 and its
Resolution[2] dated 24 January 2006 in CA-G.R. CV No. 59557. The Court of Appeals, in its assailed Decision and Resolution, reversed the Decision [3] of
the Regional Trial Court (RTC) dated 28 January 1998, in Civil Case No. C-14980, declaring the Deed of Sale executed by
respondent Dominador Bandong (Dominador) in favor of petitioner Eulalia Raymundo (Eulalia) as valid and binding.The dispositive portion of
the asailed Court of Appeals Decision reads:
 WHEREFORE, premises considered, we hereby GRANT the appeal. The January 28, 1998 decision of the RTC, Branch 126, Caloocan City is
hereby REVERSED and SET ASIDE and a new one entered:

1. ANNULLING the Deed of Absolute Sale dated February 3, 1989 as a deed of sale, and considering it instead as a real estate
mortgage of the disputed property to secure the payment of the P70,000.00 the plaintiffs-appellants spouses Bandong owe the
defendants-appellees spouses Raymundo. The spouses Bandong are given one (1) year from the finality of this Decision within
which to pay the P70,000.00 owed to the spouses Raymundo, at 12% interest per annum computed from July 17, 1991 until its
full payment.

2. ANNULLING the Deed of Absolute Sale dated September 25, 1990, between the spouses Raymundo as vendors and the
spouses Buenaobra as vendees.

3. ORDERING the Register of Deeds of Caloocan City to issue a new Transfer Certificate of Title covering Lot 18, Block 2 of the
subdivision plan PSD 16599, a portion of Lot 1073 of the Cadastral Survey of Caloocan, in the names of the
spouses Dominador and Rosalia Bandong, after the cancellation pursuant to this Decision of TCT No. 222871 currently in the
names of the spouses Angelito and Jocelyn Buenaobra; and FURTHER ORDERING the said Register of Deeds to annotate
in the new Transfer Certificate of Title in the names of the spouses Bandong a real estate mortgage in favor of the spouses
Carlos and Eulalia Raymundo reflecting the terms of this Decision.

4. AWARDING moral damages in the amount of P50,000.00; exemplary damages of P20,000.00; and attorneys fees and expenses of
litigation of P20,000.00, plus P500.00 per proven appearance of the plaintiffs-appellants counsel in court all solidarily payable
by the spouses Carlos and Eulalia Raymundo and the spouses Angelito and Jocelyn Buenaobra, to the
spouses Dominador and Rosalia Bandong.

5. ORDERING the payment of the costs of the suit, payable by the spouses Carlos and Eulalia Raymundo and the
spouses Angelito and Jocelyn Buenaobra.[4]

The factual and procedural backdrop of this case are as follows:

Eulalia was engaged in the business of buying and selling large cattle from different provinces within the Philippines. For this purpose, she
employed biyaheros whose primary task involved the procuring of large cattle with the financial capital provided by Eulalia and delivering the procured
cattle to her for further disposal. In order to secure the financial capital she advanced for the biyaheros, Eulalia required them to surrender the Transfer
Certificates of Title (TCTs) of their properties and to execute the corresponding Deeds of Sale in her favor.

Dominador had been working for Eulalia as one of her biyaheros for three decades. Considering his long years of service without any previous
derogatory record, Eulaliano longer required Dominador to post any security in the performance of his duties.[5]

However, in 1989, Eulalia found that Dominador incurred shortage in his cattle procurement operation in the amount of P70,000.00. Dominador and
his wife RosaliaBandong (Rosalia) then executed a Deed of Sale[6] in favor of Eulalia on 3 February 1989, covering a parcel of land with an area of 96
square meters, more or less, located at Caloocan City and registered under TCT No. 1421 (subject property), in the name of the Spouses Bandong. On the
strength of the aforesaid deed, the subject property was registered in the names of Eulalia and her husband Carlos Raymundo (Carlos). The subject property
was thereafter sold by the Spouses Raymundo to Eulalias grandniece and herein co-petitioner, Jocelyn Buenaobra (Jocelyn). Thus, the subject property
came to be registered in the name of Jocelyn and her husband Angelito Buenaobra (Angelito).

After the TCT of the subject property was transferred to their names, the Spouses Buenaobra instituted before the Metropolitan Trial Court (MeTC)
of Caloocan City, an action for ejectment against the Spouses Bandong, docketed as Civil Case No. 20053, seeking the eviction of the latter from the
subject property, which the Spouses Bandongopposed on the ground that they are the rightful owners and possessors thereof. The MeTC ruled in favor of
the Spouses Buenaobra which, on appeal, was affirmed in toto by the RTC[7] and subsequently, by the Court of Appeals.[8] Finally, when the case was raised
on appeal before us in G.R. No. 109422, we issued a Resolution[9] dated 12 July 1993, finding that no substantial arguments were raised therein to warrant
the reversal of the appealed decision.

To assert their right to the subject property, the Spouses Bandong instituted an action for annulment of sale before the RTC against Eulalia and
Jocelyn on the ground that their consent to the sale of the subject property was vitiated by Eulalia after they were served by Jocelyns counsel with the
demand to vacate. This was docketed as Civil Case No. C-14980. The Spouses Bandong alleged that there was no sale intended but only equitable mortgage
for the purpose of securing the shortage incurred by Dominador in the amount of P70,000 while employed as biyahero by Eulalia.

Eulalia countered that Dominador received from her a significant sum of money, either as cash advances for the purpose of procuring large cattle or
as personal loan, and when he could no longer pay his obligations, the Spouses Bandong voluntarily ceded the subject property to her by executing the
corresponding deed of sale in her favor. Indeed, the Spouses Bandong personally appeared before the Notary Public and manifested that the deed was their
own voluntary act and deed.
 For her part, Jocelyn maintained that she was a buyer in good faith and for value for she personally inquired from the Register of Deeds of the
presence of any liens and encumbrances on the TCT of the subject property and found that the same was completely free therefrom. While she admitted
that she had previous notice that Dominador and a certain Lourdes Santos (Lourdes) were in possession of the subject property, Jocelyn claimed that the
said possessors already acknowledged her ownership thereof and even asked for time to vacate. In the end, though, they refused to leave the premises.

On 28 June 1998, the RTC rendered a Decision[10] in Civil Case No. C-14980 in favor of Eulalia and Jocelyn by declaring that the Deed of Sale
between Dominador and Eulalia was valid and binding and, consequently, the subsequent sale between Eulalia and Jocelyn was also lawful absent any
showing that Jocelyn was a buyer in bad faith. The dispositive portion of the said decision reads:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint filed by the [Spouses Bandong] and ordering said
[Spouses Bandong] to pay [herein petitioners] spouses Raymundo and Buenaobra the amount of P50,000 and P30,000, respectively, as attorneys
fees and costs of the suit.

On appeal in CA-G.R. SP No. 59557, the Court of Appeals reversed the RTC Decision and found that the transaction entered into
by Dominador and Eulalia was not one of sale but an equitable mortgage considering that the purchase price was grossly inadequate and the
Spouses Bandong remained as possessors of the subject property after Eulaliasalleged purchase thereof. The appellate court likewise charged Jocelyn with
knowledge that the Spouses Raymundo were not the absolute owners of the subject property negating the presumption that she was an innocent purchaser
for value.

The Court of Appeals found the Motion for Reconsideration filed by petitioners unmeritorious and denied the same in its Resolution[11] dated 24
January 2006.

Hence, this instant Petition for Review on Certiorari filed by the petitioners assailing the Decision dated 26 September 2005 and the
Resolution dated 24 January 2006rendered by the Court of Appeals. For the resolution of this Court are the following issues:

I.
WHETHER OR NOT THE DEED OF SALE BETWEEN DOMINADOR AND EULALIA IS VALID AND BINDING.

II.
 WHETHER OR NOT JOCELYN IS A BUYER IN GOOD FAITH.

In arguing that the sale between Dominador and Eulalia is valid, petitioners posit that gross inadequacy of the price is not sufficient to invalidate the
sale, and granting arguendo that insufficient consideration may void a sale, it has not been proven that the consideration of sale
between Dominador and Eulalia was grossly inadequate.

Elaborating, petitioners maintain that the amount of P110,000.00 (which they claimed they have given to Dominador), or even the sum of P70,000.00
(which respondents admitted receiving), was a substantial consideration, sufficient to support a sale contract. Mere inadequacy of the price is not sufficient
to invalidate a sale; the price must be grossly inadequate or utterly shocking to the conscience in order to avoid a contract of sale.

Petitioners further aver that the alleged market value of the subject property as submitted by the appraiser, one of respondents witnesses, would not
serve as an objective basis in determining the actual value of the subject property, much less the supposed amount of its purchase price, in the absence of
any logical and valid basis for its determination.

Finally, petitioners contend that so long as the contract was voluntarily entered into by the parties and in the absence of a clear showing that their
consent thereto was vitiated by fraud, mistake, violence or undue influence, such as in the case at bar, the said contract should be upheld.

We do not agree.

An equitable mortgage is one that - although lacking in some formality, forms and words, or other requisites demanded by a statute - nevertheless
reveals the intention of the parties to charge a real property as security for a debt and contains nothing impossible or contrary to law.[12]

The instances when a contract - regardless of its nomenclature - may be presumed to be an equitable mortgage are enumerated in the Civil Code as
follows:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

 (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new
period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold.

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a
debt or the performance of any other obligation.

Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.

For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a contract denominated as a contract of sale; and two,
their intention was to secure an existing debt by way of an equitable mortgage.[13]

There is no question that Dominador and Eulalia entered into a contract of sale as evidenced by the document denominated as Deed of Sale[14] signed
by them. As to whether the parties intended to transfer ownership of the subject property or merely to constitute a security for an existing debt is an issue
that needs to be addressed by this Court.

In resolving this kind of controversy, the doctrine in Reyes v. Court of Appeals[15] directs us to give utmost consideration to the intention of the parties
in light of the relative situation of each and the circumstances surrounding the execution of the contract, thus:

In determining whether a deed absolute in form is a mortgage, the court is not limited to the written memorials of the transaction. The decisive
factor in evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by
all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude acts, conduct, declarations of the parties,
the negotiations between them leading to the deed, and generally, all pertinent facts having a tendency to fix and determine the real nature of their
design and understanding. x x x[16] (Emphasis supplied.)
 By applying the aforestated principle to the case at bar, we are constrained to rule that in executing the said Deed of
Sale, Dominador and Eulalia never intended the transfer of ownership of the subject property but to burden the same with an encumbrance to secure the
indebtedness incurred by Dominador on the occasion of his employment with Eulalia.

By Eulalias own admission,[17] it was her customary business practice to require her biyaheros to deliver to her the titles to their real properties and
to execute in her favor the corresponding deeds of sale over the said properties as security for the money she provided for their cattle procurement task, and
since Dominador worked for Eulaliasbusiness for years, he was allowed to advance the money without any security. Significantly, it was only after he
incurred a shortage that the sale contract was executed.

We are not inclined to believe the contention of the petitioners that Dominador ceded his property to Eulalia as payment for his obligation for it is
contrary to human experience that a person would easily part with his property after sustaining a debt. Rather, he would first look for means to settle his
obligation, and the selling of a property on which the house that shelters him and his family stands, would be his last resort. The only reasonable conclusion
that may be derived from Dominadors act of executing a Deed of Sale in favor of Eulalia is that the latter required him to do so in order to ensure that he
will subsequently pay his obligation to her.

This conclusion is in accord with the doctrine we enunciated in Aguirre v. Court of Appeals,[18] that:

The explicit provision of Article 1602 that any of those circumstances would suffice to construe a contract of sale to be one of equitable mortgage is in
consonance with the rule that the law favors the least transmission of property rights. To stress, the existence of any one of the conditions under Article 1602,
not a concurrence, or an overwhelming number of such circumstances, suffices to give rise to the presumption that the contract is an equitable mortgage.

While we agree in the petitioners insistence that inadequacy of the price is not sufficient to nullify the contract of sale, their persistence is, however,
misplaced. It is worthy to note that the factual circumstances attendant in the case at bar call not for the application of the legal and jurisprudential principles
on annulment of contract per se, but more aptly, of the provisions of Articles 1602 and 1604 of the Civil Code on the construction of the contract of sale as
an equitable mortgage.

Consequently, the agreement between Dominador and Eulalia was not avoided in its entirety so as to prevent it from producing any legal effect at
all. Instead, we construe that said transaction is an equitable mortgage, thereby merely altering the relationship of the parties from seller and buyer, to
mortgagor and mortgagee, while the subject property is not transferred but subjected to a lien in favor of the latter.
 Moreover, granting that the purchase price is adequate, the fact that respondents remain in possession of the subject property after its supposed sale
is sufficient to support our finding that the contract is one of equitable mortgage and not of sale. To reiterate, the existence of any one of the conditions
under Article 1602, not a concurrence, or an overwhelming number of such circumstances, suffices to give rise to the presumption that the contract
is an equitable mortgage.[19]

Having threshed the issue that there was no sale in favor of Eulalia but an equitable mortgage leads us to an inevitable conclusion that she has no
right to subsequently transfer ownership of the subject property, in consonance with the principle that nobody can dispose of what he does not have.[20] One
of the exceptions[21] to this rule, however, can be found in Article 1506 of the Civil Code, wherein the seller has voidable title to a property but his title has
not yet been nullified at the time of the sale, and the subsequent buyer of the property was in good faith.

An innocent purchaser for value is one who buys the property of another, without notice that some other person has a right or interest in the property, for
which a full and fair price is paid by the buyer at the time of the purchase or before receipt of any notice of claims or interest of some other person in the
property.[22]
Petitioners are harping on the contention that Jocelyn was an innocent purchaser for value. Invoking the indefeasibility of a Torrens title, they assert
that there is nothing in the subject propertys TCT that should arouse Jocelyns suspicion as to put her on guard that there is a defect in Eulalias title.

Again, we are not persuaded. The burden of proving the purchasers good faith lies in the one who asserts the same. In discharging the burden, it is
not enough to invoke the ordinary presumption of good faith.[23] In Arrofo v. Quio,[24] we have elucidated that:

[A] person dealing with registered land, [is not required] to inquire further that what the Torrens title on its face indicates. This rule, however, is not absolute but
admits of exceptions.

Thus, while it is true x x x that a person dealing with registered lands need not go beyond the certificate of title, it is likewise a well-settled rule that a
purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man on his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to face up to the fact that such defect exists, or his willful closing of his
eyes to the possibility of the existence of a defect in the vendors or mortgagors title, will not make him an innocent purchaser for value, if it afterwards develops that
the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with the measure of precaution which
may be required of a prudent man in a like situation.
 In the present case, we are not convinced by the petitioners incessant assertion that Jocelyn is an innocent purchaser for value. To begin with, she is
a grandniece of Eulaliaand resides in the same locality where the latter lives and conducts her principal business. It is therefore impossible for her not to
acquire knowledge of her grand aunts business practice of requiring her biyaheros to surrender the titles to their properties and to sign the corresponding
deeds of sale over said properties in her favor, as security. This alone should have put Jocelyn on guard for any possible abuses that Eulalia may commit
with the titles and the deeds of sale in her possession.

The glaring lack of good faith of Jocelyn is more apparent in her own admission that she was aware that Dominador and a certain Lourdes were in
possession of the subject property. A buyer of real property that is in the possession of a person other than the seller must be wary. A buyer who does not
investigate the rights of the one in possession can hardly be regarded as a buyer in good faith.[25] Jocelyns self-serving statement that she personally talked
to Dominador and Lourdes about her acquisition of the subject property and intention to take possession of the same, and that Dominador and Lourdes even
pleaded for time to vacate the subject property cannot be given credence in light of the prompt filing by the Spouses Bandong of an action for the annulment
of the sale contract between Dominador and Eulalia after they received the demand to vacate from Jocelyns lawyer.

In the last analysis, good faith, or the lack of it, is a question of intention. But in ascertaining the intention that impels one on a given occasion, the
courts are necessarily controlled by the evidence as to the conduct and other outward acts by which the motive may be safely determined. [26]

Petitioners question further the belated filing by the Spouses Bandong of an action for the annulment of sale, since the Spouses Bandong filed the
same only after they received the notice to vacate, and not immediately after the execution of the assailed Deed of Sale. We have repeatedly held that the
one who is in actual possession of a piece of land claiming to be the owner thereof may await to vindicate his right. His undisturbed possession gives him
a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own
title, which right can be claimed only by one who is in possession.[27]

Finally, we agree with the Court of Appeals that the ejectment case which had been litigated to finality by the Spouses Buenaobra and the respondents
need not alter our conclusion in the present case. Well entrenched is the doctrine that in ejectment cases, the sole question for resolution is the physical or
material possession of the property in question, so that neither the claim of juridical possession nor an averment of ownership can outrightly prevent the
court from taking cognizance of the case.[28] In ejectmentcases, all the court may do is to resolve who is entitled to its possession although, in doing so, it
may make a determination of who is the owner of the property in order to resolve the issue of possession. But such determination of ownership is not
clothed with finality. Neither will it affect ownership of the property or constitute a binding and conclusive adjudication on the merits with respect to the
issue of ownership.[29]

WHEREFORE, IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Decision dated 26 September 2005, and the Resolution
dated 24 January 2006, rendered by the Court of Appeals in CA-G.R. SP No. 59957, are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

HEIRS OF JOSE REYES, JR., G.R. No. 158377

namely: MAGDALENA C.
REYES, OSCAR C. REYES,
GAMALIEL C. REYES,
NENITA R. DELA CRUZ, Present:
RODOLFO C. REYES, and
RODRIGO C. REYES,
Petitioners, CARPIO MORALES., Chairperson,
BRION,
BERSAMIN,
-versus - ABAD,* and
VILLARAMA, JR., JJ.
AMANDA S. REYES,
CONSOLACION S. REYES,
EUGENIA R. ELVAMBUENA,
LUCINA R. MENDOZA, Promulgated:
PEDRITO S. REYES,
MERLINDA R. FAMODULAN,
EDUARDO S. REYES, and JUNE August 13, 2010
S. REYES,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION

BERSAMIN, J.:
The petitioners[1] assail the decision dated July 31, 2002 rendered in C.A.-G.R. CV No. 53039,[2] by which the Court of Appeals (CA) affirmed the decision
dated May 21, 1996of the Regional Trial Court (RTC), Branch 9, in Malolos, Bulacan.[3]

Antecedents

Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel of residential land with an area of 442 square meters, more
or less, located in Pulilan, Bulacan and covered by Tax Declaration No. 7590. On that land they constructed their dwelling. The couple had four children,
namely: Jose Reyes, Sr. (Jose, Sr.), Teofilo Reyes (Teofilo), Jose Reyes, Jr. (Jose, Jr.) and Potenciana Reyes-Valenzuela (Potenciana). Antonio Reyes died
intestate, and was survived by Leoncia and their three sons, Potenciana having predeceased her father. Potenciana also died intestate, survived by her
children, namely: Gloria ReyesValenzuela, Maria Reyes Valenzuela, and Alfredo Reyes Valenzuela. Jose, Jr., and his family resided in the house of the
parents, but Teofilo constructed on the property his own house, where he and his family resided.

On July 9, 1955, Leoncia and her three sons executed a deed denominated Kasulatan ng Biling Mabibiling Muli,[4] whereby they sold the land and
its existing improvements to the Spouses Benedicto Francia and Monica Ajoco (Spouses Francia) for P500.00, subject to the vendors right to repurchase
for the same amount sa oras na sila'y makinabang. Potencianas heirs did not assent to that deed. Nonetheless, Teofilo and Jose, Jr. and their respective
families remained in possession of the property and paid the realty taxes thereon.

Leoncia and her children did not repay the amount of P500.00.

The Spouses Francia both died intestate (i.e., Monica Ajoco on September 16, 1963, and Benedicto Francia on January 13, 1964).

Alejandro Reyes (Alejandro), the son of Jose, Sr., first partially paid to the Spouses Francia the amount of P265.00 for the obligation of Leoncia, his uncles
and his father. Alejandro later paid the balance of P235.00. Thus, on August 11, 1970, the heirs of Spouses Francia executed a deed entitled Pagsasa-ayos
ng Pag-aari at Pagsasalin,[5]whereby they transferred and conveyed to Alejandro all their rights and interests in the property for P500.00.

On August 21, 1970, Alejandro executed a Kasulatan ng Pagmeme-ari,[6] wherein he declared that he had acquired all the rights and interests of the
heirs of the Spouses Francia, including the ownership of the property, after the vendors had failed to repurchase within the given period. On the basis of
the Kasulatan ng Pagmeme-ari, Tax Declaration No. 3703 covering the property[7] was canceled by Tax Declaration No. 8715,[8] effective 1971, issued to
Alejandro. From then on, he had paid the realty taxes for the property.
Nevertheless, on October 17, 1970, Alejandro, his grandmother (Leoncia), and his father (Jose, Sr.) executed a Magkakalakip na Salaysay,[9] by
which Alejandro acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any time for the same amount of P500.00.

On October 22, 1970, Leoncia died intestate.[10] She was survived by Jose, Sr., Teofilo, Jose, Jr. and the heirs of Potenciana. Even after Leonicas
death, Teofilo and Jose, Jr., with their respective families, continued to reside in the property.
Subsequently, Tax Declaration 1228,[11] under the name of Alejandro, was issued effective 1980. All of Leoncias sons eventually died intestate,
survived by their respective heirs, namely:

Name of Decedent Surviving Heirs

Teofilo Romeo Reyes, Leonardo Reyes,
and Leonora C. Reyes

Jose, Jr. Rodrigo Reyes, Nenita Reyes- dela Cruz, Rodolfo Reyes, Oscar Reyes, Gamaliel Reyes, Magdalena Reyes (petitioners herein), Efren Reyes and
Amado Reyes dela
Cruz

Jose, Sr. Alejandro Reyes (respondents

predecessor)[12]

On September 2, 1993, Alejandro also died intestate.[13] Surviving him were his wife, Amanda Reyes, and their children, namely: Consolacion Reyes,
Eugenia Reyes-Elvambuena, Luciana Reyes-Mendoza, Pedrito S. Reyes, Merlinda Reyes-Famodulan, Eduardo Reyes and June S. Reyes (respondents
herein).

In 1994, respondent Amanda Reyes asked the heirs of Teofilo and Jose, Jr., to vacate the property because she and her children already needed it. After the
petitioners refused to comply, she filed a complaint against the petitioners in the barangay, seeking their eviction from the property. When no amicable
settlement was reached, the Barangay Lupon issued a certification to file action to the respondents on September 26, 1994.[14]

In the interim, petitioner Nenita R. de la Cruz and her brother Romeo Reyes also constructed their respective houses on the property.[15]
 RTC Proceedings and Ruling

On September 28, 1994, the respondents initiated this suit for quieting of title and reconveyance in the RTC. [16] The complaint, docketed as Civil Case No.
817-M-94 and entitled Amanda Reyes, et al. v. Heirs of Jose Reyes, Jr., et al., was later amended.[17] They alleged that their predecessor Alejandro had
acquired ownership of the property by virtue of the deed Pagsasa-ayos ng Pag-aari at Pagsasalin executed on August 11, 1970 by the heirs of the Spouses
Francia; that on the basis of such deed of assignment, Alejandro had consolidated his ownership of the property via his Kasulatan ng Pagmeme-ari; and
that under the Magkasanib na Salaysay, Alejandro had granted to Leoncia, his father Jose, Sr., and his uncles, Teofilo and Jose, Jr. the right to repurchase
the property, but they had failed to do so.

The respondents prayed for judgment in their favor, as follows:

WHEREFORE, it is respectfully prayed that judgment be rendered:

1. Quieting the title to the property by declaring the plaintiffs (respondents herein) as the rightful and lawful owners thereof;

2. Ordering the defendants (petitioners herein) to vacate subject premises and reconvey and or surrender possession thereof to the plaintiffs;

3. Ordering the defendants to recognize the right of the plaintiffs as the lawful owners of subject property;

4. Ordering the defendants to pay plaintiffs the following:

a. Moral damages in the amount of P50,000.00;

b. Exemplary damages in the amount of P20,000.00;

c. Attorney's fees of P20,000.00, acceptance fee of P10,000.00 and P500.00 per recorded Court appearance of counsel;

d. The costs of this suit.

Plaintiffs further pray for such other relief which the Honorable Court may deem just and equitable under the premises. [18]
In their answer,[19] the petitioners averred that the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale; that the
mortgagors had retained ownership of the property; that the heirs of the Spouses Francia could not have validly sold the property to Alejandro through
the Pagsasaayos ng Pag-aari at Pagsasalin; that Alejandros right was only to seek reimbursement of the P500.00 he had paid from the co-owners, namely:
Leoncia, Teofilo, Jose, Jr. and Jose, Sr. and the heirs of Potenciana; and that Alejandro could not have also validly consolidated ownership through
the Kasulatan ng Pagmeme-ari, because a consolidation of ownership could only be effected via a court order.

The petitioners interposed a counterclaim for the declaration of the transaction as an equitable mortgage, and of their property as owned in common by all
the heirs of Leoncia, Teofilo, Jose, Jr. and Jose, Sr.

On May 21, 1996, the RTC ruled in favor of the respondents, declaring that Alejandro had acquired ownership of the property in 1965 by operation of law
upon the failure of the petitioners predecessors to repurchase the property; that the joint affidavit executed by Alejandro, Leoncia and Jose, Jr. and Jose,
Sr., to extend the period of redemption was inefficacious, because there was no more period to extend due to the redemption period having long lapsed by
the time of its execution; and that the action should be dismissed insofar as the heirs of Potenciana were concerned, considering that Potenciana, who had
predeceased her parents, had no successional rights in the property.
Accordingly, the RTC decreed as follows:

WHEREFORE, on the basis of the evidence adduced and the law/jurisprudence applicable thereon, judgment is hereby rendered:

a) sustaining the validity of the Kasulatan ng Biling Mabibiling Muli (Exh. B/Exh. 1) executed on July 9, 1955 by Leoncia Mag-isa and her
sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in favor of Spouses Benedicto Francia and Monica Ajoco as well as the Pagsasa-ayos ng
Pag-aari at Pagsasalin (Settlement of Estate and Assignment) [Exh. C/Exh. 4] executed on August 11, 1970 by the heirs of spouses Benedicto
Francia and Monica Ajoco in favor of the spouses Alejandro Reyes and Amanda Salonga;
b) declaring the aforementioned Kasulatan Ng Biling Mabibili Muli (Exh. B/ Exh. 1) to be a contract of sale with right to repurchase and not
an equitable mortgage;
c) confirming the consolidation of ownership, by operation of law, of spouses Alejandro M. Reyes and Amanda Salonga over the residential
lot mentioned and referred to in Exhibit B/Exhibit 1 and Exhibit C/Exhibit 4;

d) allowing the registration with the Registry of Deeds for the Province of Bulacan of the Kasulatan ng Pagmeme-ari (Document of
Ownership) [Exh. E/Exh. 5] executed by Alejandro M. Reyes on August 21, 1970 or of any appropriate deed of consolidation of ownership over
the residential lot covered by Exhibit E/Exhibit 5 which the plaintiffs, as eventual owners by succession of the aforementioned proeprty, may deem
proper to execute;
 e) ordering the defendants and all persons claiming rights under them to vacate the residential lot subject of the above-entitled case and to
restore possession thereof unto the plaintiffs;
f) directing the defendants (except the heirs of Potenciana Reyes-Valenzuela) to pay unto the plaintiffs the amount of P20,000.00 as attorney's
fees; and
g) dismissing the complaint in so far as the defendant heirs of Potenciana Reyes-Valenzuela are concerned as well as their counterclaim for
damages and attorney's fees.

No pronouncement as to costs.

SO ORDERED. [20]
Aggrieved, the petitioners appealed to the CA.

CA Ruling

In the CA, the petitioners assailed the RTCs dispositions, except the dismissal of the complaint as against Potencianas heirs.

In its decision dated July 31, 2002, the CA ruled that the transaction covered by the Kasulatan ng Biling Mabibiling Muli was not a pacto de retro sale but
an equitable mortgage under Article 1602 of the Civil Code; that even after the deeds execution, Leoncia, Teofilo, Jose, Jr. and their families had remained
in possession of the property and continued paying realty taxes for the property; that the purported vendees had not declared the property for taxation
purposes under their own names; and that such circumstances proved that the parties envisaged an equitable mortgage in the Kasulatan ng Biling Mabibiling
Muli.

The CA observed that the heirs of the Spouses Francia had themselves admitted in paragraph 5 of the Pagsasa-ayos ng Pag-aari at Pagsasalin that the
property had been mortgaged to their predecessors-in-interest, viz:

Na, sa oras ng kamatayan ay nakaiwan sila ng isang lagay na lupang nakasanla sa kanila na makikilala sa kasulatang kalakip nito sa halagang
LIMANG DAANG PISO (P500.00). Ngunit nuong nabubuhay pa ang magasawang Benedicto Francia at Monica Ajoco ay nakatanggap na ng
halagang P265.00 kay Alejandro Reyes - Filipino, kasal kay Amanda Salonga, may sapat nagulang at naninirahan sa Pulilan, Bulacan.[21]

However, the CA held that the appellants (petitioners herein) failure to file an action for the reformation of the Kasulatan ng Biling Mabibiling Muli to
reflect the true intention of the parties within ten years from the deeds execution on July 9, 1955, pursuant to Article 1144 of the Civil Code,[22] already
barred them from claiming that the transaction executed between Leoncia and her children, on one hand, and the Spouses Francia, on the other hand, was
an equitable mortgage. The CA agreed with the RTC that the Magkakalakip na Salaysay did not effectively extend the period for Leoncia and her children
to repurchase the property, considering that the period to repurchase had long lapsed by the time the agreement to extend it was executed on October 17,
1970.

Issues

In this appeal, therefore, the petitioners insist that:[23]

I.
The Honorable Court of Appeals erred in finding that respondents (were) already barred from claiming that the transaction entered into by their
predecessors-in-interest was an equitable mortgage and not a pacto de retro sale;

II.
The Honorable Court of Appeals erred in affirming the findings of the court a quo that the Magkasanib na Salaysay (Joint Affidavit), executed
by Alejandro, Leoncia and Jose, Jr., wherein Leoncia and her children were granted by Alejandro the right to repurchase the property at anytime
for the amount of P500.00, was of no legal significance.

Ruling of the Court

The petition is meritorious.

A.

The CA correctly concluded that the true agreement of the parties vis--vis the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto
de retro sale. There was no dispute that the purported vendors had continued in the possession of the property even after the execution of the agreement;
and that the property had remained declared for taxation purposes under Leoncias name, with the realty taxes due being paid by Leoncia, despite the
execution of the agreement. Such established circumstances are among the badges of an equitable mortgage enumerated in Article 1602, paragraphs 2 and
5 of the Civil Code, to wit:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
xxx
(2) When the vendor remains in possession as lessee or otherwise;
 xxx
(5) When the vendor binds himself to pay the taxes on the thing sold;
xxx

The existence of any one of the conditions enumerated under Article 1602 of the Civil Code, not a concurrence of all or of a majority thereof, suffices to
give rise to the presumption that the contract is an equitable mortgage.[24] Consequently, the contract between the vendors and vendees (Spouses Francia)
was an equitable mortgage.

B.

Are the petitioners now barred from claiming that the transaction under the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage by their
failure to redeem the property for a long period of time?

The petitioners contend that prescription, if it must apply to them, should as well be applied to the respondents, who had similarly failed to enforce their
right under the equitable mortgage within ten years from its execution on July 9, 1955. Consequently, they urge the upholding of the original intention of
the parties to the Kasulatan ng Biling Mabibiling Muli, without taking prescription into account, because both parties did not enforce their respective rights
within the ten-year prescriptive period, is more in keeping with fairness and equity.
We agree with the petitioners.

Considering that sa oras na silay makinabang, the period of redemption stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite period
had been stated, the period to redeem should be ten years from the execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code.[25] Thus,
the full redemption price should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia or their
heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandros payments, until the debt was fully satisfied by August
11, 1970.

The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees heirs from insisting that the period to redeem
the property had already expired. Their actions impliedly recognized the continued existence of the equitable mortgage. The conduct of the original parties
as well as of their successors-in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to be an
equitable mortgage, not a pacto de retro sale.
In Cuyugan v. Santos,[26] the purported buyer under a so-called contract to sell with right to repurchase also accepted partial payments from the purported
seller. We held that the acceptance of partial payments was absolutely incompatible with the idea of irrevocability of the title of ownership of the purchaser
upon the expiration of the term stipulated in the original contract for the exercise of the right of redemption. Thereby, the conduct of the parties manifested
that they had intended the contract to be a mortgage, not a pacto de retro sale.

C.
When Alejandro redeemed the property on August 11, 1970, he did not thereby become a co-owner thereof, because his father Jose, Sr. was then still
alive. Alejandro merely became the assignee of the mortgage, and the property continued to be co-owned by Leoncia and her sons Jose, Sr., Jose Jr., and
Teofilo. As an assignee of the mortgage and the mortgage credit, Alejandro acquired only the rights of his assignors, nothing more. He himself confirmed
so in the Magkasanib na Salaysay, whereby he acknowledged the co-owners right to redeem the property from him at any time (sa ano mang oras) for the
same redemption price of P500.00.

It is worthy to note that Alejandros confirmation in the Magkasanib na Salaysay of the co-owners right to redeem was made despite 15 years having
meanwhile elapsed from the execution of the original Kasulatan ng Biling Mabibiling Muli (July 9, 1955) until the execution of the Magkasanib na
Salaysay (August 21, 1970).

D.

Neither did the petitioners failure to initiate an action for reformation within ten years from the execution of the Kasulatan ng Biling Mabibiling Muli bar
them from insisting on their rights in the property. The records show that the parties in the Kasulatan ng Biling Mabibiling Muli had abided by their true
agreement under the deed, to the extent that they and their successors-in-interest still deemed the agreement as an equitable mortgage despite the lapse of
15 years from the execution of the purported pacto de retro sale. Hence, an action for reformation of the Kasulatan ng Biling Mabibiling Muli was
unnecessary, if not superfluous, considering that the reason underlying the requirement for an action for reformation of instrument has been to ensure that
the parties to a contract abide by their true intended agreement.

The Kasulatan ng Pagmeme-ari executed by Alejandro on August 21, 1970 was ineffectual to predicate the exclusion of the petitioners and their
predecessors in interest from insisting on their claim to the property. Alejandros being an assignee of the mortgage did not authorize him or his heirs to
appropriate the mortgaged property for himself without violating the prohibition against pactum commissorium contained in Article 2088 of
the Civil Code, to the effect that [t]he creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to
the contrary is null and void. Aptly did the Court hold in Montevirgen v. Court of Appeals:[27]

The declaration, therefore, in the decision of July 1, 1971 to the effect that absolute ownership over the subject premises has become consolidated
in the respondents upon failure of the petitioners to pay their obligation within the specified period, is a nullity, for consolidation of ownership is
an improper and inappropriate remedy to enforce a transaction declared to be one of mortgage. It is the duty of respondents, as mortgagees, to
foreclose the mortgage if he wishes to secure a perfect title to the mortgaged property if he buys it in the foreclosure sale.
Moreover, the respondents, as Alejandros heirs, were entirely bound by his previous acts as their predecessors-in-interest. Thus, Alejandros
acknowledgment of the effectivity of the equitable mortgage agreement precluded the respondents from claiming that the property had been sold to him
with right to repurchase.[28]

E.

What was the effect of the Magkasanib na Salaysay?

Both the trial court and the CA declared that the Magkasanib na Salaysay, which extended the redemption period of the mortgaged property, was
inefficacious, because the period to redeem could no longer be extended after the original redemption period had already expired.

In contrast, the petitioners submit that disregarding the Magkasanib na Salaysay made no sense, considering that the respondents predecessors-in-interest
admitted therein that the petitioners had a right to redeem the property.

The respondents counter, however, that the Magkasanib na Salaysay, which acknowledged the other co-owners right to redeem the property, was void; that
the petitioners could no longer claim to be co-owners entitled to redeem the property, because the co-ownership had come to an end by Alejandro having
openly repudiated the co-ownership; that Alejandros acts of repudiation had consisted of: (a) redeeming the property from the Spouses Francia; (b) acquiring
the property from the heirs of Spouses Francia by virtue of a deed of assignment denominated as Pag-aayos ng Pag-aari at Pagsasalin; (c) executing an
affidavit of consolidation of ownership over the property (Kasulatan ng Pagmeme-ari); (d) applying for the cancellation of the tax declaration of property
in the name of Leoncia, and the subsequent issuance of a new tax declaration in his name; (e) his continuous possession of the property from 1955, which
possession the respondents as his heirs had continued up to the present time, or for a period of almost 50 years already; and (f) the payment of the taxes by
Alejandro and the respondents for more than 30 years without any contribution from the petitioners; and that such repudiation established that Alejandro
and his successors-in-interest had already acquired sole title over the property through acquisitive prescription.
The respondents and the lower courts positions cannot be sustained.

The provisions of the Civil Code governing equitable mortgages disguised as sale contracts, like the one herein, are primarily designed to curtail the evils
brought about by contracts of sale with right to repurchase, particularly the circumvention of the usury law and pactum commissorium.[29] Courts have taken
judicial notice of the well-known fact that contracts of sale with right to repurchase have been frequently resorted to in order to conceal the true nature of a
contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hard-pressed to meet even their basic needs or to
respond to an emergency, leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain the
much-needed loan from unscrupulous money lenders.[30] This reality precisely explains why the pertinent provision of the Civil Code includes a peculiar
rule concerning the period of redemption, to wit:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
xxx
(3)When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a
new period is executed;
xxx

Ostensibly, the law allows a new period of redemption to be agreed upon or granted even after the expiration of the equitable mortgagors right to repurchase,
and treats such extension as one of the indicators that the true agreement between the parties is an equitable mortgage, not a sale with right to repurchase.
It was indubitable, therefore, that the Magkasanib na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which
to pay to Alejandro the redemption price of P500.00.

F.

Did Alejandro and his heirs (respondents herein) acquire the mortgaged property through prescription?

It is true that Alejandro became a co-owner of the property by right of representation upon the death of his father, Jose Sr.[31] As a co-owner, however, his
possession was like that of a trustee and was not regarded as adverse to his co-owners but in fact beneficial to all of them.[32]
 Yet, the respondents except to the general rule, asserting that Alejandro, having earlier repudiated the co-ownership, acquired ownership of the
property through prescription.
The Court cannot accept the respondents posture.

In order that a co-owners possession may be deemed adverse to that of the cestui que trust or the other co-owners, the following elements must concur:

1. The co-owner has performed unequivocal acts of repudiation of the co-ownership amounting to an ouster of the cestui que trust or the other
co-owners;

2. Such positive acts of repudiation have been made known to the cestui que trust or the other co-owners;

3. The evidence on the repudiation is clear and conclusive; and

4. His possession is open, continuous, exclusive, and notorious.[33]

The concurrence of the foregoing elements was not established herein. For one, Alejandro did not have adverse and exclusive possession of the property,
as, in fact, the other co-owners had continued to possess it, with Alejandro and his heirs occupying only a portion of it. Neither did the cancellation of the
previous tax declarations in the name of Leoncia, the previous co-owner, and the issuance of a new one in Alejandros name, and Alejandros payment of
the realty taxes constitute repudiation of the co-ownership. The sole fact of a co-owner declaring the land in question in his name for taxation purposes and
paying the land taxes did not constitute an unequivocal act of repudiation amounting to an ouster of the other co-owner and could not constitute adverse
possession as basis for title by prescription.[34] Moreover, according to Blatero v. Intermediate Appellate Court,[35] if a sale a retro is construed as an
equitable mortgage, then the execution of an affidavit of consolidation by the purported buyer to consolidate ownership of the parcel of land is of no
consequence and the constructive possession of the parcel of land will not ripen into ownership, because only possession acquired and enjoyed in the
concept of owner can serve as title for acquiring dominion.[36]
In fine, the respondents did not present proof showing that Alejandro had effectively repudiated the co-ownership. Their bare claim that Alejandro had
made oral demands to vacate to his co-owners was self-serving and insufficient. Alejandros execution of the affidavit of consolidation of ownership
on August 21, 1970[37] and his subsequent execution on October 17, 1970 of the joint affidavit[38] were really equivocal and ambivalent acts that did not
manifest his desire to repudiate the co-ownership.
The only unequivocal act of repudiation was done by the respondents when they filed the instant action for quieting of title on September 28, 1994, nearly
a year after Alejandros death on September 2, 1993. However, their possession could not ripen into ownership considering that their act of repudiation was
not coupled with their exclusive possession of the property.

G.

The respondents can only demand from the petitioners the partition of the co-owned property and the reimbursement from their co-owners of the amount
advanced by Alejandro to repay the obligation. They may also seek from their co-owners the proportional reimbursement of the realty taxes paid for the
property, pursuant to Article 488 of the CivilCode.[39] In the alternative, they may opt to foreclose the equitable mortgage, considering that the petitioners
period to redeem the mortgaged property, which was ten years from the execution on October 17, 1970 of the Magkakasanib na Salaysay, had already long
lapsed. We clarify, however, that the respondents may take these recourses only through the appropriate actions commenced in court.

H.

The petitioners counterclaim for damages is dismissed for their failure to prove their entitlement to it.[40]

WHEREFORE, we grant the petition for review on certiorari.

The decision dated July 31, 2002 rendered by the Court of Appeals is reversed and set aside, and another judgment is rendered:

a) Upholding the validity of the Kasulatan ng Biling Mabibiling Muli (Deed of Sale with Right of Repurchase) executed on July 9, 1955 by Leoncia
Mag-isa Reyes and her sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in favor of the late Spouses Benedicto Francia and Monica Ajoco as well
as the Pagsasa-ayos ng Pag-aari at Pagsasalin(Settlement of Estate and Assignment) executed on August 11, 1970 by the heirs of the late Spouses
Benedicto Francia and Monica Ajoco in favor of the spouses Alejandro Reyes and Amanda Salonga;

b) Declaring the Kasulatan ng Biling Mabibili Muli to be an equitable mortgage, not a contract of sale with right to repurchase;

c) Finding the Magkakalakip na Salaysay executed on October 17, 1970 by and among Leoncia Mag-isa Reyes, Jose Reyes, Sr. and Alejandro Reyes
valid and effective;
 c) Nullifying the Kasulatan ng Pagmeme-ari executed by Alejandro M. Reyes on August 21, 1970; and

d) Dismissing the petitioners counterclaim.

Costs of suit to be paid by the respondents.

SO ORDERED.
 SECOND DIVISION

KINGS PROPERTIES G.R. No. 170023

CORPORATION,
Petitioner, Present:

CARPIO, J., Chairperson,

LEONARDO-DE CASTRO,*
BRION,
- versus - DEL CASTILLO, and
ABAD, JJ.

CANUTO A. GALIDO,
Respondent. Promulgated:
November 27, 2009
x---------------------------------------------------x

DECISION

CARPIO, J.:

The Case

Kings Properties Corporation (petitioner) filed this Petition for Review on Certiorari[1]assailing the Court of Appeals Decision[2]dated 20 December 2004 in
CA-G.R. CV No. 68828 as well as the Resolution[3]dated 10 October 2005 denying the Motion for Reconsideration. In the assailed decision, the Court of
Appeals reversed the Regional Trial Courts Decision[4]dated 4 July 2000. This case involves an action for cancellation of certificates of title, registration of
deed of sale and issuance of certificates of title filed by Canuto A. Galido (respondent) before Branch 71 of the Regional Trial Court of Antipolo City (trial
court).

The Facts

On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No. 112947 consisting of
four parcels of land located in San Isidro, Antipolo, Rizal (Antipolo property) and particularly described as follows:
1. Lot No. 1 containing an area of 96,297 square meters;
Lot No. 3 containing an area of 25,170 square meters;
Lot No. 4 containing an area of 26,812 square meters; and
Lot No. 5 containing an area of 603 square meters.

The Antipolo property with a total area of 14.8882 hectares was registered under Original Certificate of Title (OCT) No. 535.[5]The issuance of the homestead
patent was subject to the following conditions:

To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs of Domingo Eniceo and to his heir or heirs
and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as amended, which provide that except in
favor of the Government or any of its branches, units or institutions, the land hereby acquired shall be inalienable and shall not be subject to incumbrance for a
period of five (5) years next following the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior to the expiration of that
period; that it shall not be alienated, transferred or conveyed after five (5) years and before twenty-five (25) years next following the issuance of title, without
the approval of the Secretary of Agriculture and Natural Resources; that it shall not be incumbered, alienated, or transferred to any person, corporation,
association, or partnership not qualified to acquire public lands under the said Act and its amendments; x x x [6]

On 10 September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors and respondent
as vendee. Rufina Eniceo and Maria Eniceo sold the Antipolo property to respondent for P250,000.[7] A certain Carmen Aldana delivered the owners
duplicate copy of OCT No. 535 to respondent.[8]

Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the heirs of Maria Eniceo (Eniceo heirs),[9]who continued to occupy the
Antipolo property as owners, thought that the owners duplicate copy of OCT No. 535 was lost.[10]
On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina City (Registry of Deeds) a Notice of Loss dated 2 April 1988 of the
owners copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of a new owners duplicate copy of OCT No. 535 with Branch 72 of
the Regional Trial Court (RTC) of Antipolo, Rizal. The case was docketed as LRC Case No. 584-A.[11]

On 31 January 1989, the RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no annotation in favor of any person,
corporation or entity. The RTC ordered the Registry of Deeds to issue a second owners copy of OCT No. 535 in favor of the Eniceo heirs and declared the
original owners copy of OCT NO. 535 cancelled and considered of no further value.[12]

On 6 April 1989, the Registry of Deeds issued a second owners copy of OCT No. 535 in favor of the Eniceo heirs.[13]
Petitioner states that as early as 1991, respondent knew of the RTC decision in LRC Case No. 584-A because respondent filed a criminal case against
Rufina Eniceo and Leonila Bolinas (Bolinas) for giving false testimony upon a material fact during the trial of LRC Case No. 584-A.[14]

Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto Tronio Jr. (Tronio), petitioners general manager, and offered to
sell the Antipolo property. During an on-site inspection, Tronio saw a house and ascertained that the occupants were Bolinas relatives. Tronio also went to
the Registry of Deeds to verify the records on file. Tronio ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary
verification, petitioner decided to buy the Antipolo property.[15]

On 14 March 1995, respondent caused the annotation of his adverse claim in OCT No. 535.[16]

On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the Antipolo property for P500,000.[17]

On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and 277120 were issued. TCT No. 277747 covering lots 1 and 5 of the Antipolo property
was registered in the names of Rufina Eniceo, Ambrosio Eniceo, Rodolfo Calove, Fernando Calove and Leonila Calove Bolinas. [18]TCT No. 277120
covering lots 3 and 4 of the Antipolo property was registered in the name of petitioner.[19]

On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT
No. 278588 was issued in the name of petitioner and TCT No. 277120 was cancelled.[20]
On 17 August 1995, the Secretary of the Department of Environment and Natural Resources (DENR Secretary) approved the deed of sale between the
Eniceo heirs and respondent.[21]

On 16 January 1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent prayed for the cancellation
of the certificates of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer certificate of title in favor of
respondent.[22]

On 4 July 2000, the trial court rendered its decision dismissing the case for lack of legal and factual basis.[23]

Respondent appealed to the Court of Appeals (CA). On 20 December 2004, the CA rendered a decision reversing the trial courts decision.[24] Respondent
filed a motion for reconsideration, which the CA denied in its Resolution dated 10 October 2005.

Aggrieved by the CAs decision and resolution, petitioner elevated the case before this Court.

The Ruling of the Trial Court

The trial court stated that although respondent claims that the Eniceo heirs sold to him the Antipolo property, respondent did not testify in court as to the
existence, validity and genuineness of the purported deed of sale and his possession of the duplicate owners copy of OCT No. 535. The trial court stated
that as owner of a property consisting of hectares of land, respondent should have come to court to substantiate his claim and show that the allegations of
the Eniceo heirs and petitioner are mere fabrications.[25]

The trial court noticed that respondent did not register the deed of sale with the Register of Deeds immediately after its alleged execution on 10
September 1973. Further, respondent waited for 22 long years before he had the sale approved by the DENR Secretary. The trial court declared that
respondent slept on his rights. The trial court concluded that respondents failure to register the sale and secure the cancellation of OCT No. 535 militates
against his claim of ownership. The trial court believed that respondent has not established the preponderance of evidence necessary to justify the relief
prayed for in his complaint.[26]

The trial court stated that Bolinas was able to prove that the Eniceo heirs have remained in actual possession of the land. The filing of a petition for the
issuance of a new owners duplicate copy requires the posting of the petition in three different places which serves as a notice to the whole world.
Respondents failure to oppose this petition can be deemed as a waiver of his right, which is fatal to his cause. [27]
The trial court noted that petitioner is a buyer in good faith and for value because petitioner has exercised due diligence in inspecting the property and
verifying the title with the Register of Deeds.[28]

The trial court held that even if the court were to believe that the deed of sale in favor of respondent were genuine, still it could not be considered a
legitimate disposition of property, but merely an equitable mortgage. The trial court stated that respondent never obtained possession of the Antipolo
property at any given time and a buyer who does not take possession of a property sold to him is presumed to be a mortgagee only and not a vendee.[29]

The Ruling of the Court of Appeals

The CA ruled that the deed of sale in favor of respondent, being a notarized document, has in its favor the presumption of regularity and carries the
evidentiary weight conferred upon it with respect to its due execution. The CA added that whoever asserts forgery has the burden of proving it by clear,
positive and convincing evidence because forgery can never be presumed. The CA found that petitioner and the Eniceo heirs have not substantiated the
allegation of forgery.[30]

The CA pointed out that laches has not set in. One of the requisites of laches, which is injury or prejudice to the defendant in the event relief is accorded to
the complainant or the suit is not held to be barred, is wanting in the instant case. The CA added that unrecorded sales of land brought under the Torrens
system are valid between parties because registration of the instrument is merely intended to bind third persons. [31]

The CA declared that petitioners contention regarding the validity of the questioned deed on the ground that it was executed without the approval of the
DENR Secretary is untenable. The DENR Secretary approved the deed of sale on 17 August 1995. However, even supposing that the sale was not
approved, the requirement for the DENR Secretarys approval is merely directory and its absence does not invalidate any alienation, transfer or
conveyance of the homestead after 5 years and before 25 years from the issuance of the title which can be complied with at any time in the future.[32]

The CA ruled that petitioner is a buyer in bad faith because it purchased the disputed properties from the Eniceo heirs after respondent had caused the
inscription on OCT No. 535 of an adverse claim. Registration of the adverse claim serves as a constructive notice to the whole world. Petitioner cannot
feign ignorance of facts which should have put it on guard and then claim that it acted under the honest belief that there was no defect in the title of the
vendors. Knowing that an adverse claim was annotated in the certificates of title of the Eniceo heirs, petitioner was forewarned that someone is claiming
an interest in the disputed properties.[33]
The CA found no merit in petitioners contention that the questioned deed of sale is an equitable mortgage. The CA stated that for the presumption of an
equitable mortgage to arise, one must first satisfy the requirement that the parties entered into a contract denominated as a contract of sale and that their
intention was to secure an existing debt by way of mortgage.[34]

The CA stated that the execution of the notarized deed of sale, even without actual delivery of the disputed properties, transferred ownership from the
Eniceo heirs to respondent. The CA held that respondents possession of the owners duplicate copy of OCT No. 535 bolsters the contention that the
Eniceo heirs sold the disputed properties to him by virtue of the questioned deed.[35]

The CA reversed the trial courts decision. The dispositive portion of the CA decision reads:
WHEREFORE, the appealed decision of the Regional Trial Court of Rizal (Antipolo, Branch 71) is REVERSED and SET ASIDE and another
rendered as follows:

1. DECLARING NULL AND VOID TRANSFER CERTIFICATES OF TITLES NOS. 277747, 277120 AND 278588 OF THE
REGISTRY OF DEEDS OF MARIKINA CITY (THE LAST TWO IN THE NAME OF DEFENDANT-APPELLEE KINGS
PROPERTIES CORPORATION), THE DERIVATIVE TITLES THEREOF AND THE INSTRUMENTS WHICH WERE THE BASES
OF THE ISSUANCE OF SAID CERTIFICATES OF TITLE; AND

2. DECLARING PLAINTIFF-APPELLANT CANUTO A. GALIDO THE OWNER OF FEE SIMPLE OF LOT NOS. 1, 3, 4, 5
FORMERLY REGISTERED UNDER ORIGINAL CERTIFICATE OF TITLE NO. 535 IN THE NAME OF THE HEIRS OF DOMINGO
ENICEO, REPRESENTED BY RUFINA ENICEO, AND ORDERING THE REGISTER OF DEEDS OF MARIKINA CITY TO ISSUE
NEW TRANSFER CERTIFICATES OF TITLE FOR SAID PARCELS OF LAND IN THE NAME OF PLAINTIFF-APPELLANT
CANUTO A. GALIDO, UPON PAYMENT OF THE PROPER FEES AND PRESENTATION OF THE DEED OF SALE DATED
SEPTEMBER 10, 1973 EXECUTED BY RUFINA ENICEO AND MARIA ENICEO, AS SOLE HEIRS OF THE LATE DOMINGO
ENICEO, IN FAVOR OF THE LATTER.[36]

The Issues

Petitioner raises two issues in this petition:

1. Whether the adverse claim of respondent over the Antipolo property should be barred by laches;[37]and
 2. Whether the deed of sale delivered to respondent should be presumed an equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil
Code.[38]

The Ruling of the Court

Validity of the deed of sale to respondent

The contract between the Eniceo heirs and respondent executed on 10 September 1973 was a perfected contract of sale. A contract is perfected once there
is consent of the contracting parties on the object certain and on the cause of the obligation. [39]In the present case, the object of the sale is the Antipolo
property and the price certain is P250,000.

The contract of sale has also been consummated because the vendors and vendee have performed their respective obligations under the contract. In a
contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same to the buyer, who obligates
himself to pay a price certain to the seller.[40]The execution of the notarized deed of sale and the delivery of the owners duplicate copy of OCT No. 535 to
respondent is tantamount to a constructive delivery of the object of the sale. In Navera v. Court of Appeals, the Court ruled that since the sale was made in
a public instrument, it was clearly tantamount to a delivery of the land resulting in the symbolic possession thereof being transferred to the buyer.[41]
Petitioner alleges that the deed of sale is a forgery. The Eniceo heirs also claimed in their answer that the deed of sale is fake and spurious.[42]However, as
correctly held by the CA, forgery can never be presumed. The party alleging forgery is mandated to prove it with clear and convincing
evidence.[43]Whoever alleges forgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed to discharge this burden.

Petitioner invokes the belated approval by the DENR Secretary, made within 25 years from the issuance of the homestead, to nullify the sale of the Antipolo
property. The sale of the Antipolo property cannot be annulled on the ground that the DENR Secretary gave his approval after 21 years from the date the
deed of sale in favor of respondent was executed. Section 118 of Commonwealth Act No. 141 or the Public Land Act (CA 141), as amended by
Commonwealth Act No. 456,[44]reads:
SEC. 118. EXCEPT IN FAVOR OF THE GOVERNMENT OR ANY OF ITS BRANCHES, UNITS, OR INSTITUTIONS, OR
LEGALLY CONSTITUTED BANKING CORPORATIONS, LANDS ACQUIRED UNDER FREE PATENT OR HOMESTEAD
PROVISIONS SHALL NOT BE SUBJECT TO ENCUMBRANCE OR ALIENATION FROM THE DATE OF THE APPROVAL OF THE
 APPLICATION AND FOR A TERM OF FIVE YEARS FROM AND AFTER THE DATE OF THE ISSUANCE OF THE PATENT OR
GRANT X X X

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Natural Resources,[45]which approval shall not be denied except on constitutional and legal grounds.

In Spouses Alfredo v. Spouses Borras,[46]the Court explained the implications of Section 118 of CA 141. Thus:

A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the
patent or grant is issued. A violation of this prohibition renders a sale void. This , however, expires on the fifth year. From then on until the
next 20 years, the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary
is required to approve the alienation unless there are constitutional and legal grounds to deny the approval. In this case, there are no apparent or
legal grounds for the Secretary to disapprove the sale of the Subject Land.

The failure to secure the approval of the Secretary does not ipso factomake a sale void. The absence of approval by the Secretary does not a sale
made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely directory
or a formality. The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been previously
authorized. (Underscoring supplied)

Equitable Mortgage

Petitioner contends that the deed of sale in favor of respondent is an equitable mortgage because the Eniceo heirs remained in possession of the Antipolo
property despite the execution of the deed of sale.

An equitable mortgage is one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals
the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. [47]The essential requisites of an
equitable mortgage are:

1. The parties entered into a contract denominated as a contract of sale; and

 2. Their intention was to secure existing debt by way of a mortgage. [48]

In Lim v. Calaguas,[49]the Court held that in order for the presumption of equitable mortgage to apply, there must be: (1) something in the language of the
contract; or (2) in the conduct of the parties which shows clearly and beyond doubt that they intended the contract to be a mortgage and not a pacto de
retro sale.[50]Proof by parol evidence should be presented in court. Parol evidence is admissible to support the allegation that an instrument in writing,
purporting on its face to transfer the absolute title to property, was in truth and in fact given merely as security for the payment of a loan. The presumption
of equitable mortgage under Article 1602 of the Civil Code is not conclusive. It may be rebutted by competent and satisfactory proof of the contrary.[51]

Petitioner claims that an equitable mortgage can be presumed because the Eniceo heirs remained in possession of the Antipolo property. Apart from the
fact that the Eniceo heirs remained in possession of the Antipolo property, petitioner has failed to substantiate its claim that the contract of sale was intended
to secure an existing debt by way of mortgage. In fact, mere tolerated possession is not enough to prove that the transaction was an equitable mortgage.[52]

Furthermore, petitioner has not shown any proof that the Eniceo heirs were indebted to respondent. On the contrary, the deed of sale executed in favor of
respondent was drafted clearly to convey that the Eniceo heirs sold and transferred the Antipolo property to respondent. The deed of sale even inserted a
provision about defrayment of registration expenses to effect the transfer of title to respondent.

In any event, as pointed out by respondent in his Memorandum, this defense of equitable mortgage is available only to petitioners predecessors-in-interest
who should have demanded, but did not, for the reformation of the deed of sale.[53] A perusal of the records shows that the Eniceo heirs never presented the
defense of equitable mortgage before the trial court. In their Answer[54]and Memorandum[55]filed before the trial court, the Eniceo heirs claimed that the
alleged deed of sale dated 10 September 1973 between Rufina Eniceo and Maria Eniceo was fake and spurious. The Eniceo heirs contended that even
assuming there was a contract, no consideration was involved. It was only in the Appellees Brief [56]filed before the CA that the Eniceo heirs claimed as an
alternative defense that the deed should be presumed as an equitable mortgage.
IN PHILIPPINE PORTS AUTHORITY V. CITY OF ILOILO,[57]WE RULED THAT A PARTY WHO ADOPTS A CERTAIN THEORY UPON WHICH
THE CASE IS TRIED AND DECIDED BY THE LOWER COURT WILL NOT BE PERMITTED TO CHANGE THE THEORY ON APPEAL. A
THEORY OF THE CASE NOT BROUGHT TO THE ATTENTION OF THE LOWER COURT WILL NOT BE CONSIDERED BY A REVIEWING
COURT, AS A NEW THEORY CANNOT BE RAISED FOR THE FIRST TIME AT SUCH LATE STAGE.
ALTHOUGH PETITIONER RAISED THE DEFENSE OF EQUITABLE MORTGAGE IN THE LOWER COURT, HE CANNOT CLAIM THAT THE
DEED WAS AN EQUITABLE MORTGAGE BECAUSE PETITIONER WAS NOT A PRIVY TO THE DEED OF SALE DATED 10 SEPTEMBER
1973. PETITIONER MERELY STEPPED INTO THE SHOES OF THE ENICEO HEIRS. PETITIONER, WHO MERELY ACQUIRED ALL THE
RIGHTS OF ITS PREDECESSORS, CANNOT ESPOUSE A THEORY THAT IS CONTRARY TO THE THEORY OF THE CASE CLAIMED BY THE
ENICEO HEIRS.

The Court notes that the Eniceo heirs have not appealed the CAs decision, hence, as to the Eniceo heirs, the CAs decision that the contract was a sale and
not an equitable mortgage is now final. Since petitioner merely assumed the rights of the Eniceo heirs, petitioner is now estopped from questioning the deed
of sale dated 10 September 1973.

Petitioner is not a buyer in good faith

Petitioner maintains that the subsequent sale must be upheld because petitioner is a buyer in good faith, having exercised due diligence by inspecting the
property and the title sometime in February 1995.
In Agricultural and Home Extension Development Group v. Court of Appeals,[58] a buyer in good faith is defined as one who buys the property of another
without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or
before he has notice of the claim or interest of some other person in the property.

In Balatbat v. Court of Appeals,[59]the Court held that in the realm of double sales, the registration of an adverse claim places any subsequent buyer of the
registered land in bad faith because such annotation was made in the title of the property before the Register of Deeds and he could have discovered that
the subject property was already sold.[60]The Court explained further, thus:
A purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon his guard and
then claim that he acted in good faith and under the belief that there were no defect in the title of the vendor. One who purchases
real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts
which should have put him upon such inquiry and investigation as be necessary to acquaint him with the defects in the title of his vendor.[61]
Petitioner does not dispute that respondent registered his adverse claim with the Registry of Deeds on 14 March 1995. The registration of the adverse claim
constituted, by operation of law, notice to the whole world.[62]From that date onwards, subsequent buyers were deemed to have constructive notice of
respondents adverse claim.
PETITIONER PURCHASED THE ANTIPOLO PROPERTY ONLY ON 20 MARCH 1995 AND 5 APRIL 1995 AS SHOWN BY THE DATES IN THE
DEEDS OF SALE. ON THE SAME DATES, THE REGISTRY OF DEEDS ISSUED NEW TCTS IN FAVOR OF PETITIONER WITH THE
ANNOTATED ADVERSE CLAIM. CONSEQUENTLY, THE ADVERSE CLAIM REGISTERED PRIOR TO THE SECOND SALE CHARGED
PETITIONER WITH CONSTRUCTIVE NOTICE OF THE DEFECT IN THE TITLE OF ENICEO HEIRS. THEREFORE, PETITIONER CANNOT BE
DEEMED AS A PURCHASER IN GOOD FAITH WHEN THEY BOUGHT AND REGISTERED THE ANTIPOLO PROPERTY.
IN CARBONELL V. COURT OF APPEALS,[63]THIS COURT RULED THAT IN DOUBLE SALES, THE FIRST BUYER ALWAYS HAS PRIORITY
RIGHTS OVER SUBSEQUENT BUYERS OF THE SAME PROPERTY. BEING THE FIRST BUYER, HE IS NECESSARILY IN GOOD FAITH
COMPARED TO SUBSEQUENT BUYERS.THE GOOD FAITH OF THE FIRST BUYER REMAINS ALL THROUGHOUT DESPITE HIS
SUBSEQUENT ACQUISITION OF KNOWLEDGE OF THE SUBSEQUENT SALE. ON THE OTHER HAND, THE SUBSEQUENT BUYER, WHO
MAY HAVE ENTERED INTO A CONTRACT OF SALE IN GOOD FAITH, WOULD BECOME A BUYER IN BAD FAITH BY HIS SUBSEQUENT
ACQUISITION OF ACTUAL OR CONSTRUCTIVE KNOWLEDGE OF THE FIRST SALE.[64]THE SEPARATE OPINION OF THEN JUSTICE
TEEHANKEE IS INSTRUCTIVE, THUS:

The governing principle here is prius tempore, potior jure(first in time, stronger in right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyers rights except only as provided by the Code and that is where the second buyer first registers in good faith the second
sale ahead of the first. Such knowledge of the first buyer does bar her from availing of her rights under the law, among them, to first her purchase
as against the second buyer. But in converso knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register
the second sale, since such knowledge taints his prior registration with bad faith.
This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer: that before the second buyer
can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyers rights)
from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer
must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law.[65]

Laches
PETITIONER CONTENDS THAT RESPONDENT IS GUILTY OF LACHES BECAUSE HE SLEPT ON HIS RIGHTS BY FAILING TO REGISTER
THE SALE OF THE ANTIPOLO PROPERTY AT THE EARLIEST POSSIBLE TIME. PETITIONER CLAIMS THAT DESPITE RESPONDENTS
KNOWLEDGE OF THE SUBSEQUENT SALE IN 1991, RESPONDENT STILL FAILED TO HAVE THE DEED OF SALE REGISTERED WITH THE
REGISTRY OF DEEDS.

The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could have been
done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it.[66]

Respondent discovered in 1991 that a new owners copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo
heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of
an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil
complaint with the trial court against the Eniceo heirs and petitioner. Respondents actions negate petitioners argument that respondent is guilty of laches.

True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property Registration Decree (PD 1529) are effective between and binding
only upon the immediate parties. The registration required in Section 51 of PD 1529 is intended to protect innocent third persons, that is, persons who,
without knowledge of the sale and in good faith, acquire rights to the property. [67] Petitioner, however, is not an innocent purchaser for value.

WHEREFORE, we DENY the petition. We AFFIRM the 20 December 2004 Decision and 10 October 2005 Resolution of the Court of Appeals in CA-
G.R. CV No. 68828.
SO ORDERED.
 THIRD DIVISION

[G.R. No. 152168. December 10, 2004]

HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR,
VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and
AURELIO T. BALITE JR., All Represented by GASPAR T. BALITE, petitioners, vs. RODRIGO N. LIM, respondent.

DECISION
PANGANIBAN, J.:

A deed of sale that allegedly states a price lower than the true consideration is nonetheless binding between the parties and their successors
in interest. Furthermore, a deed of sale in which the parties clearly intended to transfer ownership of the property cannot be presumed to be an
equitable mortgage under Article 1602 of the Civil Code. Finally, an agreement that purports to sell in metes and bounds a specific portion of an
unpartitioned co-owned property is not void; it shall effectively transfer the sellers ideal share in the co-ownership.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the February 11, 2002 Decision of the Court of Appeals (CA)
[1] [2]

in CA-GR CV No. 65395. The decretal portion of the Decision reads as follows:

IN THE LIGHT OF ALL THE FOREGOING, the Decision of the Court a quo subject of the appeal is hereby SET ASIDE AND REVERSED and another
Decision is hereby rendered as follows:

1. The Deed of Absolute Sale (Exhibit A) is valid only insofar as the pro indiviso share of Esperanza Balite over the property covered by Original Certificate
of Title No. 10824 is concerned;

2. The Register of Deeds is hereby ordered to cancel Transfer Certificate of Title No. 6683 and to issue another over the entirety of the property covered by
Original Certificate of Title No. 10824, upon the payment of the capital gains tax due, as provided for by law, (based on the purchase price of the property in
the amount of P1,000,000.00), with the following as co-owners, over the property described therein:
a) Each of the [petitioners] over an undivided portion of 975 square meters;

b) The [respondent], with an undivided portion of 9,751 square meters.

3. The [respondent] is hereby ordered to pay to the [petitioners] the amount of P120,000.00, within a period of five (5) months from the finality of the Decision
of this Court;

4. In the event that the [respondent] refuses or fails to remit the said amount to the [petitioner] within the period therefor, the rights and obligations of the
parties shall be governed by Republic 6552 (Maceda Law). [3]

The Facts

The CA summarized the facts in this manner:

The spouses Aurelio x x x and Esperanza Balite were the owners of a parcel of land, located [at] Poblacion (Barangay Molave), Catarman, Northern Samar,
with an area of seventeen thousand five hundred fifty-one (17,551) square meters, [and] covered by Original Certificate of Title [OCT] No. 10824. When
Aurelio died intestate [in 1985, his wife], Esperanza Balite, and their children, x x x [petitioners] Antonio Balite, Flor Balite-Zamar, Visitacion Balite-
Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, Cristeta (Tita) Balite and Aurelio Balite, Jr., inherited the [subject] property and became co-owners
thereof, with Esperanza x x x inheriting an undivided [share] of [9,751] square meters.

In the meantime, Esperanza x x x [became] ill and was in dire need of money for her hospital expenses x x x. She, through her daughter, Cristeta, offered to sell
to Rodrigo Lim, [her] undivided share x x x for the price of P1,000,000.00. x x x Esperanza x x x and Rodrigo x x x agreed that, under the Deed of Absolute
Sale, to be executed by Esperanza x x x over the property, it will be made to appear that the purchase price of the property would be P150,000.00, although the
actual price agreed upon by them for the property was P1,000,000.00.

On April 16, 1996, Esperanza x x x executed a Deed of Absolute Sale in favor of Rodrigo N. Lim over a portion of the property, covered by [OCT] No. 10824,
with an area of 10,000 square meters, for the price of P150,000.00 x x x.

[They] also executed, on the same day, a Joint Affidavit under which they declared that the real price of the property was P1,000,000.00, payable to Esperanza
x x x, by installments, as follows:

1. P30,000.00 upon signing today of the document of sale.

2. P170,000.00 payable upon completion of the actual relocation survey of the land sold by a Geodetic Engineer.
3. P200,000.00 payable on or before May 15, 1996.

4. P200,000.00 payable on or before July 15, 1996.

5. P200,000.00 payable on or before September 15, 1996.

6. P200,000.00 payable on or before December 15, 1996.

Only Esperanza and two of her children, namely, Antonio x x x and Cristeta x x x, knew about the said transaction. x x x Geodetic Engineer Bonifacio G. Tasic
conducted a subdivision survey of the property and prepared a Sketch Plan showing a portion of the property, identified as Lot 243 with an area of 10,000
square meters, under the name Rodrigo N. Lim.

The Sketch Plan was signed by Rodrigo x x x and Esperanza. Thereafter, Rodrigo x x x took actual possession of the property and introduced improvements
thereon. He remitted to Esperanza x x x and Cristeta x x x sums of money in partial payments of the x x x property for which he signed Receipts.

Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. x x x learned of the sale, and on August 21, 1996, they wrote a letter to the Register of Deeds [RD] of Northern
Samar, [saying] that they [were] not x x x informed of the sale of a portion of the said property by their mother x x x nor did they give their consent thereto,
and requested the [RD] to:

x x x hold in abeyance any processal or approval of any application for registration of title of ownership in the name of the buyer of said lot, which has not yet
been partitioned judicially or extrajudicially, until the issue of the legality/validity of the above sale has been cleared.

On August 24, 1996, Antonio x x x received from Rodrigo x x x, the amount of P30,000.00 in partial payment of [the] property and signed a Receipt for the
said amount, declaring therein that the remaining balance of P350,000.00 shall personally and directly be released to my mother, Esperanza Balite, only.
However, Rodrigo x x x drew and issued RCBC Check No. 309171, dated August 26, 1996, [payable] to the order of Antonio Balite in the amount
of P30,000.00 in partial payment of the property.

On October 1, 1996, Esperanza x x x executed a Special Power of Attorney appointing her son, Antonio, to collect and receive, from Rodrigo, the balance of
the purchase price of the x x x property and to sign the appropriate documents therefor.

On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the latter that her children did not agree to the sale of the property to him and
that she was withdrawing all her commitments until the validity of the sale is finally resolved:

xxxxxxxxx
On October 31, 1996, Esperanza died intestate and was survived by her aforenamed children.

[Meanwhile], Rodrigo caused to be published, in the Samar Reporter, on November 14, 21 and 28, 1996, the aforesaid Deed of Absolute Sale. Earlier, on
November 21, 1996, Antonio received the amount of P10,000.00 from Rodrigo for the payment of the estate tax due from the estate of Esperanza.

Also, the capital gains tax, in the amount of P14,506.25, based on the purchase price of P150,000.00 appearing on the Deed of Absolute Sale, was paid to the
Bureau of Internal Revenue which issued a Certification of said payments, on March 5, 1997, authorizing the registration of the Deed of Absolute Sale x x x.
However, the [RD] refused to issue a title over the property to and under the name of Rodrigo unless and until the owners duplicate of OCT No. 10824 was
presented to [it]. Rodrigo filed a Petition for Mandamus against the RD with the Regional Trial Court of Northern Samar (Rodrigo Lim versus Fernando
Abella, Special Civil Case No. 48). x x x. On June 13, 1997, the court issued an Order to the RD to cancel OCT No. 10824 and to issue a certificate of title
over Lot 243 under the name of Rodrigo.

On June 27, 1997, [petitioners] filed a complaint against Rodrigo with the Regional Trial Court of Northern Samar, entitled and docketed as Heirs of the
Spouses Aurelio Balite, et al. versus Rodrigo Lim, Civil Case No. 920, for Annulment of Sale, Quieting of Title, Injunction and Damages x x x, [the origin
of the instant case.]

xxxxxxxxx

The [petitioners] had a Notice of Lis Pendens, dated June 23, 1997, annotated, on June 27, 1997, at the dorsal portion of OCT No. 10824.

In the meantime, the RD cancelled, on July 10, 1997, OCT No. 10824 and issued Transfer Certificate of Title [TCT] No. 6683 to and under the name of
Rodrigo over Lot 243. The Notice of Lis Pendens x x x was carried over in TCT No. 6683.

Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the amount of P2,000,000.00 and executed a Real Estate Mortgage
over the [subject] property as security therefor.

On motion of the [petitioners], they were granted x x x leave to file an Amended Complaint impleading the bank as [additional] party-defendant. On November
26, 1997, [petitioners] filed their "Amended Complaint.

The [respondent] opposed the Amended Complaint x x x contending that it was improper for [petitioners] to join, in their complaint, an ordinary civil action for
the nullification of the Real Estate Mortgage executed by the respondent in favor of the Bank as the action of the petitioners before the court was a special civil
action.
On March 30, 1998, the court issued an Order rejecting the Amended Complaint of the petitioners on the grounds that: (a) the Bank cannot be impleaded as
party-defendant under Rule 63, Section 1 of the 1997 Rules of Civil Procedure; (b) the Amended Complaint constituted a collateral attack on TCT No. 6683.
The [petitioners] did not file any motion for the reconsideration of the order of the court.
[4]

The trial court dismissed the Complaint and ordered the cancellation of the lis pendens annotated at the back of TCT No. 6683. It held that,
pursuant to Article 493 of the Civil Code, a co-owner has the right to sell his/her undivided share. The sale made by a co-owner is not invalidated
by the absence of the consent of the other co-owners. Hence, the sale by Esperanza of the 10,000-square-meter portion of the property was valid;
the excess from her undivided share should be taken from the undivided shares of Cristeta and Antonio, who expressly agreed to and benefited
from the sale.

Ruling of the Court of Appeals

The CA held that the sale was valid and binding insofar as Esperanza Balites undivided share of the property was concerned. It affirmed the
trial courts ruling that the lack of consent of the co-owners did not nullify the sale. The buyer, respondent herein, became a co-owner of the property
to the extent of the pro indiviso share of the vendor, subject to the portion that may be allotted to him upon the termination of the co-ownership.
The appellate court disagreed with the averment of petitioners that the registration of the sale and the issuance of TCT No. 6683 was ineffective
and that they became the owners of the share of Esperanza upon the latters death.
The CA likewise rejected petitioners claim that the sale was void allegedly because the actual purchase price of the property was not stated in
the Deed of Absolute Sale. It found that the true and correct consideration for the sale was P1,000,000 as declared by Esperanza and respondent
in their Joint Affidavit. Applying Article 1353 of the Civil Code, it held that the falsity of the price or consideration stated in the Deed did not render
[5]

it void. The CA pointed out, however, that the State retained the right to recover the capital gains tax based on the true price of P1,000,000.
The appellate court rejected petitioners contention that, because of the allegedly unconscionably low and inadequate consideration involved,
the transaction covered by the Deed was an equitable mortgage under Article 1602 of the Civil Code. Observing that the argument had never been
raised in the court a quo, it ruled that petitioners were proscribed from making this claim, for the first time, on appeal.
The CA further held that the remaining liability of respondent was P120,000. It relied on the Receipt dated August 24, 1996, which stated that
his outstanding balance for the consideration was P350,000. It deducted therefrom the amounts of P30,000 received by Antonio on August 27,
1996; and P200,000, which was the amount of the check dated September 15, 1996, issued by respondent payable to Esperanza.
Finally, the appellate court noted that the mortgage over the property had been executed after the filing of the Complaint. What petitioners
should have filed was a supplemental complaint instead of an amended complaint. Contrary to respondents argument, it also held that the bank
was not an indispensable party to the case; but was merely a proper party. Thus, there is no necessity to implead it as party-defendant, although
the court a quo had the option to do so. And even if it were not impleaded, the appellate court ruled that the bank would still have been bound by
the outcome of the case, as the latter was a mortgagee pendente lite over real estate that was covered by a certificate of title with an annotated lis
pendens.
Hence, this Petition. [6]

Issues

In their Memorandum, petitioners present the following issues:

A

Whether or not the [CA] seriously erred in not deciding that the Deed of Absolute Sale dated April 16, 1996 is null and void on the grounds that it is falsified; it
has an unlawful cause; and it is contrary to law and/or public policy.

Whether or not the [CA] gravely erred in not finding that the amount paid by [respondent] is only three hundred twenty thousand (P320,000.00) pesos and that
respondents claim that he has paid one million pesos except P44,000.00 as balance, is fraudulent and false.

Whether or not the [CA] seriously erred in not deciding that at the time the Deed of Sale was registered x x x on May 30, 1997, said Deed of Sale can no longer
bind the property covered by OCT No. 10824 because said land had already become the property of all the petitioners upon the death of their mother on
October 31, 1996 and therefore such registration is functus of[f]icio involving a null and void document.

Whether or not the [CA] seriously erred in not ruling that petitioners amended complaint dated November 27, 1997 was proper and admissible and deemed
admitted to conform to evidence presented.

Whether or not the [CA] seriously erred in not declaring that TCT No. T-6683 in the name of Respondent Rodrigo N. Lim is null and void and all dealings
involving the same are likewise null and void and/or subject to the decision of the case at bar in view of the notice of lis pendens annotated therein.

F
Even assuming but without admitting that the Deed of Sale is enforceable, the respondent court seriously erred in not deciding that the consideration is
unconscionably low and inadequate and therefore the transaction between the executing parties constitutes an equitable mortgage.

The [CA] greatly erred in not rendering judgment awarding damages and attorneys fee[s] in favor of petitioners among others. [7]

In sum, the issues raised by petitioners center on the following: 1) whether the Deed of Absolute Sale is valid, and 2) whether there is still any
sum for which respondent is liable.

The Courts Ruling

The Petition has no merit.

First Issue:
Validity of the Sale

Petitioners contend that the Deed of Absolute Sale is null and void, because the undervalued consideration indicated therein was intended for
an unlawful purpose -- to avoid the payment of higher capital gains taxes on the transaction. According to them, the appellate courts reliance on
Article 1353 of the Civil Code was erroneous. They further contend that the Joint Affidavit is not proof of a true and lawful cause, but an integral
part of a scheme to evade paying lawful taxes and registration fees to the government.
We have before us an example of a simulated contract. Article 1345 of the Civil Code provides that the simulation of a contract may either be
absolute or relative. In absolute simulation, there is a colorable contract but without any substance, because the parties have no intention to be
bound by it. An absolutely simulated contract is void, and the parties may recover from each other what they may have given under the contract. On [8]

the other hand, if the parties state a false cause in the contract to conceal their real agreement, such a contract is relatively simulated. Here, the
parties real agreement binds them. [9]

In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual purchase price of the property. That
the parties intended the agreement to produce legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996 and [10]

petitioners admission that there was a partial payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to
transfer the ownership of over 10,000 square meters of the property . Clear from the letter is the fact that the objections of her children prompted
Esperanza to unilaterally withdraw from the transaction.
 Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. All the essential requisites prescribed by
law for the validity and perfection of contracts are present. However, the parties shall be bound by their real agreement for a consideration
of P1,000,000 as reflected in their Joint Affidavit.
[11]

The juridical nature of the Contract remained the same. What was concealed was merely the actual price. Where the essential requisites are
present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the
[12]

parties and their successors in interest.

Petitioners cannot be permitted to unmake the Contract voluntarily entered into by their predecessor, even if the stated consideration was
included therein for an unlawful purpose. The binding force of a contract must be recognized as far as it is legally possible to do so. However, as
[13]

properly held by the appellate court, the government has the right to collect the proper taxes based on the correct purchase price.
Being onerous, the Contract had for its cause or consideration the price of P1,000,000. Both this consideration as well as the subject matter of
the contract -- Esperanzas share in the property covered by OCT No. 10824 -- are lawful. The motives of the contracting parties for lowering the
price of the sale -- in the present case, the reduction of capital gains tax liability -- should not be confused with the consideration. Although illegal,
[14]

the motives neither determine nor take the place of the consideration. [15]

Deed of Sale not an

Equitable Mortgage

Petitioner further posits that even assuming that the deed of sale is valid it should only be deemed an equitable mortgage pursuant to Articles
1602 and 1604 of the Civil Code, because the price was clearly inadequate. They add that the presence of only one of the circumstances
enumerated under Article 1602 would be sufficient to consider the Contract an equitable mortgage. We disagree.
For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a contract denominated as a contract of sale;
and, two, their intention was to secure an existing debt by way of mortgage. [16]

Indeed, the existence of any of the circumstances enumerated in Article 1602, not a concurrence or an overwhelming number thereof, suffices
to give rise to the presumption that a contract purporting to be an absolute sale is actually an equitable mortgage. In the present case, however,
[17]

the Contract does not merely purport to be an absolute sale. The records and the documentary evidence introduced by the parties indubitably
show that the Contract is, indeed, one of absolute sale. There is no clear and convincing evidence that the parties agreed upon a mortgage of the
subject property.
Furthermore, the voluntary, written and unconditional acceptance of contractual commitments negates the theory of equitable mortgage. There
is nothing doubtful about the terms of, or the circumstances surrounding, the Deed of Sale that would call for the application of Article 1602. The
Joint Affidavit indisputably confirmed that the transaction between the parties was a sale.
 When the words of a contract are clear and readily understandable, there is no room for construction. Contracts are to be interpreted according
to their literal meaning and should not be interpreted beyond their obvious intendment. The contract is the law between the parties.
[18]

Notably, petitioners never raised as an issue before the trial court the fact that the document did not express the true intent and agreement of
the contracting parties. They raised mere suppositions on the inadequacy of the price, in support of their argument that the Contract should be
considered as an equitable mortgage.
We find no basis to conclude that the purchase price of the property was grossly inadequate. Petitioners did not present any witness to testify
as to the market values of real estate in the subjects locale. They made their claim on the basis alone of the P2,000,000 loan that respondent had
been able to obtain from the Rizal Commercial Banking Corporation. This move did not sufficiently show the alleged inadequacy of the purchase
price. A mortgage is a mere security for a loan. There was no showing that the property was the only security relied upon by the bank; or that the
borrowers had no credit worthiness, other than the property offered as collateral.

Co-Ownership

The appellate court was correct in affirming the validity of the sale of the property insofar as the pro indiviso share of Esperanza Balite was
concerned.
Article 493 of the Civil Code gives the owner of an undivided interest in the property the right to freely sell and dispose of such interest. The
[19]

co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned in common, because such right over the thing
is represented by an aliquot or ideal portion without any physical division. Nonetheless, the mere fact that the deed purports to transfer a concrete
portion does not per se render the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the
[20]

sale is subject to the results of the partition upon the termination of the co-ownership.
Hence, the transaction between Esperanza Balite and respondent could be legally recognized only in respect to the formers pro indiviso share
in the co-ownership. As a matter of fact, the Deed of Absolute Sale executed between the parties expressly referred to the 10,000-square-meter
portion of the land sold to respondent as the share of Esperanza in the conjugal property. Her clear intention was to sell merely her ideal or
undivided share in it. No valid objection can be made against that intent. Clearly then, the sale can be given effect to the extent of 9,751 square
meters, her ideal share in the property as found by both the trial and the appellate courts.

Transfer of Property

During her lifetime, Esperanza had already sold to respondent her share in the subject parcel; hence her heirs could no longer inherit it. The
property she had transferred or conveyed no longer formed part of her estate to which her heirs may lay claim at the time of her death. The transfer
took effect on April 16, 1996 (the date the Deed of Absolute Sale was executed), and not on May 30, 1997, when the Deed of Absolute Sale was
registered. Thus, petitioners claim that the property became theirs upon the death of their mother is untenable.

Second Issue:
Respondents Liability

Petitioners insist that the appellate court erred in holding that respondents outstanding liability on the Deed of Sale was P120,000, when the
Receipts on record show payments in the total amount of P320,000 only. They argue that the August 24, 1996 Receipt, on which the appellate
court based its conclusion, was unreliable.
To begin with, this Court is not a trier of facts. It is not its function to examine and determine the weight of the evidence. Well-entrenched is
[21]

the doctrine that only errors of law, and not of facts, are reviewable by this Court in a petition for review on certiorari under Rule 45 of the Revised
[22]

Rules of Court. Philippine Airlines, Inc. v. Court of Appeals has held that factual findings of the Court of Appeals are binding and conclusive upon
[23]

the Supreme Court. These findings may be reviewed only under exceptional circumstances such as, among others, when the inference is
[24]

manifestly mistaken; the judgment is based on a misapprehension of facts; findings of the trial court contradict those of the CA; or the CA
[25] [26] [27]

manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion. [28]

Although the factual findings of the two lower courts were not identical, we hold that in the present case, the findings of the CA are in accord
with the documents on record. The trial court admitted in evidence the August 24, 1996 Receipt signed by Antonio Balite. Interestingly, he was
never presented in the lower court to dispute the veracity of the contents of that Receipt, particularly the second paragraph that had categorically
stated the outstanding balance of respondent as of August 24, 1996, to be P350,000. Furthermore, the evidence shows that subsequent payments
of P30,000 and P200,000 were made by the latter. Thus, we affirm the CAs Decision holding that the remaining unpaid balance of the price
was P120,000.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against the petitioners.
SO ORDERED.