G.R. NO.

124242, January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION VS. CA
FACTS: On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo
Babasanta for the price of P15 per square meter. The latter made a downpayment of P50,000.00 as evidenced
by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling P200,000.00
were made by Babasanta.
Babasanta demanded the execution of a Final Deed of Sale in his favor so he may effect full payment of the
purchase price and notified the spouses about having received information that the spouses sold the same
property to another without his knowledge and consent. He demanded that the second sale be cancelled and
that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property,
but reminded Babasanta that when the balance of the purchase price became due, he requested for a reduction
of the price and when she refused, Babasanta backed out of the sale. Pacita added that she returned
P50,000.00 to Babasanta through Eugenio Oya. Thus, Babasanta filed a case for Specific Performance and
Damages.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for
Intervention and alleged that it had legal interest in the subject matter under litigation because on 3 May 1989,
the two parcels of land involved had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it
was a buyer in good faith and for value and therefore it had a better right over the property in litigation.
Respondent Babasanta argued that the latter had no legal interest in the case because the two parcels of land
involved had already been conveyed to him by the Spouses Lu and hence, the vendors were without legal
capacity to transfer or dispose of the two parcels of land to the intervenor.
ISSUES:
1. Who between SLDC and Babasanta has a better right over the two parcels of land subject of the instant
case in view of the successive transactions executed by the Spouses Lu. - SLDC
2. Whether or not the agreement between Babasanta and Spouses Lu was a contract to sell or a contract
of sale. - Contract to Sell
3. Whether or not there was a double sale. - No double sale
RULING: An analysis of the facts obtaining in this case, as well as the evidence presented by the parties,
irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to
sell and not a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00)
from Babasanta as partial payment of 3.6 hectares of farm lot. While there is no stipulation that the seller
reserves the ownership of the property until full payment of the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for
the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the price. Doubtlessly, the receipt
signed by Pacita Lu should legally be considered as a perfected contract to sell.
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price.
There being an obligation to pay the price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Glaringly absent from the records is any indication that
Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part
of the sellers to convey title never acquired obligatory force.
There was no double sale in this case because the contract in favor of Babasanta was a mere contract to sell;

hence, Art. 1544 is not applicable. There was neither actual nor constructive delivery as his title is based on a
mere receipt. Based on this alone, the right of SLDC must be preferred.

G.R. 176308, May 8, 2009

PAGADUAN VS. SPOUSES OCUMA
FACTS: The subject lot used to be part of a big parcel of land that originally belonged to Nicolas Cleto. The big
parcel of land was the subject of two separate lines of dispositions. The first line of disposition: Cleto sold land to
Antonio Cereso on May 11, 1925. Cereso in turn sold the land to the siblings with the surname Antipolo on
September 23, 1943. The Antipolos sold the property to Agaton Pagaduan, father of petitioners, on March 24,
1961. All the dispositions in this line were not registered and did not result in the issuance of new certificates of
title in the name of the purchasers.
The second line of disposition: started on January 30, 1954, after Cletos death, when his widow Ruperta
Asuncion as his sole heir and new owner of the entire tract, sold the same to Eugenia Reyes. This resulted in the
issuance Transfer Certificate of Title (TCT) No. T-1221 in the name of Eugenia Reyes in lieu of TCT No. T-1220
in the name of Ruperta Asuncion.
On November 26, 1961, Eugenia Reyes executed a unilateral deed of sale where she sold the northern portion
with an area of 32,325 square meters to respondents for P1,500.00 and the southern portion consisting of 8,754
square meters to Agaton Pagaduan for P500.00. (FIRST SALE)
Later, on June 5, 1962, Eugenia executed another deed of sale, this time conveying the entire parcel of land,
including the southern portion, in respondents favor (SECOND SALE). Thus, TCT No. T-1221 was cancelled
and in lieu thereof TCT No. T-5425 was issued in the name of respondents. On June 27, 1989, respondents
subdivided the land into two lots.
On July 26, 1989, petitioners instituted a complaint for reconveyance of the southern portion with an area of
8,754 square meters, with damages, against respondents before the RTC of Olongapo City.
RTC decided in petitioners favor; a constructive trust over the property was created in petitioners favor.
CA reversed decision; while the registration of the southern portion in the name of respondents had created an
implied trust in favor of Agaton
Pagaduan, petitioners, however, failed to show that they had taken
possession of the said portion.
ISSUE: Whether or not there was a double sale.
RULING: In this case, there was a double sale. Article 1544 should apply.
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith.
Where it is an immovable property that is the subject of a double sale, ownership shall be transferred: (1) to the
person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest
title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith and
registration in good faith.
DOUBLE SALE: first sale by Eugenia Reyes to Agaton Pagaduan and a second sale by Eugenia Reyes to the

respondents.
For a second buyer like the respondents to successfully invoke the second paragraph, Article 1544 of the Civil
Code, it must possess goodvfaith from the time of the sale in its favor until the registration of the same.
Respondents sorely failed to meet this requirement of good faith since they had actual knowledge of Eugenias
prior sale of the southern portion property to the petitioners, a fact antithetical to good faith. This cannot be
denied by respondents since in the same deed of sale that Eugenia sold them the northern portion to the
respondents for P1,500.00, Eugenia also sold the southern portion of the land to Agaton Pagaduan for P500.00.
It is to be emphasized that the Agaton Pagaduan never parted with the ownership and possession of that portion
of Lot No. 785 which he had purchased from Eugenia Santos. Hence, the registration of the deed of sale by
respondents was ineffectual and vested upon them no preferential rights to the property in derogation of the
rights of the petitioners.
Knowledge gained by respondents of the first sale defeats their rights even if they were first to register the
second sale. Knowledge of the first sale blackens this prior registration with bad faith. Good faith must concur
with the registration. Therefore, because the registration by the respondents was in bad faith, it amounted to no
registration at all. As the respondents gained no rights over the land, it is petitioners who are the rightful owners,
having established that their successor-in-interest. Agaton Pagaduan had purchased the property from Eugenia
Reyes on November 26, 1961 and in fact took possession of the said property.
KINGS PROPERTIES CORP., VS. CANUTO A. GALIDO
FACTS: 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 before the RTC of Antipolo City. On April 18, 1966, the
heirs of Eniceo, namely Rufina and Maria Eniceo, were awarded with Homestead Patent consisting of four
parcels of land located in San Isidro, Antipolo, Rizal. The Antipolo property with a total area of 14.8882 hectares
was registered under OCT No. 535.
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
On September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and
Maria Eniceo as vendors and respondent as vendee. The property was sold to respondent for P250,000. A
certain Carmen Aldana delivered the owner's duplicate copy of OCT No. 535 to respondent.
On 1988, the Eniceo heirs registered with the Registry of Deeds a Notice of Loss of the owner's copy of OCT No.
535.
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 owner's copy of
OCT No. 535 in favor of the Eniceo heirs and declared the original owner's copy of OCT No. 535 canceled and
considered no further value.
Petitioner states that as early as 1991, respondent knew of the RTC decision because respondent filed a
criminal case against Rufina Eniceo and Leonila Bolinas for giving false testimony upon a material fact during
the trial. They alleged that sometime in 1995, Bolinas came to the office of Alberto Tronio Jr., petitioner's general
manager, and offered to sell the Antipolo property. During an on-site inspection, Tronio saw a house and

ascertained that the occupants were Bolina's relatives. Tronio also went to the Registry of Deeds to verify the
records on file and ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the
necessary verification, petitioner decided to buy the Antipolo property.
On March 20, 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4
of the Antipolo property for P500,000.00.
On August 17, 1995, the Secretary of Department of Environment and Natural Resources (DENR Secretary)
approved the deed of sale between the Eniceo heirs and respondent. On January 1996, respondent filed a civil
complaint with the trial court against the Eniceo heirs and petitioner praying 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.
The trial court rendered it's decision dismissing the case for lack of legal and factual basis. However, the CA
reversed the trial court's decision.
ISSUE: 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.
RULING:
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. 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. 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.
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.
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. 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.
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.
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.

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.

HEIRS OF THE LATE SPOUSES BALITE VS. LIM

FACTS: Spouses Aurelio and Esperanza Balite were the owners of a parcel of land. When Aurelio died intestate,
his wife Esperanza and their children inherited the subject property and became co-owners thereof. Esperanza
became ill and was in dire need of money for her hospital expenses. She, through her daughter, Criseta, offered
to sell to Rodrigo Lim, her undivided share for the price of P1 mil. Esperanza and Rodrigo agreed that under the
Deed of Absolute Sale, it will be made to appear that the purchase price of the property was P150,000 although
the actual price agreed upon by them for the property was P1mil.
On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor of Rodrigo. They also executed on the
same day a Joint Affidavit under which they declared that the real price of the property was P1mil. payable to
Esperanza by installments. Only Esperanza and two of her children Antonio and Criseta knew about the said
transaction. When the rest of the children knew of the sale, they wrote to the Register of Deeds saying that their
mother did not inform them of the sale of a portion of the said property nor did they give consent thereto.
Nonetheless, Rodrigo made partial payments to Antonio who is authorized by his mother through a Special
Power of Attorney.
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. Then Esperanza died intestate and was survived by her children. Meanwhile, Rodrigo caused to be
published the Deed of Absolute Sale.
Petitioners filed a complaint against Rodrigo for the annulment of sale, quieting of title, injunction and damages.
Rodrigo secured a loan from the Rizal commercial Banking Corporation in the amount of P2mil and executed a
Real Estate Mortgage over the property as security thereof. On motion of the petitioners, they were granted
leave to file an amended complaint impleading the bank as additional party defendant. The court issued an order
rejecting the amended complaint of the petitioners. Likewise, the court dismissed the complaint and held that
pursuant to Article 493 of the Civil Code, a co-owner is not invalidated by the absence of the consent of the coowners. Hence, the sale by Esperanza of the property was valid; the excess from her undivided share should be
taken from the undivided shares of Criseta and Antonio, who expressly agreed to and benefited from the sale.
The CA likewise held that the sale was valid and binding insofar as Esperanza's undivided share of the property
was concerned. It affirmed the RTC ruling that the lack of consent of the co-owners did not nullify the sale.
ISSUE: Whether or not the Deed of Absolute Sale was valid. - Deed of Absolute Sale was merely relatively
simulated, it remains valid and enforceable
RULING:
Validity of the Sale
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
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.
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 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.
Deed of Sale not an Equitable Mortgage
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.
In the present case, however, 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.
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 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 coowner. Furthermore, the 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.

HEIRS OF REYES VS. REYES

FACTS: Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel of residential
land located in Pulilan, Bulacan. On that land they constructed their dwelling. The couple had four children,
namely: Jose, Sr., Teofilo, Jose, Jr. and Potenciana. Antonio Reyes died intestate, and was survived by Leoncia

and their three sons. Potenciana also died intestate, survived by her children.
On July 9, 1955, Leoncia and her three sons executed a deed denominated Kasulatan ng Biling Mabibiling Muli,
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. 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 Pagsasaayos ng Pag-aari at Pagsasalin, 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, 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 Pagmemeari, Tax Declaration was 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, 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. 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.
On September 2, 1993, Alejandro also died intestate. Surviving him were his wife, Amanda, and their children. 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.
In the interim, petitioner Nenita R. de la Cruz and her brother Romeo Reyes also constructed their respective
houses on the property.
ISSUE: Whether or not the 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.
RULING: 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.
Consequently, the contract between the vendors and vendees (Spouses Francia) was an equitable mortgage.

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?
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. 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 successorsin-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.
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.
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 wellknown 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 muchneeded 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.