a. Definition [G.R. No. 156522.

May 28, 2004]

b. Distinguished from option to purchase
c. Period of redemption (NCC 1606)
d. Effect when no redemption is made ERLINDA SAN PEDRO, petitioner, vs. RUBEN LEE
e. Equitable mortgage (NCC, 1602-06; CASES: San Pedro vs. and LILIAN SISON, respondents.
Lee, et al. 28 May 2004; Ceballos vs. Intestate Estate of the late
Emigdio Mercado, 28 May 2004; Balatero vs. IAC, 154 SCRA 530; DECISION
Lacorte vs. CA, 286 SCRA 24; Camus vs. CA, 222 SCRA 612; YNARES-SANTIAGO, J.:
Dapiton vs. CA, 272 SCRA 95)
In this petition for review, we are tasked with determining whether
f. Right of the parties to the fruits of the land (NCC 1617)
a document denominated as
g. Right of vendor a retro as to charges/encumbrances (NCC
a Kasulatan ng Ganap na Bilihan ng Lupa is a deed of absolute sale
1618)
as it appears to be on the surface or merely an equitable mortgage.
2. Legal Redemption; concept and instances (NCC 1619-1623)
Petitioner Erlinda San Pedro initiated this suit against the
spouses Ruben Lee and Lilian Sison on November 23, 1994,
[1]

CASES: Alonzo vs. IAC,150 SCRA 259; Primary Structures praying for: (1) a declaration that the document
Corporation vs. Sps. Valencia, GR No. 150060, August 19, 2003; entitled Kasulatan ng Ganap na Bilihan ng Lupa is an equitable
Lee Chuy Realty Corporation vs. Court of Appeals, December 4, mortgage and not a sale; (2) the reconveyance of the property
1995) subject of the Kasulatan ng Ganap na Bilihan ng Lupa; and (3)
damages.
The Kasulatan ng Ganap na Bilihan ng Lupa, which the parties
executed on May 23, 1985 provides as follows:

NA AKONG SI, ERLINDA SAN PEDRO, may sapat na gulang,

Pilipino, balo at naninirahan sa 374 Herbosa Street, Tondo, Manila,
sa bisa ng kasulatang ito ay nagpapatunay
Na ako ang tunay at ganap na may-
ari at namumusesyon sa isang (1) lagay ng lupa na nakatala sa aking pangal
an sa ilalim ng Transfer Certificate of Title No. T-290387
ng Patalaan ng Kasulatanng Lalawigang Bulakan, na lalong makikilala sa m
ga sumusunod na palatandaan:
[Technical description follows.]
Na dahil at alang-
alang sa halagang ISANG DAAN AT LIMAMPUNG LIBONG PISO (P150
,000.00), Salaping Pilipino, na ngayong araw na ito ay ibinayad sa akin
at tinanggap ko naman ng buong kasiyahang-
loob bilang husto at ganap na kabayaran ni RUBIN T. LEE,
may sapat na gulang, Pilipino, kasal kay Lilian Sison at naninirahan sa
230 MacArthur Highway, Karuhatan, Valenzuela, Metro
Manila, aking IPINAGBIBILI, ISINASALIN at INILILIPAT ng ganap at p
atuluyan at walang anumang pasusubali o pananagutan, ang lahat at boo
[sic] kong karapatan at pagmamay-
ari at pamumusesyon sa nabanggit na lagay ng lupa at mga kaunlaran o mej
oras na dito ay makikita o nakatirik o matatagpuan sa nasabing RUBIN T.
LEE at sa kanyang mgatagapamana o kahalili. [2]
The document bears two signatures above the typewritten words
ERLINDA SAN PEDRO, Nagbibili. It contains the signatures of two
witnesses, one of whom was Philip dela Torre, and was notarized by
a certain Venustiano S. Roxas. [3]
San Pedros version of events paints a portrait of an unscrupulous
couple, usuriously taking advantage of her financial straits to enrich
themselves. Petitioner claims that she desperately needed money to
support her childrens college education, and approached one Philip
[4]
dela Torre, who introduced her to respondent Ruben Lee. From Lee [5]
and his wife Lilian Sison, San Pedro was able to secure a loan in the
amount of P105,000.00, with interest of P45,000.00, or a total
indebtedness of P150,000.00. As security for this loan, she agreed
[6]
to mortgage a 17,235-square meter parcel of agricultural land
located at San Juan, Balagtas, Bulacan, covered by Transfer
Certificate of Title (TCT) No. T-290387. This transaction took place
[7]
in the office of Atty. Venustiano Roxas, where she met Lee for the
first time.
[8]
San Pedro claims that Atty. Roxas and Lee coerced her to sign
the Kasulatan ng Ganap na Bilihan ng Lupa and that the document
was executed merely as written evidence of the loan and
mortgage. She alleges that Atty. Venustiano Roxas and Ruben Lee
told her that the document was just a formality, with the assurance
[9]
from Atty. Roxas and Lee that respondents would never enforce the
contract against her. She readily agreed because she believed in
[10]
good faith that the spouses were tunay na tao. She further claims
[11]
that she continued in possession of the parcel of land through her
tenant, Federico Santos, and continued to receive her landowners
share of the harvest from 1985 until 1995. [12]
In 1986, petitioner attempted to pay the real property tax on the
[13]
subject agricultural land. To her surprise, she learned that the
[14]
property had already been transferred to the names of
respondents. She also learned that TCT No. T-290387 had been
[15]
cancelled and TCT No. RT-41717 (T-305595) had been issued in the
name of Ruben Lee. [16]
 After saving enough money to pay her indebtedness, San Pedro between Santos and San Pedros mother, and trust receipts dated
[28]

attempted to redeem her mortgage. She approached Ruben Lees from 1981 to 1991, all showing payment to San Pedro of 18 cavans
brother, Carlito, offering to pay her debt, but she was continually of palay. [29]

rebuffed. Nine years after the contract was executed, she initiated
[17]

Petitioners second witness, Adela Ortega, claimed to be an

this suit to recover title to the subject property.
experienced broker, engaged in the real estate business since after
Respondents, on the other hand, present an entirely different the Second World War. She testified that the parcel of land which
[30]

version of events. They claim that the sale of the property in question
was brokered by their mutual acquaintance and broker, Philip dela
Torre. Spouses Lee and Sison are engaged in the real estate
[18]
was the subject of the contract in question was grossly undervalued,
since she sold similarly located parcels of land in 1985 for around
P60.00 per square meter. She also claimed that, in 1995, she sold
[31]

business, and believed that San Pedros agricultural property would a piece of agricultural land adjacent to the subject property for
be a good investment. It was disclosed to them that the property had P350.00 per square meter. [32]

no existing right of way, that it was not tenanted, and that it was
[19]

Juanito Angeles, the third witness for the petitioner, was a

low-lying real estate which was prone to flooding during the rainy
Supervising Revenue Examiner in Revenue District 25. He [33]

season. They thus negotiated for the purchase of the property,

[20]

produced Department Order No. 83-94, effective September 25,

which had an initial asking price of P200,000.00, and offered to pay
[21]

1994, which contains zonal valuations of several municipalities in

P150,000.00 therefor. San Pedro accepted their offer and agreed to
Bulacan. Based on these zonal valuations, he testified that the price
[34]

sell the land. [22]

of agricultural lots located in Barangay San Juan, Balagtas, Bulacan

Respondents requested that petitioner execute an affidavit of ranges from P60.00 per square meter (for lots along the barangay
non-tenancy and a written power of attorney authorizing
[23]
road) to P20.00 per square meter (for interior lots). He also stated
[35] [36]

respondents to pay the capital gains taxes and expenses on the that prior to the effectivity of Department Order No. 83-94, the capital
registration of the property in their name. [24]
gains tax was determined from the consideration or the zonal
valuation, whichever was higher. [37]

During the trial, petitioner presented four witnesses. The first,

Federico Santos, a 61-year-old farmer, testified that he was San For their part, respondents presented Carlito Lee,
Pedros tenant and had been tilling her land since 1975, which his [25]
Jose Samaniego, Atty. Amando Tetangco, Philip dela Torre, and
parents had been tilling before him. He further claimed that this
[26]
Atty. Venustiano Roxas, in addition to respondent Ruben Lee.
tenancy relation was uninterrupted until the time of his testimony in
Carlito Lee, Rubens brother, testified that Philip dela Torre
1995, and that he paid San Pedro her owners share of the harvest
introduced him and Ruben to Erlinda San Pedro, who wanted to sell
every year. Introduced in evidence were a tenancy agreement
[27]

her property. The sale price was originally P200,000.00, which was
[38]
reduced to P150,000.00 because the agricultural lot in question had
no existing right of way and was frequently flooded during the rainy
season. Carlito also testified that although the contract of sale was
[39]
entered into between San Pedro and Ruben Lee, the money for the
purchase of the property came from CenicaHardware, a corporation
of which he is a part owner. [40]
Carlito alleged that he and Ruben met with San Pedro on several
occasions, in order to negotiate the purchase price and terms of
payment. On their second meeting, they requested San Pedro to
[41]
execute an affidavit of non-tenancy to prove that the property was
not occupied. On their third meeting, San Pedro produced the
[42]
requested affidavit, which was notarized by a certain
Atty. Amando Tetangco. They set another meeting, for May 23,
[43]
1985, at which San Pedro arrived at the Cenica Hardware store with
the affidavit of non-tenancy and the original title of the
property. That same day, Carlito and his brother withdrew the
[44]
amount of P150,000.00 from Solid Bank, and paid San Pedro, for
which she signed a receipt. They then proceeded to the office of
[45]
Atty. Venustiano Roxas for the execution of the contract of sale.
[46]
Jose Samaniego, the Municipal Assessor of Balagtas, Bulacan,
produced, inter alia, the Declaration of Real Property No.
10786 and Declaration of Real Property No. 01846, both in the
[47] [48]
name of Ruben Lee. Declaration of Real Property No. 10786, for the
year 1987, covers the property identified by TCT No. T-305595, and
proclaims the market value of this property to be
P34,470.00. Declaration of Real Property No. 01846, for the year
1994, is for the property covered by TCT No. T-305595, and
identifies the market value of the property to be P137,880.00.
Samaniego explained that the amount appearing on the
declaration of real property stands for the value of a certain parcel of
land per square meter if the land is residential, commercial or
industrial, and per hectare if it is agricultural. The unit value is based
on the schedule of market value prepared during the revision, which
is approved by the Provincial Assessor and submitted to the
Sangguniang Panlalawigan for approval. Thus, the bases for
determining unit value are the deed of sale, the payment value and
the production cost of the land. [49]
The next witness, Atty. Amando Tetangco, testified that he
notarized an affidavit of non-tenancy executed by Erlinda San Pedro
sometime in May 1985. He identified his signature on the said
[50]
affidavit, which he drafted. He also identified the signature of San
[51]
Pedro, alleging that she caused the preparation of the
affidavit, although he admitted that he had never met San Pedro
[52]
prior to May 17, 1985, the date of execution of the affidavit. [53]
Philip dela Torre, a real estate broker, testified as to the
negotiations between San Pedro and Lee regarding the purchase
price of the property. The sum of P150,000.00 was finally agreed
[54]
upon, with the capital gains tax to be paid by Lee. The agreement
[55] [56]
between the parties was reduced in writing as
the Kasulatan ng Ganap na Bilihan ng Lupa. For his participation in
[57]
the transaction, dela Torre received a commission of 3%, or
P4,500.00. Dela Torre was one of the witnesses to this contract,
[58]
and identified his signature thereon. He also identified (1) the
[59]
signature of San Pedro, who signed the document in his
presence, and (2) the document embodying the agreement that
[60]
Ruben Lee would pay the capital gains tax on the transaction. [61]
 Finally, Atty. Venustiano Roxas testified for the respondents. He
recalls having prepared and notarized
the Kasulatan ng Ganap na Bilihan ng Lupa, and identified his
signature thereon. [62]
On June 22, 1998, the trial court rendered a decision in favor of
petitioner, declaring the contract between petitioner and respondents
as one of mortgage and not of sale, and ordering the reconveyance
of the property and the payment of damages.
On appeal, the Court of Appeals reversed the trial court, and
rendered a decision in favor of respondents, the dispositive portion of
which reads:
WHEREFORE, premises considered, the assailed Decision dated 22 June
1998 of the Regional Trial Court of Malolos, Bulacan, Branch 17 is hereby
REVERSED and SET ASIDE, and a new one is hereby entered dismissing
the Complaint for lack of merit. No pronouncement as to costs.
SO ORDERED.
Hence, this appeal, which raises the sole issue of whether the
contract in question is an equitable mortgage or a deed of absolute
sale.
The document appears on its face to be a contract of sale, and
contains the following clause:
Na dahil at alang-
alang sa halagang ISANG DAAN AT LIMAMPUNG LIBONG PISO (P150
,000.00), Salaping Pilipino, na ngayong araw na ito ay ibinayad sa akin
at tinanggap ko naman ng buong kasiyahang-
loob bilang husto at ganap na kabayaran ni RUBIN T. LEE,
may sapat na gulang, Pilipino, kasal kay Lilian Sison at naninirahan sa
230 MacArthur Highway, Karuhatan, Valenzuela, Metro
Manila, aking IPINAGBIBILI, ISINASALIN at INILILIPAT ng ganap at p
atuluyan at walang anumang pasusubali o pananagutan, ang lahat at boo
[sic] kong karapatan at pagmamay-
ari at pamumusesyon sa nabanggit na lagay ng lupa at mga kaunlaran o mej
oras na dito ay makikita o nakatirik o matatagpuan sa nasabing RUBIN T.
LEE at sa kanyang mgatagapamana o kahalili. [63]
Its nomenclature notwithstanding, we are called upon to decide
whether the contract is really one of equitable mortgage, in
accordance with the statutory presumptions set forth in Article 1602
of the Civil Code, which are applicable to documents purporting to be
contracts of absolute sale. [64]
Article 1602 provides:
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.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws.
It is well-settled that the presence of even one of the foregoing
circumstances is sufficient to declare a contract as an equitable
mortgage, in consonance with the rule that the law favors the least
[65]
transmission of property rights. For the presumption of an equitable
[66]
mortgage to arise under Article 1602, two requisites must concur: (1)
that the parties entered into a contract denominated as a sale; and
(2) that their intention was to secure an existing debt by way of a
mortgage. [67]
After a careful review of the records of the case, we find no
cogent reason to disturb the ruling of the Court of Appeals.
Actori incumbit onus probandi. Upon the plaintiff in a civil case,
[68]
the burden of proof never parts. Plaintiff must therefore establish
[69]
her case by a preponderance of evidence. She has the burden of
[70]
presenting evidence required to obtain a favorable judgment, and [71]
she, having the burden of proof, will be defeated if no evidence were
given on either side. [72]
In this case, it was incumbent upon San Pedro to adduce
sufficient evidence to support her claim of an equitable
mortgage. Petitioner relies on paragraphs 1, 2, 5 and 6 of Article
1602. Upon an examination of the evidence, we find insufficient
[73]
basis to conclude the existence of any of the grounds she relied
upon.
Anent alleged inadequacy of the purchase price, petitioner
presented two witnesses who testified as to the market values of real
estate in the subject locale. Neither of these witnesses, however,
was able to conclusively demonstrate that the purchase price of the
property was grossly inadequate.
The testimony of the purported broker, Adela Ortega, was not
given any credence by the Court of Appeals. We quote with approval
the ruling of the Court of Appeals on this point:
Plaintiff-appellees witness Adela Ortega failed to substantiate her allegation
that the prevailing price of the subject property at the time of the sale (1985)
was P60.00 per square meter. Although Adela Ortega claimed that she was
able to sell lots adjacent to the subject property at the said prevailing price,
she failed to present proof of such claim despite her reservation to do
so. Moreover, Adela Ortegas competency and credibility as an experienced
real estate broker is also suspect or questionable. She admitted that she was
not aware or familiar with the factors or bases that affect the increase in the
value of realty, or how does it influence the zonal valuation made by the
local government, which should be very basic to a real estate broker.
The second witness, BIR Revenue Supervisor Juanito Angeles,
testified as to the market value of properties in the subject locale as
of the effectivity of Department Order No. 83-94, on September 25,
1994. However, it must be noted that Angeles did not testify as to the
market value of the locale as of May 23, 1985, the date of the
contract in question. Neither did petitioner present any other described therein has an area of 1.5 hectares, while the property
[80]

evidence of the real estate market values as of that date. subject of the contract in question has an area of 17,235 square
meters, or 1.72 hectares. There is therefore no clear indicator that
Absent any evidence of the market value of the locale as of the
the parcel of land being tilled by Santos is, indeed, the parcel of land
date of the contract, it cannot be concluded that the price at which
subject of the contract between San Pedro and Lee. Although a
the property was sold, or about P8.70 per square meter, was grossly
landowner-tenant relation has been established between San Pedro
inadequate. Mere inadequacy of price would not be sufficient. The
and Santos, we cannot conclude therefrom that San Pedro was in
price must be grossly inadequate, or purely shocking to the
[74]

possession of the property subject of

conscience. Since the property in question could have been worth
[75]

the Kasulatan ng Ganap na Bilihan ng Lupa through her tenant

as little as P20.00 per square meter in 1994, the price of P8.70 per
square meter nine years earlier, in 1985, does not seem to be
grossly inadequate. Indeed, respondents Declaration of Real
Property No. 10786, for the year 1987, shows the market value of the
property to be only P34,470.00 for that year.
Federico Santos.
Petitioner argues that the direct connection between the parcel of
land tilled by Santos and the land in question needs no proof, in view
of the purported admission by respondents in the course of the
proceedings. Specifically, petitioner points to (1) an alleged
[81]

As regards the alleged continuous possession of the property in

admission made by respondents counsel during the cross-
question, San Pedro presented Federico Santos, who testified that
examination of witness Federico Santos on July 3, 1995, and (2) a
[82]

he is a farmer by occupation, currently tilling a farmholding of less

statement made in respondents Comment/Opposition to Plaintiffs
than two hectares located at San Juan, Balagtas, Bulacan, owned [76]

Formal Offer of Evidence, to the effect that petitioners exercise of

by Erlinda San Pedro, to whom he has been paying lease rentals of
rights of ownership over the parcel of land in question amounts to a
18 cavans a year. The testimony of the witness was offered to
[77]

usurpation of respondents rights as owner of the

prove that he was the agricultural leasehold tenant of the petitioner
property. Petitioner relies on Rule 129, Section 4 of the Revised
[83]

on the parcel of land which was described in the complaint.[78]

Rules of Court, which provides in part that [a]n admission, verbal or

However, while the witness may have established that he was, written, made by a party in the course of the proceedings in the same
indeed, the agricultural tenant of the petitioner, the identity of the case, does not require proof.
parcel of land which he tills and the parcel of land described in the
An examination of the records of the case, however, will readily
complaint was not established. The Kasunduan sa Buwisan entered
[79]

disclose that no such admission was made either by respondents or

into between Federico J. Santos and Lourdes Manalo Vda. De San
by respondents counsel. The question propounded by respondents
Pedro dated May 14, 1975 reiterates the tenancy relation between
counsel on July 3, 1995, is as follows:
witness Santos and the San Pedro family. The parcel of land
 Q Mr. Witness, are you aware of the fact that since 1985 the land you have
been cultivating has been transferred in the name of Sps. Ruben Lee
and Lilian Sison?
A No, maam.[84]
In the assessment of this Court, said question contains absolutely
no admission that the parcel of land tilled by Santos is in fact the
parcel of land subject of the contract in question.
We likewise find no admission made in respondents
Comment/Opposition to Plaintiffs Formal Offer of Evidence. The
alleged admission was made in the comment/objection to petitioners
Exhibits F to F-14, the Receipts of Payments of Rentals by Federico
Santos to Erlinda San Pedro, and reads:
These receipts do not prove rights of ownership. The same even show acts
of USURPATION of the Rights of Ownership of the defendants by the
plaintiff and her alleged tenant since Title to the property in question is now
in the name of Defendant spouses as Evidenced by TCT No. T-
305595. (Ehx. B of the Plaintiff) [85]
On the contrary, what the foregoing portion of the
Comment/Objection reveals is that: if Santos was indeed tilling the
parcel of land covered by TCT No. T-305595 as a tenant of San
Pedro, San Pedro would be guilty of usurpation.
Rule 129, Section 4 of the Revised Rules of Court provides that a
judicial admission may be contradicted by showing that it was made
through palpable mistake, or that no such admission was
made. Petitioners theory as regards the purported judicial admission
is readily contradicted by a perusal of the records, which show that in
fact no such admission was made by respondents. We thus find no
adequate proof for petitioners contention that she was exercising
possessory rights over the parcel of land covered by TCT No. T-
305595.
As a third ground for the establishment of the purported equitable
mortgage, petitioner argues that paragraph 5 of Article 1602 is
present. Again, petitioner presented no proof that she, as vendor of
[86]
property, bound herself to pay taxes on the thing sold.
Finally, petitioner relies on Article 1602, paragraph 6, which
applies to 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.
In contrast, respondents witnesses all testified as to the existence
of a contract of sale between her and respondent Ruben
Lee. Pertinently, Philip dela Torre, who brokered the sale, and
Atty. Venustiano Roxas, who prepared the contract in question, were
both unequivocal as to the nature of the contract. These two
witnesses, whose impartiality was not impugned, both affirmed the
sale of the subject property.
Respondents presented documentary evidence which shows that
the contract was indeed a sale: (1) a receipt for P150,000.00 dated
May 23, 1985, issued by Erlinda San Pedro, attesting full receipt of
the amount in question; (2) an authority to pay capital gains tax,
[87]
executed by Erlinda San Pedro in favor of Ruben Lee; and (3) an
[88]
affidavit of non-tenancy executed by Erlinda San Pedro. [89]
The Kasulatan ng Ganap na Bilihan ng Lupa unequivocally states
the absolute sale of the property covered by Transfer Certificate of
Title No. T-290387. Being a notarized document, it carries the
evidentiary weight conferred upon duly executed instruments [G.R. No. 155856. May 28, 2004]
provided by law, and is entitled to full faith and credit upon its face.
[90]

WHEREFORE, premises considered, the decision of the Court of

Appeals dated November 20, 2002, which dismissed the complaint LEONORA CEBALLOS, petitioner, vs. Intestate Estate of the
filed by petitioner for lack of merit, is AFFIRMED. No pronouncement Late EMIGDIO MERCADO and the Heirs of EMIGDIO
as to costs. MERCADO, respondents.
SO ORDERED.
DECISION
PANGANIBAN, J.:

Well-settled is the rule that expert opinion is never

conclusive. Courts may exercise discretion in accepting or overruling
the opinions of handwriting experts. Clear and convincing evidence is
required to overturn the presumption of validity of a notarized deed of
absolute sale. Absent such species of evidence, the presumption
stands.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of

[1]

Court, seeking to set aside the June 20, 2002 Decision and the
[2]

October 11, 2002 Resolution of the Court of Appeals (CA) in CA-GR

[3]

CV No. 53463. The dispositive part of the assailed Decision reads as

follows:

WHEREFORE, premises considered, the present appeal is hereby

DISMISSED and the decision appealed from in Civil Case No. CEB-12690
is hereby AFFIRMED with MODIFICATION in that the award of moral
damages is hereby REDUCED to P50,000.00.
With double costs against the plaintiff-appellant. [4]
The assailed Resolution denied petitioners Motion for
Reconsideration.
The Facts
The facts of the case are summarized by the CA in this wise:
[Petitioner] Leonora Emparado Ceballos is the registered owner of a certain
parcel of land (Lot No. 3353, Pls-657-D) situated in Bato, Badian, Cebu,
consisting of 53,301 square meters and covered by Transfer Certificate of
Title No. T-948 of the Register of Deeds for
the Province of Cebu. Sometime in October 1980, [petitioner] was
introduced to Emigdio Mercado for the purpose of obtaining a loan as the
latter was also known to be in the business of lending money. [Petitioner]
was able to borrow the amount of P12,000.00 payable in two (2) months
and to secure said loan, she executed in favor of Emigdio Mercado a Deed
of Real Estate Mortgage over the subject property. The said mortgage deed
was not registered by the mortgagee. [Petitioner] was not able to pay her
mortgage indebtedness to Emigdio Mercado within the stipulated
period. On February 13, 1982, a Deed of Absolute Sale was executed
whereby the mortgaged property was sold to Emigdio Mercado for the price
of P16,500.00. Said instrument contained the signatures of [petitioner] and
her husband Narciso Ceballos and notarized by Atty. Elias V. Ortiz. It
appears that sometime in 1990, [petitioner] offered to buy back the property
from Emigdio Mercado for the price of P30,000.00 but the latters wife
refused since the same was already transferred in their names under TCT
No. TF-3252 issued on June 1, 1987. Emigdio Mercado died on January 12,
1991 and a petition for the issuance of letters of administration over his
intestate estate was filed by her daughter Thelma M. Aranas before
the RTC-Cebu City, Branch 11 (Spec. Proc. No. 3094-CEB).
On August 18, 1990, [petitioner] instituted the present suit against the
Intestate Estate of the Late Emigdio Mercado, Teresita Mercado as the
Administrator, and/or the Heirs of the Late Emigdio Mercado. The
Complaint alleged the following:
[Petitioner] is the owner as her paraphernal property of a parcel of land
located at Barangay Bato, Municipality of Badian, Province of Cebu and
covered by TCT No. T-948, the same being her hereditary share from the
property of her late father Rufo Emparado. Sometime in the early part of
December 1980, to accommodate a friend who was hospitalized, [petitioner]
went to the late Emigdio Mercado, who was known, besides his other
businesses, to be also in the business of lending money, although at
exorbitant rate of interest. A Real Estate Mortgage was drawn on December
31, 1980 for P12,000.00 although only P8,000.00 was actually delivered,
the difference represents the interest for the use of money, for a period of
two (2) months. Since the accommodated party could not yet produce the
redemption money, [petitioner] periodically went to the mortgagee to beg
him not to foreclose the mortgage. On February 13, 1982, [petitioner] was
made to execute a Deed of Sale with Pacto de Retro for an increased
consideration, from P12,000.00 to P16,500.00 for a period of one (1) year
from date of execution thereof, which contract was in fact an equitable
mortgage. [Petitioner] religiously paid interest on the loan even beyond the
term of the mortgage, on the repeated request by [petitioner] to the deceased
mortgagee not to foreclose the mortgage. [Petitioner] learned to engage in
the buy and sell of just any commodity, more especially real estate, and her
income improved. In November 1990, she went to the deceased mortgagee
to redeem the property to which the latter agreed but the wife, Teresita
Virtucio-Mercado vehemently objected saying that it could no longer be
done because the title had been transferred in their names. [Petitioner]
waited for a propitious time to again propose to redeem the property since it
was a matter of convincing by the deceased mortgagee for his wife to agree
to the redemption, when she learned of his death on January 12,
1991. [Petitioner] then started her epic to recover the property; she engaged
in gathering documentation when to her great worry and apprehension she
discovered that the title to the property had indeed been transferred in the
name of the deceased Emigdio S. Mercado under TCT No. TF-3252. Such
transfer of title was based on a document, Deed of Absolute Sale,
purportedly executed by [petitioner] and her husband on February 13, 1982,
the same date when deceased Emigdio Mercado and [petitioner] executed
the Deed of Sale With Pacto de Retro and for the same consideration
of P16,500.00, the latter document turned out not to have been submitted by
the deceased for notarization. Said Deed of Absolute Sale is an absolute
fabrication with the signatures therein appearing to have been of the
[petitioners] and husbands, were absolute forgeries. [Petitioner] submitted
said deed of sale to disinterested third parties to confirm its being spurious;
she sought the assistance of the Philippine National Police (PNP) which
found (PNP Report No. 097-91) that said document of sale is a forgery; and
hence, it is patent that the transfer of title on the property was done through
fraud. [Petitioner] is willing and ready to redeem the property and there is
no other way for her to recover her property but through the
courts. [Petitioner] thus prayed for a judgment (1) declaring the Deed of
Absolute Sale void from the beginning; (2) to allow [petitioner] to redeem
her property; (3) ordering defendant, after redemption, to reconvey the
property to [petitioner]; (4) ordering defendant to reimburse [petitioner]
attorneys fees of P50,000.00 and litigation expenses of P10,000.00, and to
pay moral damages in the sum of P100,000.00.
In their Answer with Counterclaim, [respondents] Heirs of the Late Emigdio
Mercado asserted that what was written on the deed of real estate mortgage
was the truth and that the deed of sale with pacto de retro was not pushed
through because [petitioner] decided to sell the property to the late Emigdio
Mercado absolutely for the price of P16,500.00. [Petitioner] already knew
that she had sold the property to Mr. Mercado and she was even the one
who delivered to him the Deed of Absolute Sale already signed by her and
her husband, and already notarized by the notary public; and since that time
[respondents] have been in possession of said property and were the ones
paying the realty taxes thereon. The signatures appearing on the deed of sale
are genuine, and the property can no longer be redeemed as it had already
been sold in an absolute manner to Mr. Mercado. [Respondents] thus prayed
that the complaint be dismissed and on the counterclaim, that [petitioner] be
ordered to pay [respondents] the amounts of P30,000.00 as attorneys
fees, P20,000.00 as litigation expenses, P1,000,000.00 as moral damages
and P200,000.00 as exemplary damages.
xxxxxxxxx
To prove her allegations in the complaint, [petitioner] presented
documentary evidence and her own testimony and those of her witnesses
Romeo Varona (document examiner of the PNP Crime Laboratory, Camp
Sotero Cabahug) and Jovencio Virtucio. [Respondents], on the other hand,
presented the testimonies of Atty. Elias Ortiz (who notarized the Deed of
Absolute Sale), Teresita Virtucio Mercado and SPO2 Wilfredo Espina
(member of the PNP assigned at the Crimes Record Section). In rebuttal,
[petitioner] returned to the witness stand and also presented the testimony of
Pio Delicano (alleged overseer of the subject land since
1990). [Respondents] sur-rebuttal evidence consisted of a copy of tax
declaration in the names of [petitioner] and Francisca Emparado and copy
of the complaint in Civil Case No. CEB-13680 pending before RTC-
Cebu City, Branch 22 between [petitioner] and her own brothers and sisters
over the same property subject of the present litigation. On October 19,
1995, the trial court rendered judgment in favor of the [respondents] and
against the [petitioner] as earlier cited.
[5]
Ruling of the Court of Appeals
The Court of Appeals held that petitioner had failed to prove by
the requisite evidence her allegation of forgery in the subject Deed of
Absolute Sale. It further ruled thus:
[T]he trial court had observed the correct process of identification first, by
not completely relying on the findings or statements by the handwriting
expert presented by appellant as to the existence of forgery in the questioned
document, and more important, in considering both similarities and
dissimilarities between the questioned signatures and the standard signatures
as to extract by such comparison between the two (2) sets of signatures the
habitual and characteristic resemblance which naturally appears in the
genuine writing. x x x The apparent dissimilarities are overshadowed by the
striking similarities and therefore, fail to overcome the presumption of
validity in favor of the duly notarized Deed of Absolute Sale.[6]
Moreover, the CA found no reason to consider as an equitable
mortgage the transaction between petitioner and the deceased
Emigdio Mercado, since none of the circumstances enumerated in
Article 1602 of the Civil Code was present.
The CA also affirmed a reduced award of moral damages
because of bad faith on the part of petitioner when she imputed to
the deceased acts of forgery and fraud. This imputation tended to
blacken his memory, and caused his surviving heirs emotional and
psychological suffering.
Hence, this Petition. [7]
The Issues
Petitioner raises the following issues for our consideration:
I. The findings of the appellate court as regards the questioned signature
cannot be upheld as it is in disregard of fundamental precepts on
handwriting analysis. Moreover, the said findings failed to take into account
circumstances admitted by respondents and which ineluctably show a
transaction of mortgage, not of sale.
II. Even granting that the subject deed is valid, it is incumbent upon the
lower courts to declare the contract as one of equitable mortgage, not of
sale.
III. The award of moral damages, attorneys fees and costs of suit finds no
support in fact, in law, and in prevailing jurisprudence.
[8]
The Courts Ruling
 The Petition is partly meritorious.
First Issue:
Handwriting Analysis
Petitioner assails the CAs findings of fact. She insists that the
signatures on the subject Deed of Absolute Sale were forged.
Her contention has no merit. Well-entrenched is the rule that the
Supreme Courts role in a petition under Rule 45 is limited to
reviewing or reversing errors of law allegedly committed by the
appellate court. Factual findings of the trial court, especially when
affirmed by the Court of Appeals, are conclusive on the
parties. Since such findings are generally not reviewable by this
Court, it is not duty-bound to analyze and weigh all over again the
[9]
evidence already considered in the proceedings below. [10]
In the present case, we find no reason to deviate from this
rule. The courts a quo had sufficient factual basis in holding that the
questioned signatures were not forgeries.Although there were
dissimilarities between the questioned and the standard signatures,
the CA also found between them striking similarities as to indicate
the habitual and characteristic writing of the appellant. The apparent
dissimilarities are overshadowed by the striking similarities and,
therefore, fail to overcome the presumption of validity in favor of the
duly notarized Deed of Absolute Sale.
Petitioner fails to convince us that the CA committed reversible
error in affirming the trial court and in giving no weight to expert
opinion. Justice Francisco, a recognized authority in Remedial Law,
explains:
Expert opinions are not ordinarily conclusive in the sense that they must be
accepted as true on the subject of their testimony, but are generally regarded
as purely advisory in character; the courts may place whatever weight they
choose upon such testimony and may reject it, if they find it is inconsistent
with the facts in the case or otherwise unreasonable. [11]
Such opinion was not arbitrarily disregarded by the courts
below. The RTC, as affirmed by the CA, overruled the conclusion of
the expert witness, because he only relied on the dissimilarities in the
signatures, but ignored their striking similarities or
characteristics. The trial court meticulously explained:
The aforementioned similarities between the questioned signatures and the
standard signatures, are more prominent or pronounced in comparison with
the standard signatures appearing in the said deed of real estate mortgage
which was omitted by Mr. Varona in the list of documents submitted by
[petitioner] to him which contained her standard signatures. It has been
written by an authority in handwriting that, to wit:
The principles underlying handwriting identification are based on the
comparison of certain distinctive characteristics imprinted in the individual
writing. These characteristics are injected into the writing involuntarily as a
habit which are unconscious and inconspicuous to the eye of the writer and
cannot be completely suppressed or concealed whether they appear in
signature or general writing and constitute the identifying evidence that
forms the basis of expert opinion. (Baker, Law of Disputed and Forged
Documents, p. 22.)
The test of the comparison for identification actually is the accurate judging
of the individuals writing habit which means the comparative weighing of
the characteristics, and, like any other evidence, the deduction must be
determined by the number and value of the peculiarities. (Baker, ibid., p.
24.)
The specimens of the standard signatures of [petitioner] found in Exhibit N
were written and given by her in 1991 per investigation report submitted by
Mr. Romeo Varona when the questioned document was dated February 13,
1982, or after a lapse of almost nine (9) years. A closer look over said
specimens of [petitioners] standard signatures disclose
x x x much different strokes, a rather smooth, accomplished, disguised and
much improved handwriting, possibly due to the fact that [petitioner] in the
latter years became proficient in her handwriting compared to her signatures
several years back as shown in her standard signatures found in the deed of
real estate mortgage where marked similarities in the questioned signatures
and the standard signatures are present in both.
Yet despite the lapse of time, the instinctive habit of [petitioners] own
handwriting characteristics set forth in her standard signatures find their
similar impressions in her questioned signatures as distinctly observed by
this Court.
It is for this reason that this Court holds as it hereby holds that the finding of
the handwriting expert, Mr. Romeo Varona, that the signature of [petitioner]
as appearing in the questioned document is forged and cannot be binding or
conclusive to this Court in view of the aforementioned observation of this
Court as to the existence of similar imprinted characteristic habit of the
writer seen both present in the questioned signatures and the standard
signatures. x x x
The RTC made an impressively thorough study and arrived at a
well-reasoned resolution of the issue of forgery. We have no reason
to overrule the CAs affirmation of that resolution.
As a public document, the subject Deed of Absolute Sale has in
its favor the presumption of regularity. To contradict it, one must
present evidence that is clear and convincing; otherwise, the
document should be upheld. [12]
Second Issue:
Equitable Mortgage
Petitioner also contends that the Contract should be declared as
an equitable mortgage, because (1) the original transaction was a
loan; and, (2) for a titled property with an area of more than fifty-three
thousand square meters in a tourist area, the contract price
of P16,500 was ridiculously low.
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.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws.
Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
In this case, both the trial and the appellate courts found none of
the above-enumerated circumstances. We find no cogent reason to
reverse their factual finding.
Concededly, the original transaction was a loan. Petitioner failed
to pay the loan; consequently, the parties entered into another
agreement -- the assailed, duly notarized Deed of Absolute Sale,
which superseded the loan document. Petitioner had the burden of
proving that she did not intend to sell the property; that Emigdio
Mercado did not intend to buy it; and that the new agreement did not
embody the true intention of the parties. We find no basis for
[13]
disturbing the CAs finding that she had failed to discharge this
burden.
Harping on the alleged unconscionably low selling price of the
subject land, petitioner points out that it is located in a tourist area
and golf haven in Cebu. Notably, she has failed to prove that
on February 13, 1982, the date of the sale, the area was already the
tourist spot and golf haven that she describes it to be. In 1990, the
property might have been worth ten million pesos, as she claimed;
[14]
however, at the time of the sale, the area was still
undeveloped. Hence, her contention that the selling price was
[15]
unconscionably low lacks sufficient substantiation.
Petitioner also argues that Mercados delay in registering the
Deed of Absolute Sale and transferring the land title shows that the
real agreement was an equitable mortgage.
An equitable mortgage is one that -- although lacking in some
formality, form or 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. Delay in transferring title is not one of the instances
[16]
enumerated by law -- instances in which an equitable mortgage can
be presumed. Moreover, throughout the testimony of petitioner
before the trial court, she never claimed that after the Deed of
Absolute Sale had been executed in February 13, 1982, the land
continued to be intended merely to secure payment of the P12,000
loan taken on December 31, 1980. [17]
This Court has held that a document acknowledged before a
notary public enjoys the presumption of regularity. It is a prima
facie evidence of the facts therein stated. To overcome this
presumption, there must be presented evidence which is clear and
convincing. Absent such evidence, the presumption must be
upheld. [18]
In this case, petitioner failed to present clear and convincing
evidence to overcome the presumption of validity of the notarized
Deed conveying the land to private respondents. Her testimony
denying the validity of the sale, having been made by a party who
Appeals, 141 SCRA 488 [1986]. Settled in our jurisprudence is the rule that
moral damages cannot be recovered from a person who has filed a
complaint against another in good faith, or without malice or bad faith
(Philippine National Bank v. Court of Appeals, 159 SCRA 433 [1988]; R &
B Surety and Insurance v. Intermediate Appellate Court, 129 SCRA 736
[1984]). If damage results from the filing of the complaint, it is damnum
absque injuria (Ilocos Norte Electrical Company v. Court of Appeals, 179
SCRA 5 [1989]). [22]

has an interest in the outcome of the case, is not as reliable as

written or documentary evidence. Moreover, self-serving statements
are inadequate to establish ones claims. Proof must be presented to
support the same. [19]
Third Issue:
Moral Damages
We now discuss the propriety of the award of moral damages. A
resort to judicial processes is not, per se, evidence of ill will upon
which a claim for damages may be based. [20]
In China Banking Corporation v. Court of Appeals, we held:
[21]
Respondents have failed to show that petitioner was motivated
by bad faith or malice when she instituted the action for declaration
of nullity of the Deed of Absolute Sale.Moreover, although she claims
that her signature on the Deed was a forgery, contrary to the findings
of the court a quo, she does not impute authorship of the alleged
forgery to the deceased Emigdio Mercado. Hence, the courts a
quo erred in awarding moral damages.
For the same reasons, the award for attorneys fees and
expenses of litigation cannot be sustained.

WHEREFORE, the Petition is PARTLY GRANTED. The assailed

x x x Malicious prosecution, both in criminal and civil cases, requires the Decision is AFFIRMED, with the MODIFICATION that the awards for
presence of two elements, to wit: a) malice; and b) absence of probable moral damages, attorneys fees and expenses of litigation are
cause. Moreover, there must be proof that the prosecution was prompted by deleted. No pronouncement as to costs.
a sinister design to vex and humiliate a person, and that it was initiated SO ORDERED.
deliberately knowing that the charge was false and baseless (Manila Gas
Corporation v. Court of Appeals, 100 SCRA 602 [1980]). Hence, mere
filing of a suit does not render a person liable for malicious prosecution
should he be unsuccessful, for the law could not have meant to impose a
penalty on the right to litigate (Ponce v. Legaspi, 208 SCRA 377
[1992]; Saba v. Court of Appeals, 189 SCRA 50 [1990]; Rubio v. Court of

G.R. No. 73889 September 30, 1987
FLORENCIO BALATERO and HEIRS OF JOSEFA
BADELLES, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and JUAN
VELOSO, respondents.
GUTIERREZ, JR., J.:
This is a petition to review on certiorari the decision of the then
Intermediate Appellate Court in AC-G.R. No. CV-58576 which reversed
the decision of the then Court of First Instance of Lanao del Norte in
Cadastral Case No. IL-N-1 LRC Record No. N-146 adjudicating Lot
Numbers 433-A and 433-B of the Iligan Cadastral 292 to petitioners
Florencio Balatero and the heirs of Josefa Badelles.
The Director of Lands initiated the court proceedings to settle and
adjudicate 1419 lots to rightful claimants inside the tract of land in Iligan
City designated as the Iligan Cadastral 292.
The claimants for Lot No. 433 with an area of 216 square meters and
Lot No. 817 with an area of 34 square meters were:
1. Petitioner Florencio Balatero, for a portion of both lots by purchase
from Josefa I. de Badelles and Leona, Salvacion, Jose, Catalina and
Dominga, as surnamed Badelles;
2. Josefa Iglupas Badelles, for Lot No. 433 having inherited the same
from her parents. Josefa died during the pendency of the case and was
substituted by her heirs, petitioners herein;
3. Private respondent Juan A. Veloso, for Lot No. 433, having
purchased the same from Josefa Iglupas; and
4. Anacleto Iglupas for Lot No. 433, having inherited the same from his
deceased parents Alejo Iglupas and Tomasa Ronda.
The facts which formed the basis for the trial court's decision are
summarized as follows:
The court finds that Lot No. 817 which contains an area of
34 square meters was provided by the cadastral surveyors
for the widening of a national street and the corner thereof
with San Miguel St. With the filing of their cadastral
answers, claimants admit that the land in question is still
part and parcel of the public domain. The State as
sovereign power and as absolute and final owner of as
lands of the public domain has the right to segregate from
an area which it allows to be claimed for private ownership
such portion or portions thereof as it may deem necessary
to retain for common use and for the public good. Lot No.
817 cannot, therefore, be claimed in private ownership by
the claimants herein or any other person for that matter.
The State had reserved the same for public use. (p. 33,
Rollo)
xxx xxx xxx
xxx xxx xxx
... That the property in question was originally owned by
the parents of Josefa Iglupas (mother-in-law of claimant
Florencio Balatero) and her brother Alejo (father of
claimant Anacleto Iglupas); that after the death of their
parents, the lot was given to Alejo Iglupas and his wife
Tomasa Ronda; that Alejo Iglupas died in 1916 and on May
10, 1968, his widow Tomasa Ronda, and their son Severo
sold the property to Josefa Iglupas and her husband Juan
Badelles for a consideration of P111.00, which sale is
embodied in a public document denominated "Escritura de
Compra Venta" (Exh. "E"); that in that same year of 1918,
Josefa Iglupas together with her husband and children
occupied the lot and the old house thereon; that in 1926,
Josefa Badelles built a new and bigger house on the lot;
that Juan Badelles died in that house and lot in 1927 and
his widow Josefa Badelles and her children continued living
thereon until the children became of age and got married;
that Josefa 1. Badelles herself died in that property in
1967; that on June 9, 1930, Josefa Iglupas in order to
secure a loan of P68.00 mortgaged the property to
claimant Juan Veloso in a public document denominated
as "Pacto de Retro Sale" (Exh. "B"); that this loan was paid
sometime in 1947, first in an amount of P100.00 and
subsequently an additional amount of P300.00 00; that on
April 30, 1954, Josefa Iglupas and her children Catalina,
Leona, Salvacion and Leoncia sold a portion of the lot to
Florencio Balatero as shown in a document denominated
"Deed of Sale Unregistered Land' (Exh. "II"); that the lot
was later resurveyed and subdivided and in a plan (Exh.
"I") duly approved by the Director of Lands, Lot 433 was
divided into Lot 433-A (Exh. "I-A") with an area of 98
square meters as pertaining to Florencio Balatero and Lot
433-B (Exh. " I-B ") with an area of 118 square meters as
pertaining to the Heirs of Josefa Badelles; that Josefa
Iglupas Vda. de Badelles had occupied the property from
the year 1918 and up to the time of her death in 1967 when
her "Deed of Sale of Unregistered Land" (Exh. "II"); (sic)
that heirs succeeded her in the possession thereof; that the
property has always been d in the name of Josefa Iglupas
Badelles (Exhs. "IV-Badelles") and taxes thereon paid
under her name (Exhs. "VI-Badelles" and "VI-A-Badelles"
to "VI-J-Badelles"), that the portion, Lot 433-A, acquired by
Florencio Balatero was also later declared in his own name
(Exh. "III") and the taxes thereon also paid by him (Exhs.
"IV" and "IV-A" to "IV-U")
After consideration of the evidence of the claimants, the
court finds and holds that it is claimant Florencio Balatero
who has a registerable title over Lot No. 433-A and the
Heirs of Josefa Iglupas Vda. de Badelles over that of Lot
No. 433-B. There is no conflict as between the Heirs of
Josefa I. Badelles and Florencio Balatero, hence it is only
incumbent upon the court to treat of the claims of Anacleto
Iglupas and Juan Veloso.
Anacleto Iglupas claims that what was sold to Josefa
Iglupas in the document "Escritura de Compra Venta" in
1918 is only a house and does not include the lot. The
Spanish phrase in the document which is in point reads.
"una casa con su solar de table con techo de nipa dentro
de la poblacion del Municipio de Iligan". Iglupas would like
to have the word "solar" interpreted as meaning "floor." The
English word "floor" is "suelo" in Spanish. So what was
sold is "a house including the lot made of wood and with
nipa roofing." This interpretation is buttressed by the fact
that the boundaries of the property is (sic) even described
in the document. While it is true that Anacleto Iglupas did
not sign the document, he testified in Court that Josefa
Iglupas began claiming the land as her own wayback in
1925 and he did nothing about it. If Iglupas had ever any
right to the property in 1918 to 1925, he lost it by
prescription:
The dispositive portion of the decision of the trial court reads.
"The owners of proprietors of real property,
provided with the most legitimate and perfect
title, may be deprived and dispossessed
thereof by usurpers who, by the lapse of time
specified by law, acquire the same by
prescription to their benefit and to the
prejudice of the legitimate owners." (Arts 1106
and 1137, Civil Code, Cruz vs. De Leon, 21
Phil. 199). From 1925 to the present is a
Period of more than 40 years.
With respect to claimant to Juan Veloso, he was never in
possession of the property. He never for once asserted his
right to possess the same. This only jibes with the claim of
the Heirs of Josefa Iglupas that the "Pacto de Retro Sale"
on which Veloso bases his claim of ownership was only a
mortgage. The consideration of the pacto de retro sale in
1930 for the amount of P68.00 is inconsistent with logic if
the fact that Josefa Iglupas bought the property from
Tomasa Ronday and Severo Iglupas for a consideration of
P111.00 in 1918 is taken into account. In fine, Veloso had
never any actual Possession or control over the property or
any portion thereof which could ripen into a registerable
title.
On the other hand, the Heirs of Josefa Iglupas and
Florencio Balatero, the latter through the late Josefa
Iglupas have always been in possession of the property
under claims of ownership since 1918. (pp. 38-14)
WHEREFORE, judgment is hereby rendered adjudicating
Lot No. 433-A containing an area of 98 square meters to
claimant Florencio Balatero married to Leoncia B. Balatero
and Lot No. 433-B containing an area of 118 square
meters to the Heirs of Josefa Iglupas Vda. de Badelles,
namely: Leona B. Vda. de Moncote, Salvacion B. Dacup
Leoncia B. Balatero, Catalina B. de Gracia, Jose I.
Badelles, and Dominga Jarabe.
Lot No. 817 containing an area of 34 square meters is
hereby declared as property of the State, the same having
been provided for the widening of a national road.
The Commissioner of Land Registration is hereby directed,
after this decision shall have become final of which he shall
be advised by a specific order of this court in Judicial Form
 No. 115, to issue the corresponding decrees and titles as
above provided. (p. 41, Rollo)
The petitioners now contend:
Claimant Juan Veloso appealed the decision to the then Intermediate
Appellate Court. As stated earlier the lower court's decision was
reversed and set aside. The dispositive portion of the appellate decision
reads:
WHEREFORE, decision appealed from is hereby
REVERSED and SET ASIDE. Judgment is hereby
rendered:
1. Adjudicating the whole of Cadastral Lot No.433 (Lot Nos.
433-A and 433-B) to claimant Juan Veloso, Filipino, of legal
age, married to Pilar Daniel Veloso with residence at I
Iligan City.
2. Declaring Lot No. 817 as property of the state, the same
having been provided for the widening of the national road.
3. Directing the National Land Titles and Deeds of
Registration Administration to issue the corresponding
decrees and titles as above provided, after the decision
has become final.
Costs against the appellees. (p. 51, Rollo).
Petitioners Florencio Balatero and the Heirs of Josefa Badelles filed a
motion for reconsideration on the decision but the motion was denied
by the appellate court.
Hence, this petition over the ownership of Lot No. 433.
(1) That the Respondent Court erred in holding that the
court a quo committed an error in declaring the Pacto de
Retro Sale, Exh. B as a mere mortgage;
(2) That the Respondent Court erred in holding that the two
factors inadequacy of price and the vendor remains in
possession as a lessee, does not give rise to the
presumption that the contract is one of equitable mortgage,
inasmuch as Art. 1602 of the New Civil Code of the
Philippines, was not found in the Old Civil Code, hence,
since the contract was execute in 1930 — "no such
presumption existed as yet."
(3) That Respondent Court erred in disregarding and not
giving weight to the fact that the Petitioners occupied and
possessed the subject property openly, adversely,
continuously, peacefully and uninterruptedly from 1934, the
alleged date of the consolidation of title, to Private
Respondent Veloso, up to the present, is covered by Art.
41 of the Code of Civil Procedure and effected the
acquisition of the property by prescription; and that Private
Respondent's assertion of better title is barred;
(4) That Respondent Court erred in holding that Petitioners
Heirs of Josefa Iglupas had no more right or interest in the
subject property when they sold Lot 433-A to Petitioner
 Florencio Balatero and that the sale to the latter was null
and void;
(5) That Respondent Court erred in disregarding the fact
that Petitioner Florencio Balatero is an innocent purchaser
in good faith for value and the Respondent Court had no
authority to order reconveyance of property already in the
name of another;
(6) That Respondent Court has allowed Private
Respondent Veloso to take inconsistent positions contrary
to the elementary principles of right dealing and good faith,
and cannot "adopt a posture of double-dealing without
running afoul of the doctrine of estoppel;" for it has allowed
Private Respondent Veloso who has slept on as rights to
prejudice the rights of third parties who have placed
reliance on his inaction." (pp. 9-10, Rollo)
The following facts are not disputed: that the subject parcel of land (Lot
433 Iligan Cadastre) was originally owned by the parents of Josefa
Iglupas; that after the death of Josefa's parents, Lot 433 was given to
Alejo Iglupas who is married to Tomasa Ronda; that after the death of
Alejo, Tomasa Ronda sold the said lot to Josefa Iglupas for P111.00 as
evidenced by an "Escritura de Compra Ventra" (Exh "E ").
In a June 23, 1930 document denominated as "Pacto de Retro Sale"
(Exh. "B") this Lot 433 was sold by Josefa Iglupas to private respondent
Juan Veloso for the amount of P68.00. Whether or not this contract was
really what it purports to be or was an equitable mortgage is the main
issue in the instant petition.
Article 1602 of the present Civil Code states:
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.
In any of the foregoing cases, any money, fruits, or other
benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the
usury laws.
The appellate court, however, declined to apply Article 1602 on the
ground that it is a new provision of the New Civil Code not found in the
Old Civil Code. The appellate court opined that since the contract was
executed in 1930, there was no presumption or an equitable mortgage
existing at this time.
This is not well-taken.
We have ruled that Article 1602 apples even to cases arising prior to
the effectivity of the New Civil Code. Thus, in the case of Santos vs.
Duata (14 SCRA 1041) we stated:
Article 1602 is a new provision in the Civil Code designed
primarily to curtail the evils brought about by contracts of
sale with right of repurchase, such as the circumvention of
the usury law and pactum commissorium. It particularly
envisions contracts of sale with right of repurchase where
the real intention of the parties is that the pretended
purchase price is money loaned, and in order to secure the
payment of the loan a contract purporting to be a sale
with pacto de retro is drawn up (See report of the Code
Commission, pp. 61-63).
Being remedial in nature, Article 1602 may be applied
retroactively to cases arising prior to the effectivity of the
New Civil Code. (Casabar vs. Sino Cruz, L-6882, Dec. 29,
1954). Hence, it may be applied in this case to determine
the nature of Exhibit 3. (at p. 1045; emphasis supplied).
The pertinent portions of the contract donominated as Pacto de Retro
Sale stated:
... That for and in consideration of the sum of P68.00, the
receipt whereof is by these presents acknowledged, the
party of the First Part sells, cedes and transfers the
property above describe to the party of the second part
(now Veloso), his heirs and assigns, subject to the
conditions hereinbelow specified.
That the party of the first part (now Iglupas) by these
presents reserves for herself, her heirs and assigns, the
right to repurchase said property during the period of four
(4) months from the execution of this instrument by paying
back and returning to said party of the second part the
purchase price herein stated together with all the expenses
incident to the execution of this instrument; and that on
failure of said party of the first part to exercise the right to
repurchase said property according to the terms herein
stipulated, title thereto shall pass to and become vested,
absolutely and with no reservation, in the party of the
second part, his heirs and assigns. In such case, the party
of the first part does by these presents covenant as with
the said party on the second part that before the execution
of this instrument she was lawfully seized in fee of said
premises; that they were free from all liens and
encumbrances, that she had a perfect right to convey the
same, and that she will warrant and forever defend the
same unto the said party of the second part, his heirs and
assigns, against the lawful claims of all persons
whomsoever.
IN TESTIMONY WHEREOF, — ... (Exh."B") (pp.86-
87,Rollo)
The well-settled principle in the interpretation of a contract is that if the
terms thereof are clear and leave no doubt as to the intention of the
contracting parties the literal meaning of the stipulation shall control but
when the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former (Article 1281 of the Old
Civil Code, now Article 1370, New Civil Code; Labasan vs. Lacuesta,
86 SCRA 16).
On its face, the contract would show that the disputed parcel of land
was transferred to private respondent Juan Veloso by way of sale with
pacto de retro. However, there are circumstances present in the instant
case which clearly indicate that the contract should be treated as an
equitable mortgage.
First, the 216 square meters parcel of land remained undisturbed in the
possession of the vendor Josefa Iglupas even after the execution of the
contract. Had Josefa Iglupas really executed a contract of sale in favor
of Juan Veloso, this small parcel of land should have been delivered to
the latter and he would have taken immediate possession after the
execution of the contract of sale. The assertion of the private
respondent to the effect that Josefa Iglupas became a lessee after the
execution of the contract and his claim that the P100.00 received from
Josefa Iglupas and the P300.00 from Leoncia Balatero (receipt of which
amounts he had earlier denied) were rentals create a presumption that
the contract was intended to be an equitable mortgage under paragraph
2, Article 1602 of the New Civil Code (see Capulong vs. Court of
Appeals, 130 SCRA 245). Moreover, Josefa paid the taxes due on the
property, mortgaged the lot to the Philippine National Bank, and
exercised all acts of ownership during the period when it was supposed
to already have been sold.
On this score alone, the appellate court's findings that the contract was
really a pacto de retro sale constitutes reversible error. As we ruled
in Santos vs. Duata, supra.
Ciriaca Santos, however, maintains that mere possession
of the land and payment of land taxes due thereon by
Duata would not warrant presumption that Exhibit 3 is an
equitable mortgage. Accordingly, she contends that there
must be a "concurrence of an overwhelming number of
circumstances" before the presumption would arise. To this
proposition we do not agree. Article 1602, when it
expressly states "in any of the following cases,"
contemplates the existence of any of the circumstances
enumerated therein. (at p. 1045)
Second, the price or consideration in 1930 of P68.00 is unusually
inadequate. This conclusion is supported by the fact that the same
parcel of land was bought by Josefa Iglupas in 1918 for the price of
P111.00. If the contract was indeed one of sale, why should the vendor,
Josefa Iglupas sell the parcel of land for a price almost half of what she
paid for it twelve years earlier. It is common knowledge that the value of
real property appreciates through the years and not otherwise. This fact
also shows that the contract was an equitable mortgage rather than a
contract of sale (See Labasan vs. Lacuesta, supra; and Serrano vs.
Court of Appeals, 139 SCRA 179).
The fact that four (4) years after the execution of the contract, more
specifically on October 6, 1934, private respondent Juan Veloso
executed an affidavit (Exh. "D") to consolidate his right of ownership
over the subject parcel of land is of no consequence. The "constructive
possession" over the parcel of land mentioned by the appellate court
did not ripen into ownership. The rule is that only the possession
acquired and enjoyed in the concept of ownercan seven as a title for
acquiring dominion. (Article 447, old Civil Code, Aside 540, new Civil
Code) As can be gleaned from the facts earlier stated, Juan Veloso
never owned the subject parcel of land because the contract over the
same between Josefa Iglupas and Juan Veloso was actually an
equitable mortgage and not a contract of sale.
The appellate court's observations that the lower court's findings of fact
conclusively show that the contract was actually a contract of sale are
inaccurate and based on misreading of the provisions.
An examination of the lower court's decision shows that the supposed
findings of facts cited by the respondent court are actually a summary
of the evidence presented by the private respondent to substantiate his
claim that the contract between him and Josefa Iglupas was indeed a
contract of sale. This claim was, however, controverted by the
petitioners who presented their own evidence to prove that the subject
contract was an equitable mortgage. The petitioners' evidence was
likewise summarized in the lower court's decision. The lower court, after
summarizing the conflicting evidence adduced by both parties, came
out with its own findings of facts, the end result of which was its ruling
that the subject contract between the protagonists was actually an
equitable mortgage. We find no reason to set aside these findings.
WHEREFORE, the instant petition is GRANTED. The questioned
decision of the then Intermediate Appellate Court is REVERSED and
SET ASIDE. The decision of the then Court of First Instance of Lanao
del Norte is REINSTATED.
SO ORDERED.
[G.R. No. 124574. February 2, 1998]
SIMON LACORTE, ROSARIO LACORTE, SEVERINO
LACORTE, JEROSALINA LACORTE-FERNANDEZ and
CIRILA LACORTE-ANGELES, petitioners, vs. THE
HONORABLE COURT OF APPEALS, SPOUSES
PEREGRINO and ADELA LACORTE, and JOSE
ICACA, respondents.
DECISION
REGALADO, J.:
In this appeal by certiorari, petitioners seek the reversal of the judgment
promulgated by public respondent Court of Appeals on August 9, 1995[1] which
dismissed the basic complaint for rescission and/or annulment of document
filed by the former against herein private respondents. What is noteworthy
and distressing is the fact that the parties are siblings, the subject matter is a
comparatively small parcel of land, the case had to be instituted by and
eventually brought to this Court with the assistance of agencies of the
Department of Justice,[2] and it is now on its tenth year of litigation.
Petitioners and private respondent Peregrino Lacorte are the heirs of
Maria Inocencio Lacorte who was the original owner of a parcel of land
located at Sta. Cruz, Lezo, Aklan with an area of 14,556 square meters, more
or less. The subject property was foreclosed by the Rural Bank of Malinao,
Aklan, Inc. which, after consolidating its ownership thereover, subsequently
sold the same to herein private respondent Jose Icaca.
 On October 17, 1983, respondent Jose Icaca and petitioner Simon
Lacorte, in behalf of the heirs of Maria Lacorte, entered into an Agreement
whereby the former was authorized to purchase the subject property from the
bank provided that the heirs of Maria Lacorte shall be given the right to
repurchase the same in the amount of P33,090.00 within a period of one year
from that date. The one-year redemption period was later extended to March,
1987 pursuant to another Agreement dated October 16, 1984. Both
agreements were signed by petitioner Simon Lacorte for himself and in
representation of the heirs of Maria Lacorte. On November 4, 1984,
respondent Peregrino Lacortes wife, Adela, paid to respondent Icaca the
amount of P26,000.00 as deposit for the repurchase of the property.
It appears, however, that without the knowledge and consent of herein
petitioners, and before the expiration of the grace period, private respondents
Peregrino Lacorte and his wife were able to purchase the land in their names
by virtue of a Deed of Reconveyance executed by respondent Icaca dated
February 3, 1987.
That prompted herein petitioners to commence this action on December
9, 1988 for annulment of the contract on the ground that the same was
entered into in evident bad faith and in violation of the previous agreements
between the parties, thereby resulting in prejudice to the property rights of
herein petitioners. In their Answer, respondents Peregrino and Adela Lacorte
denied that there was an agreement to sell the property collectively to the
heirs of Maria Lacorte, and argued that since the land was legally sold by the
bank to respondent Icaca, then the sale thereof by the latter to the former is
likewise valid.
Respondent Jose Icaca filed a separate Answer wherein he alleged, inter
alia, that:
2. x x x (W)hile it is true that he sold the property to the spouses
Peregrino Lacorte and Adela Lacorte, he did so (i)n the honest belief
and understanding that the spouses bought the same for the
common good of all pursuant to the understanding/agreement he
had with the said spouses and the plaintiffs and that he will allow
them to buy back the property collectively from him x x x. (T)he said
spouses assured him that they were buying the property not for
themselves alone but for the benefit as well of the plaintiffs and this
was also the understanding of the herein answering defendant when
he signed the Deed of Reconveyance x x x. (H)ad he known it
otherwise and were it not for the assurance of the spouses Peregrino
and Adela Lacorte to the effect that the purchase of the property is
for the collective use of all of them x x x the herein defendant would
not have sold the property to them x x x. (T)he undersigned hav(e)
no objection to the rescission and/or annulment of the Deed of
Reconveyance x x x because in truth and in fact his intention was
really to reconvey the questioned property to the plaintiffs and his co-
defendants x x x. [3]
In a decision dated November 29, 1991, the trial court ordered (a) the
rescission of the deed of reconveyance executed in favor of respondent
spouses Peregrino and Adela Lacorte, as well as the tax declarations issued
in their names, and (b) Jose Icaca to sell the land in question to all the
petitioners herein and private respondent spouses.[4] In so ruling, it declared
that by reason of the aforesaid agreements, marked as Exhibits B and C,
respectively, executed between respondent Jose Icaca and petitioner Simon
Lacorte who acted in representation of the heirs of Maria Lacorte, which
actually constitute a promise to buy and sell, there was bad faith on the part
of respondent spouses in purchasing the land solely in their favor.
It also noted that the deed of reconveyance was executed within the
period granted under Exhibits B and C for the heirs to collectively repurchase
the land from Icaca.Moreover, it observed that if respondent spouses were
truly buying the land in good faith for themselves and not for the other heirs, it
was not necessary for respondent Adela Lacorte to ask petitioners to look
for P7,090.00 which represents the balance and was apparently to be used
as part of the purchase price. Finally, it concluded that petitioners had a
cause of action against respondents by reason of the promise to buy and sell
executed between the Lacortes and Icaca, which is reciprocally demandable
pursuant to Article 1479 of the Civil Code.
In reversing the court a quo and ordering the dismissal of the complaint,
respondent Court of Appeals ruled that petitioners have no cause of action
against private respondents since the former were not parties either to the
Deed of Reconveyance sought to be annulled or to the Deed of Absolute Sale
executed between the bank and Jose Icaca. It applied the general rule
under Article 1397 of the Civil Code to the effect that an action for annulment
of contract may be instituted only by those who are principally or subsidiarily
obliged thereby.
While it recognized the exception that one who is not principally or
subsidiarily bound may ask for annulment if his rights are prejudiced by one of
the contracting parties, respondent court nonetheless merely held that
prejudice on the part of the plaintiffs has not been established. If at all they
are now asking for the annulment of the Deed of Reconveyance, it is probably
because they are supposedly heirs of Maria. It has not been proven either to
what extent the Deed of Reconveyance should be nullified, even on the
assumption that plaintiffs rights have been prejudiced.[5]
Hence this petition, wherein the primary issue posed for resolution is
whether or not herein petitioners are entitled to bring an action for annulment
and/or rescission of the Deed of Reconveyance entered into by respondent
spouses Peregrino and Adela Lacorte with Jose Icaca.
On this score, it becomes inevitable to initially determine the nature of the
agreements entered into by petitioners with Icaca which are the bases of
petitioners claim to the property. Because of its importance, the Agreement
dated October 17, 1983 is hereunder quoted verbatim and in full:
AGREEMENT
17 October
1983
TO WHOM IT MAY CONCERN:
This is to certify that I, JOSE I. ICACA, of legal age, married, a resident of
Ramos Street, Lezo, Aklan, after an agreement has been made to the heirs of
Maria Lacorte, represented by her son Simon Lacorte, also of legal age,
likewise a resident of Lezo, Aklan, do hereby agreed the following conditions:
That with the consent of the said Simon Lacorte and his co-heirs, I have
been authorized directly to purchase their foreclosed land which was
mortgaged to the Rural Bank of Malinao, Aklan;
That we further agreed that within the period of one year beginning this
date October 17, 1983, I am giving them the chance and privilege to recover
and repurchase the said land in the purchase (illegible) of TWENTY ONE
THOUSAND FIVE HUNDRED PESOS (P21,500.00) plus TWELVE
THOUSAND NINETY (P12,090.00) PESOS of their recent mortgage debt
amounting in total of THIRTY THREE THOUSAND (P33,090.00) PESOS.
IN WITNESS HEREOF I have hereunto set my signature this 17th day of
October 1983 at Lezo, Aklan, Philippines.
(Sgd.) JOSE
I. ICACA
(Sgd.)
SIMON LACORTE
IN THE PRESENCE OF:
(Sgd.) ROSARIO I. LACORTE
(Sgd.) CIRILA L. ANGELES[6]
A contract is presumed to be an equitable mortgage when the vendor
remains in possession as lessee or otherwise, or 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 [7] In the case at bar, it is
not disputed that petitioners mother, Maria Lacorte, and two of her children,
herein petitioners Rosario and Jerosalina, remained in possession of the
property despite the existence of the Agreement hereinbefore quoted, and
they continue to do so up to the present time.[8] No less than respondent Adela
Lacorte admitted these facts in her testimony.
Further, prior to the expiration of that Agreement of October 17, 1983,
another one was entered into between the same parties extending the period
of redemption up to and until March, 1987. Thus, in the second Agreement
dated October 16, 1984, it was stipulated that:
Although the period granted to the heirs of Maria Lacorte to buy back
the land from me is due to expire tomorrow in accordance with the
agreement dated October 17, 1983, I, Jose I. Icaca, do hereby give
extra period to recover and repurchase the property from me until
March 1987. [9]
That the contract is an equitable mortgage is likewise evident from the
words used in the Agreement itself, that is, that the heirs of Maria Lacorte
shall pay as part of the purchase price the amount of TWELVE THOUSAND
NINETY (P12,090.00) PESOS of their recent mortgage debt. Apparently, the
parties decided to put in writing an earlier mortgage made by Maria Lacorte in
favor of Jose Icaca.[10] The existence of such mortgage even provides a logical
explanation for the course of action taken by Simon Lacorte in making special
arrangements with Icaca so that the latter could buy the foreclosed property
from the bank.
More importantly, the document executed between Adela Lacorte and
Jose Icaca is entitled Deed of Reconveyance wherein the latter bound himself
to transfer, deliver and reconvey the parcel of land described therein. The
term reconvey means to convey back or to former place; to transfer back to
former owner, as an estate, and reconveyance being a transfer of realty back
to the original or former grantor.[11] A contract of reconveyance, therefore,
presupposes the existence of a prior agreement wherein a party to whom
property was conveyed undertakes to reconvey the same to the other party
under certain terms and conditions.
Such agreements may be in the nature of a contract of sale with a right of
repurchase or an equitable mortgage. In fine, a contract of reconveyance is
but a necessary consequence of the exercise of a partys right to repurchase
the property subject of a contract of sale with a right of repurchase or of an
equitable mortgage. This particular attribute of the Deed of Reconveyance
executed by respondent Icaca gives further weight to our finding that the
Agreement of October 17, 1983 is indeed a contract of equitable mortgage.
Considering that Simon Lacorte executed the Agreement with Jose Icaca
for and in behalf of all the heirs of Maria Lacorte, it stands to reason that any
payment made by one or some of the heirs will logically and definitely have to
likewise inure to the benefit of all the heirs. This notwithstanding, respondent
spouses insist that they are the exclusive owners of the subject property
because they were the ones who paid for it and that it was never intended
that they will buy it for and in behalf of the other heirs. They further deny any
knowledge of and participation in the Agreement dated October 17, 1983.
The argument is, unfortunately, specious. The records abound with facts
and circumstances which reveal otherwise, as we shall demonstrate seriatim.
1. The initial payment of P26,000.00 was made on November 4, 1984,
immediately after the Agreement of October 16, 1984 extending the
redemption period was executed. The balance of P7,090.00 was paid
only in February, 1987 when the Deed of Reconveyance was executed,
which was well within the extended period granted to herein
petitioners. If respondent spouses really knew nothing about the previous
agreements with Icaca, it is an incredible accident that the dates of
payment of the purchase price coincided quite closely with the periods
stipulated by the parties. And, if ever there was any other agreement
entered into exclusively between respondent spouses and Jose Icaca,
the records are completely bereft thereof and respondent spouses
conveniently failed to give any explanation therefor. Indeed, it is highly
 improbable that, sine stipulatio, Icaca would still have accepted payment
of the balance despite the lapse of a long period of time, contrary to the
ordinary and normal course of things.
2. Respondent Adela Lacorte claimed that she informed herein petitioners
about the sum of P26,000.00 she had paid to Jose Icaca. According to
her, she did that on purpose because she wanted petitioners to help her
raise the amount necessary to pay the balance of the purchase price.[12] If
what she alleges is true, then it is perplexing why she would still ask for
money from petitioners and thereby involve them in the contract with
Icaca although that was supposed to be for respondent spouses
exclusively.
3. Adela Lacorte likewise admitted that her mother-in-law and two of herein
petitioners remain and continue to be in possession of the property even
after the sale thereof to Icaca. The only plausible and explicative reason
for this is that petitioners were merely enforcing the rights vested in them
under those aforementioned agreements with Icaca.
4. Also, by her own admission, Adela Lacorte knew that petitioners were
very interested in redeeming the property from Icaca. On the witness
stand, she stated that when she met with Icaca to negotiate for the
repurchase of the property, she was accompanied by both her husband
and petitioner Rosario Lacorte.[13] It will be recalled that Rosario Lacorte is
one of the petitioners who has been continuously occupying the subject
land from the time it was still owned by Maria Lacorte up to the
present. Logically, it is Rosario Lacorte who, among the heirs, is most
interested in regaining ownership of the property. Thus, Adela Lacorte
cannot make it appear that Rosarios presence in that meeting was
inconsequential; on the contrary, Adelas close contact with petitioners
during the negotiations is clear proof that she was privy to the
agreements between petitioners and Icaca.
5. Petitioner Simon Lacorte testified that they were the ones who negotiated
with the bank for the reduction of the redemption price from P45,000.00
to P21,000.00. After the bank had agreed to their proposal, Simon
Lacorte immediately consulted with Icaca, to whom the land had also
been mortgaged for P12,500.00, on the possibility of the latter paying the
redemption price while petitioners still did not have the money to buy
back their property. Icaca acceded and, consequently, an agreement
was executed between the parties[14]
Simon Lacorte further explained that his brothers and sisters agreed to
make arrangements with the bank, except respondent Peregrino who merely
said that it was up to them.[15] Apparently, respondent spouses were
inceptually not interested in redeeming the property[16] and refused to
cooperate with petitioners for that purpose.[17] They took interest and
cooperated only after the redemption price was considerably reduced by the
bank through the joint efforts of herein petitioners. These facts sufficiently
prove that respondent spouses were fully aware of the dealings and
arrangements made by petitioners with the bank and Icaca for the redemption
of the property, otherwise they could not have known about the particulars
thereof.
All told, we are not persuaded by respondent spouses pretension that
they were oblivious of the existing agreements between petitioners and Icaca
when they paid for the land in question. Besides, it would be downright unfair
for petitioners not to gain anything after all their efforts and the trouble that
they had gone through precisely to preserve and retain ownership of the
property within the family.
One more thing. The case records irresistibly reveal that the real intention
of Icaca was to reconvey the land to all the heirs of Maria Lacorte. This fact is
supported by both the documentary evidence on record and the
uncontroverted testimony of Icaca himself, to wit:
Q: You said, you sold the property in question to the defendant herein Peregrino
and Adela Lacorte before the document was executed, did they approach you
telling or (sic) intend to acquire the property?
A: Only Simon.
Q: How about Peregrino and Adela, did they not go to you?
A: No, they did not.
 Q: Can you please tell the Honorable Court, how come did you sold (sic) the
property to Peregrino and Adela Lacorte?
A: Actually, I dont intend to sell the property because I pity them and because
what we agreed with Simon and because they are brothers, I was thinking
that they have an agreement already that whoever of them can afford to buy
the property, I will sell it to them.
xxx
Q: When you said that you have no intention of selling the property to the
defendants Peregrino and Adela Lacorte, could you please tell this Honorable
Court to whom do you intend to sell the property?
A: My agreement with Simon is, whoever of the brothers and sisters can afford to
buy the property, I will sell it to them. That is our agreement.
xxx
Q: When you said them, to whom do you refer?
A: To any brothers and sisters of the children of Maria Lacorte.[18]
On cross-examination, Icaca clarified and emphasized that he sold the
property not to just one person but to the whole family.[19] Thus:
Q: The Court is asking you, if you understood selling it to spouses Adela and
Peregrino Lacorte not the children of Maria Lacorte who are Simon, Rosario,
Severino, Jerosalina and Cirila.
A: I did not know that that is their intention your Honor. Only I understood that I
was selling the property to the brothers and sisters.
Q: Why when Adela Lacorte made you sign this document, what did she tell you?
A: That Adela Lacorte told me your Honor that she will tell them that they had
already acquired the property.
Q: You did not find it strange after reading this document that you are selling it,
the property to Adela and Peregrino Lacorte, instead of Peregrino Lacorte
and his brothers and sisters who are the children of his mother?
A: I did not understand that that document is only for the spouses because I
thought that its for the brothers and sisters as per agreed (sic) that whoever is
capable of buying back the property, would buy it for everybody.[20]
Such intention of Icaca is more in accord with the basic characteristic of a
contract of reconveyance which, as earlier stated, involves a transfer of realty
back to its original owner. Petitioners mother, Maria Lacorte, is admittedly the
original owner of the subject lot; Adela Lacorte does not claim otherwise. This
only goes to show that the reconveyance was really intended for all the heirs
of Maria Lacorte. Besides, it was Adela Lacorte who prepared the Deed of
Reconveyance, hence any ambiguity therein must be resolved against her
and in favor of Jose Icaca who merely signed it.
In the mind of this Court, what probably motivated respondent spouses to
appropriate the property for themselves is because petitioners could not raise
the money needed to pay Jose Icaca. This hypothesis finds substance in the
testimony of Adela Lacorte which is very revealing:
Q: It did not occur to your mind (sic) to again tell the plaintiffs to accompany you
because you are already paying Mr. Icaca the amount of P26,000.00?
A: It enter(ed) my mind but because they have no money to add to
that P26,000.00, I got mad and I decided to go alone.[21]
In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.[22] In
light of the foregoing disquisition, the inevitable conclusion is that it was really
the intention of the parties that the subject parcel of land shall be reconveyed
to all the heirs of Maria Lacorte, hence the payment made by Adela Lacorte
should be deemed to inure to the benefit of all the aforementioned
heirs. Consequently, herein petitioners necessarily stand to be prejudiced by
the Deed of Reconveyance executed solely in favor of Adela Lacorte since
they should have been included as parties thereto.
Article 1359 of the Civil Code provides that when, there having been a
meeting of the minds of the parties to a contract, their true intention is not
expressed in the instrument purporting to embody the agreement by reason
of mistake, fraud, inequitable conduct or accident, one of the parties may ask as additional parties thereto, since there has been a meeting of the minds on
for the reformation of the instrument to the end that such true intention may the object and the consideration. Herein petitioners need merely
be expressed. If such mistake, fraud, inequitable conduct, or accident has contribute pro rata to the payments and expenses as may have heretofore
prevented a meeting of the minds of the parties, the proper remedy is not been made or shall hereafter be involved in implementing the relief sought by
reformation of the instrument but annulment of the contract. and granted to them, the details of which shall be determined by the trial
court.
There is no doubt that petitioners are entitled to bring an action to annul
the contract because they stand to be prejudiced by the enforcement of the WHEREFORE, the judgment appealed from is
Deed of Reconveyance.As to whether or not they also have the right to ask hereby REVERSED and SET ASIDE, and the judgment of the Regional Trial
for reformation of the instrument, we hold in the affirmative. This is because Court, Branch 1, of Kalibo, Aklan, is hereby REINSTATED, subject to the
petitioner should really have been made parties to the Deed of Reconveyance modifications regarding the implementation thereof by the court a quo on the
were it not for the fact that Adela Lacorte had fraudulently excluded their basis of the rationale therefor as herein discussed.
names therefrom. From the start of the negotiations with the bank and, later,
SO ORDERED.
with Jose Icaca, petitioners have actively participated. They remained in
possession of the land, gathered fruits therefrom, and never for a moment
relinquished their rights thereover.
Adela Lacorte explicitly recognized such right when she sought the help
of petitioners in raising money to pay for the land. It was clear that, from the
very start, petitioners were already recognized as actual parties to the
prospective reconveyance. What deluded Jose Icaca, and prevented him
from doubting the veracity of the Deed of Reconveyance brought to him by
Adela Lacorte for signature, was the latters misrepresentation that she was
purportedly acting for and in behalf of all the heirs of Maria Lacorte.
Since petitioners should in truth and in fact be parties to the Deed of
Reconveyance, they are entitled to the reformation of the contract in order to
reflect the true intention of the parties. In fact, Jose Icaca, who is the real
injured party in this case because of the fraud committed on him, has
acquiesced to the cancellation of the contract. There is nothing to prevent the
reformation of the instrument[23] as has in effect been granted by the court a
quo by way of an additional or alternative relief.
We accordingly declare that what is necessary is only a reformation of the
Deed of Reconveyance by reflecting therein the names of herein petitioners
 representative, defendant-appellee David, executed by and
between themselves a "Deed of Absolute Sale of Real
G.R. No. 102314 May 26, 1993 Property" over a parcel of land (Lot 7-B of the Subd. plan
(LRC) psd-324403, approved as a non-subd. proj. being a
LEA O. CAMUS, petitioner, portion of Lot 7 (LRC) Pcs-16468 LRC Rec. No. 5941),
vs. including all improvements thereon, situated in the barrio of
Hen. T. de Leon, Municipality of Valenzuela, Metro Manila,
THE HONORABLE COURT OF APPEALS, CONRADO S. DAVID and containing an area of Six Hundred Thirty One (631) square
DAVID MOTORS and MARKETING CORPORATION, respondents. meters, more or less, covered by Transfer Certificate of
Title No. 119038 of the Registry of Deeds of Caloocan City,
Juan E. Mabbayad, Jr. for petitioner. and for and in consideration of One Hundred Fifty
Thousand (P150,000.00) Pesos (Exhibit "B" also Exhibit
Antonio B. Fidelito for private respondents. "2").

On November 27, 1987, plaintiff-appellant filed the instant

complaint, praying for the annulment of the subject deed of
absolute sale and consequent cancellation of the certificate
MELO,J.:
of title obtained by defendants-appellees by virtue thereof;
the interpretation and declaration of the subject deed of
Both the trial and appellate courts construed the transaction effected
absolute sale as an equitable mortgage; and for a writ of
between herein petitioner and private respondent on May 20, 1986 as
preliminary injunction (Record, pp. 1-38).
an absolute sale of a piece of realty, but petitioner thinks otherwise,
saying that it was a mere equitable mortgage. Hence, the petition at
In their answer, defendants-appellees, contended that the
bar.
subject encumbrance was one of absolute sale (Record,
pp. 51-70).
Respondent court briefly narrated the background of the case which
petitioner did not bother to assail in her pleadings before this Court,
After trial on the merits, the lower court rendered the
thus:
impugned decision . . . (p. 62, Rollo.)
On May 20, 1986, the parties, with plaintiff-appellant as
In her memorandum, petitioner hastened to add a few more details on
vendor and defendant-appellee David Motors and
how the so-called sale in favor of private respondent evolved.
Marketing Corporation (DMMC, for brevity) through its
According to petitioner, she previously mortgaged the same parcel of
land on July 23, 1985 to Mrs. Macaria Dimafelis. Before the mortgage
matured, she had to look for other sources from whom she can borrow
money to liquidate the mortgage and this financial constraint led to her
being introduced to Conrado S. David, herein private respondent,
through one Natividad de Gula. It was in the office of private respondent
where petitioner impressed that idea of utilizing the mortgaged lot as
collateral for the loan which she wanted to obtain from private
respondent.
In response to the request, private respondent allegedly agreed to
extend the loan subject to the following terms:
a) the gross principal amount of the indebtedness shall be
P150,000.00;
b) repayment period will be two years with an automatic grace period of
one month;
c) interest shall ten percent a month payable monthly;
d) the transaction shall be denominated as an absolute sale instead of
a real estate mortgage; and that
e) out of the proceeds of the loan, P40,000.00 will be retained by
private respondent as payment for a two months advance interest
(P30,000.00 at P15,000.00 interest a month) and the remaining sum of
P10,000.00 will be for documentation expense.
Petitioner claims that she was initially reluctant to express her
conformity but she nonetheless agreed to the conditions after she was
supposedly assured by private respondent that the nomenclature
attached to their transaction was a mere formality and that petitioner
had no reason to be apprehensive inasmuch as private respondent will
register the deed of conveyance only if petitioner does not pay the
monthly interest. Petitioner signed the "Deed of Absolute Sale" and
surrendered the owner's duplicate copy of the certificate of title after
private respondent issued a check in the amount of P109,000.00 to
Mrs. Dimafelis as full settlement of petitioner's previous indebtedness.
For her part, petitioner received P1,000.00 in cash and was made to
sign a cash voucher to show that she received P150,000.00. Further,
payment of the interest for four months was allegedly made to private
respondent, who did not issue any receipt therefor, until petitioner
discovered, to her dismay, that the instrument was registered which
triggered the issuance of a new certificate of title in the name of
respondent corporation.
All of the foregoing statements were derived by petitioner from her open
court declarations when she sat on the witness stand in order to
develop the theory that the entire scheme was a simple loan
accommodation.
But the trial court was far from convinced by petitioner's disquisition and
neither was respondent court which concurred with the factual
observation of the court of origin that gross inadequacy of price had not
been sufficiently demonstrated. In interpreting the covenant as an
absolute transmission of dominion in favor of private respondent,
Justices Aldecoa, Jr., Campos, and Felimon Mendoza were in unison
when they declared that none of the badges of an equitable mortgage
under Article 1602 of the Civil Code can be appreciated "in favor of
herein petitioner (p. 68, Rollo).
Of particular significance to the resolution of the question on the true Q. Mrs. Camus, are you the same Lea O. Camus who is the plaintiff in
character of the disputed transaction are the contemporaneous and this case:
subsequent acts of the contracting parties which have been translated
into testimonial evidence in the course of the trial on the merits. Indeed, A. Yes, sir.
this specie of evidentiary proof, known as the Parol Evidence Rule, may
well be the acknowledged adjective norm that can spell the difference Q. Do you know the defendant Conrado S. David in this case?
between successor failure of the instant petition (Macapinlac vs.
Gutierrez Repide, 43 Phil. 770 [1922]: Cuyugan vs. Santos, 34 Phil. 100 A. Yes, sir.
[1916]). For there can be a better appreciation of the problem at hand
only if we resort to what the parties had already emphasized below to Q. Since when have you known him?
buttress their respective contentions and in this respect, the decision of
respondent court seems a bit deficient considering that it relied more on A. When I was introduced to him by an old woman, sir.
the alleged sufficiency of the purchase price (p. 66, Rollo) and the bare
fact that petitioner, who was accompanied by her "businesswoman Q. When was that?
daughter", could not have been duped into accepting private
A. The 1st week of May, 1986, sir.
respondent's offer to purchase the property (p. 67, Rollo).
Q. And what is the name of the lady who introduced you to him?
We concede that on these two aspects, we do not occupy a superior
position to brush aside what respondent court, arrived at but the so-
A. Natividad de Gula, sir.
called adequacy of the consideration, pegged at P150,000.00 by private
respondent himself (p. 33, Rollo) for a 631 square meter lot, and the COURT:
impression of petitioner's willingness to absolutely part with her
possession, do not necessarily diminish the existence of other By the way, is she connected with this case?
circumstances under Article 1602 of the Civil Code.
ATTY. MABBAYAD., JR.:
Verily, petitioner endeavored to demonstrate her financial constraint
and the need to pay off the mortgage in favor of Mrs. Dimafelis, which I think so, your honor.
she was able to rectify approaching Conrado S. David who offered to
help thus: Q. And why were you so introduced by Madam Natividad de Gula to the
defendant Conrado S. David?
ATTY. MABBAYAD, JR.:
A. Because Natividad de Gula learned that I am in need of a loan. A. She learned from another person, sir.

Q. And when for the first time did you come to know and become Q. And on the same occasion when you first met and talked to Ms. de
acquainted with Mrs. Natividad de Gula? Gula and she told you that she could help you obtain a loan from Mr.
Conrado David, did she tell you her official or personal relationship with
A. Later part of April, 1986, sir. Mr. David?

Q. How did you came to meet her? A. According to her, she knows Mr. David and she used to bring
borrowers to Mr. David, sir.
A. She went to our house, sir.
xxx xxx xxx
Q. That was on the last week of April?
ATTY. MABBAYAD, JR.:
A. Yes, sir.
Q. On that same occasion did Mrs. de Gula explain to you the terms
Q. And when she went to your house, were, you there? and conditions that Mr. David, the lender to whom she brought many
borrowers previously on the loan that he normally extends?
A. Yes, sir, I was.
A. Yes, sir.
Q. Were you able to talk to each other?.
Q. What were those terms and conditions of the loan that was extended
A. Yes, sir. to you?

Q. How did the conversation start and finish? xxx xxx xxx

A. I am in need of a loan and she told me that she can help me and she WITNESS:
knows somebody and that is Conrado David who can extend the loan to
me, sir. A. She asked me how much money do I need, if I have a title and
complete papers, tax declarations, tax receipts.
Q. Did she tell you how she came to know that you needed to borrow
money? ATTY. MABBAYAD, JR.:
Q. And what did you tell her? A. Yes, sir.

A. She told me that Mr. David can give what I need, sir. Q. Whereat?

Q. And what did you tell her after she asked you whether you have a A. At their factory office at Dalandanan, sir.
title or any supporting papers that you have in support of the loan?
Q. In what municipality or city?
A. That if it is necessary that she introduce me to Mr. David, sir.
A. Valenzuela, Metro Manila, sir.
Q. Now, why did you have to borrow money?
Q. And who were your companions when you went to see Mr. David at
A. I badly needed money because I have an obligation. the said factory?

Q. What kind of obligation? A. One of my daughters, sir.

A. I have a property mortgaged with Mrs. Macaria Dimafelis, sir. Q. How about Mrs. de Gula, was she with you then?

Q. The same property now subject of this case? A. Yes, sir.

A. Yes, sir. Q. What is the name of your daughter?

Q. Now, did you in fact go and see Mr. David as suggested to you by A. Ms. Paz Camus, sir.
Mrs. Natividad de Gula?
Q. Now, when you went already in the office of Mr. David and saw him,
A. Yes, sir. what happened?

Q. When did you go and see Mr. David?
A. On May. 9, 1986, sir.
Q. And were you able to see Mr. David?
A. Mrs. de Gula introduced me to Mr. David and she told Mr. David
what I needed, sir.
Q. What specifically did Mrs. de Gula tell Mr. David about your so-called
"pangangailangan" or need?
A. Mrs. de Gula told Mr. David that I needed a "sangla". Q. Did Mr. David ask you what kind of collateral you are willing to offer
him to secure the loan you intended to obtain from him?
COURT:
A. Yes, sir.
Q. What do you mean by that?
Q. And what did you tell him?
A. That I needed a collateral to borrow money, ma'am.
A. I told him that the property is a house and lot located at No. 11
ATTY. MABBAYAD, JR.: Gumamela St., Marulas, Valenzuela, Metro Manila.

Q. Did you need a collateral to borrow money or you needed money to Q. And after you told Mr. David that, that was the time he said that he
be collateralized by a collateral? will first inspect the property being offered as collateral?

A. That I needed to put up a collateral to get the money, sir. A. Yes, sir.

Q. In short you already have the collateral that you needed in order .. Q. Did he ask you how much money you wanted to borrow from him?
interrupted . . .
A. He asked me, sir.
ATTY. FIDELINO:
Q. And what did you tell him?
Q. Objection, your Honor, very leading.
A. I told him P150,000.00, sir.
COURT:
Q. Why do you need to borrow the amount of P150,000.00 from
Reform the question. anybody?

ATTY. MABBAYAD, JR.: A. For the payment of my obligation, sir.

Q. After Mrs. de Gula explained to Mr. David your purpose in going to COURT:
Mr. David, what did Mr. David say or comment?
Q. The one you are mentioning, your obligation to Mrs. Dimafelis?
A. He will first look into the property, sir.
A. Yes, your Honor. Q. What papers or documents did Mr. Conrado David require you to
present or show to him?
ATTY. MABBAYAD, JR.:
A. Like the xerox copy of the title, declaration, tax receipts, plan or
Q. How much is your obligation to Mrs. Dimafelis? building permit.

A. P109,000.00, sir. Q. Building or construction plan of what?

Q. Since you needed only P109,000.00 and yet you borrowed A. Of the house which I had constructed, sir.
P150,000.00, what do you intend to do with the remaining amount of
the least P41,000.00? Q. Where is this house so constructed?

A. To meet other needs and also to give commission to the person who A. At No. 11 Gumamela St. Marulas, Valenzuela, Metro Manila.
helped me.
Q. You told the Court that you offered as collateral or security to the
Q. And did Mr. David or any of his agents or employees in fact inspect intended loan you are trying to obtain from Mr. David your house and lot
the proffered collateral as he said to you? located at No. 11 Gumamela St., do you have proof to show that you
are the owner of the property?
A. Yes, sir.
A. Yes, sir, I have a xerox copy of my own title.
Q. When was that?
xxx xxx xxx
A. May 11 or 12, 1986, sir.
ATTY. MABBAYAD, JR.:
Q. And who made the inspection of the proffered collateral?
Q. Were you there in your residence when Mr. David inspected the
A. Mr. David himself, sir. property which you offered as collateral?

Q. But in that, first meeting of yours with Mr. David, did he require you A. Yes, sir, I was there.
present to him or show to him any paper?
Q. And after Mr. David inspected the property, the proffered collateral,
A. Yes, sir. what did he say or do?
A. He told me to meet him in his office, sir. COURT:

Q. Did you in fact go to his office after Mr. David inspected the proffered For how much?
collateral?.
A. For P150,000.00, ma'am.
A. Yes, sir, at Dalandanan.
Q. AND WHAT DID YOU TELL HIM?
Q. When was that?
A. I FELT SAD BECAUSE WHAT HE WANTED ME TO EXECUTE
A. May 15, 1986, sir. WAS A DEED OF SALE AND I SUGGESTED IF THE DOCUMENT
THAT I WOULD EXECUTE WOULD BE AN ORDINARY LOAN
Q. And did you have any companion when, you went there? DOCUMENT.

A. I have, sir. Q. WAIT, BEFORE HE SUGGESTED THAT YOU EXECUTE A DEED

OF SALE. YOU SAID YOU WERE BORROWING. DID YOU NOT TALK
Q. Who? ABOUT ANY INTEREST THAT YOU ARE GOING TO PAY?

A. Mrs. de Gula and my daughter, Ma. Paz, sir. A. WE TALKED ABOUT THE INTEREST MA'AM.

Q. Were you able to see Mr. David on that date? Q. Before he asked you to execute a deed of sale?

A. Yes, sir. A. Yes, ma'am.

Q. And did you talk about this loan with him? Q. HOW MUCH?

A. Yes, sir. A. 10% INTEREST, MA'AM.

Q. What happened when you talked about the loan you were trying to ATTY. MABBAYAD, JR.:
obtain for him?
Q. WHAT OTHER TERMS AND CONDITIONS DID MR. DAVID TALK
A. HE TOLD ME THAT HE CAN GIVE ME THE MONEY PROVIDED I WITH YOU ON THAT PARTICULAR SECOND OCCASION THAT YOU
EXECUTED A DEED OF SALE. WENT TO HIM?
A. WE TALKED ABOUT THE LOAN, THAT HE IS AGREEABLE TO
EXTEND THE LOAN WITH 10% INTEREST PROVIDED THAT THE
DOCUMENT WOULD BE A DEED OF SALE. I TOLD HIM THAT WHY
IS IT THAT IT IS A DEED OF SALE. AND HE TOLD ME THAT THAT
IS HIS POLICY.
Q. Now did you not talk about the repayment period for this loan?
A. We talked about the repayment, we agreed on a loan term payment
of 2 years, and provided that 10% interest monthly be made.
Q. Did you agree to those terms and conditions that Mr. David told you?
A. AT FIRST, I DO NOT WANT TO ACCEPT THE CONDITIONS BUT
LATER ON, I AGREED BECAUSE I BADLY NEEDED HE MONEY.
Q. IN OTHER WORDS, YOU AGREED ON THE FOLLOWING: THAT
THE DEED OF SALE COVERING THE PROFFERED COLLATERAL
BE EXECUTED INSTEAD OF AN ORDINARY DEED OF REAL
ESTATE MORTGAGE?
A. Yes, sir.
Q. NO OTHER CONDITION?
A. HE ALSO TOLD ME THAT+ HE WILL NOT HAVE THE DOCUMENT
REGISTERED IN HIS NAME UNLESS OR IN CASE I WILL NOT BE
ABLE TO PAY OR REDEEM THE PROPERTY AFTER THE LAPSE
OF THE PERIOD, sir.
Petitioner continued to testify regarding her acquiescence to the terms
and the disposition of the proceeds in this manner:
ATTY. MABBAYAD, JR.:
Q. In the last hearing of this case Madam
Witness, you said hat Mr. David and you
argreed on the amount of the loan and the
terms and conditions thereof. After you so
agreed with Mr. David, the amount, terms and
conditions thereof, what transpired?.
A. He told me that he will have the documents
prepared and will send cause the preparation
of the deed of sale and requested me to bring
more documents.
Q. What documents did Mr. David ask you to
bring?
A. The copy of the title, tax declarations, tax
receipts, the plan, the plan of the house and
the building permit, sir.
Q. And after he told you that, did he tell you
when you are going to meet again?
ATTY. FIDELINO:
Leading, your Honor, and no basis.
ATTY. MABBAYAD:
I will reform the question.
Q. Was the deed of sale indeed prepared?
A. Yes, sir.
Q. And were you able to bring the documents
you just mentioned to Mr. David?
A. Yes, sir.
Q. And when did you bring those documents
to him?
A. 2 days after we talked, sir.
Q. You agreed on the terms and conditions?
A. Yes, sir.
Q. And what happened when you submitted
the documents required of you by Mr. David?
A. He took hold of the document but we will
return to sign the deed of sale.
Q. And did you go back to see him as he told
you to do?
A. Yes, sir.
Q. And did you sign the deed of sale that he
caused to be prepared?
A. I signed the document, sir.
Q. After signing the deed of sale caused to be
prepared by defendant Conrado David, were
you given a copy thereof?
A. No, sir.
xxx xxx xxx
Q. Since you already signed the document
and submitted the documents already
requested of you, did he give you the amount?
A. Not yet, sir.
Q. Why?
A. Because I fetched first the person to whom I
have an obligation.
Q. What is the name of that person?
A. Mrs. Macaria Dimafelis, sir.
Q. Were you able to fetch Mrs. Macaria
Dimafelis?
A. Yes, sir.
Q. Where did you bring her?
A. To the office of Mr. David, sir.
Q. When was that in relation to the deed of
sale which you signed, Exhibit A and A-1?
A. May 19, 1986, sir.
Q. And when you and Mrs. Dimafelis went to
the office of Mr. David were you able to see
him?
A. Yes, sir.
Q. Who were with you when you went to the
office of Mr. David on May 19, 1986?
A. My daughter Josefina and also Ma. Paz.
Q. Nobody else?
A. And Mrs. Natividad de Gula and also the
agent.
Q. What happened when you and your other
companions met in the office of Mr. David on
the particular date?
A. Mr. David asked for the title in possession
of Mrs. Dimafelis, sir.
Q. Did Mrs. Dimafelis give the title to Mr. David
as he requested?
A. Yes, sir, it is complete.
Q. And after Mrs. Dimafelis handed over the
title to Mr. David, what also happened?
A. Mr. David prepared the check for Mrs.
Dimafelis, sir.
COURT:
Q. How much?
A. P109,000.00, ma'am.
ATTY. MABBAYAD:
Q. Now, you said earlier Madam, that you and
Mr. David agreed on a preferred amount of
loan of P150,000.00. My question to you is,
was the said amount of P150,000.00 given to
you Mr. David?
A. No, sir.
Q. Why?
A. WHAT WAS GIVEN BY MR. DAVID WAS
ONLY P109,000.00 IN FACT WHICH WAS
RECEIVED AND SIGNED BY
MRS. DIMAFELIS AND ANOTHER P1,000.00 To the question of whether petitioner agreed to an outright sale, she
IN CASH. emphasized a vehement denial on June 15, 1989:

xxx xxx xxx ATTY. MABBAYAD:

ATTY. MABBAYAD: Q. Mrs. Camus, when Mr. Conrado S. David

testified as the first and only witness for the
Q. Now, you said earlier that you and Mr. defendants, he said that although initially the
David agreed on a loan in the amount of transaction you approached (?) to him was
P150,000.00 and you said just now that what one of a loan, eventually and finally it became
actually was given by Mr. David was an outright sale and that you sold the property
P109,000.00 in the form of check issued and to him for and in consideration of the price of
delivered to Macaria Dimafelis in the amount P150,000.00. What can you say about this
of P109,000.00 and P1,000.00 cash which he testimony of Mr. Conrado David?
gave you. WHAT HAPPENED TO THE
BALANCE OF P40,000.00? A. OUR TRANSACTION WITH HIM IS A
LOAN FOR THE AMOUNT OF P150,000.00,
A. MR. DAVID SAID THAT IT WOULD BE SIR, WHEN WE APPROACHED HIM, WE
USED FOR DOCUMENTATION AND FOR 2 REALLY INTENDED TO HAVE A LOAN WITH
MONTHS ADVANCE INTEREST. MORTGAGE AND THEN WHEN I ASKED
HIM FOR THE AMOUNT OF P150,000.00
Q. DID HE TELL YOU THE BREAKDOWN OF FOR A LOAN, HE SAID WHY IS IT BIG AND
THE APPLICATION OF THE AMOUNT OF ASKED ME HOW MUCH IS THE PRICE PER
P40,000.00? SQ. METER AND I ANSWERED P500.00.

A. NO MORE, sir. COURT:

(pp. 3-5, 7-10, 12, TSN, April 7, 1989; Q. YOU AGREED TO A SALE?
Emphasis supplied.)
A. I DID NOT AGREE TO A SALE AND OUR
AGREEMENT IS ONLY FOR A LOAN WITH
 MORTGAGE AND HE SAID IF HE IS GOING A. The following day, ma'am.
TO PREPARE A DEED, OF SALE, IT IS
ONLY FOR PURPOSES OF FORMALITY, ATTY. MABBAYAD:
MA'AM.
Q. That could be about May 10, 1986?
(pp. 2-3, TSN, June 15, 1989; Emphasis
supplied.) A. Yes , sir.

The foregoing narration was corroborated by petitioner's daughter who Q. And were you and your mother and the
declared: other members of your group able to talk to
Mr. David when he instructed your mother to
ATTY. MABBAYAD: see him in his office?

Q. And before leaving what did Mr. David tell A. Yes, sir.
your mother, if any, after inspecting your
property? Q. Who talked to Mr. David on that particular
occasion?
A. He told us to go to his office again so that
we could talk, sir. A. My mother, sir.

Q. Did your mother go to Mr. David's office as Q. Were you present?

he instructed?
A. Yes, sir.
A. Yes, sir.
Q. What about Natividad de Gula?
COURT:
A. She was also there but she is outside the
Q. Alone? office, sir.

A. Together with Aling Naty and me, ma'am. Q. And what did Mr. David and your mother
talk about?
Q. When?
A. He said he is AMENABLE IN GRANTING
THE P150,000.00 LOAN TO MY MOTHER
BUT MY MOTHER WILL ONLY GET
P110,000.00 BECAUSE THE REST WILL BE
FOR THE DOCUMENTATIONS AND FOR
THE ADVANCE INTEREST.
Q. Did Mr. David tell your mother how much is
for documentation?
A. P10,000.00. sir.
Q. And did Mr. David tell your mother how
much would be deducted from the agreed
gross amount of the loan for the advance
interest?
A. P30,000.00, sir.
Q. How much interest was finally agreed upon
between Mr. David and your mother?
A. 10% per month, sir.
Q. And aside from the amount of the loan and
the rate of interest agreed upon by your
mother and Mr. David, were there other terms
and conditions imposed on by Mr. David?
COURT:
Is there no written agreement?
ATTY. MABBAYAD:
None, your Honor.
COURT:
Alright.
WITNESS:
A. He told my mother that the DOCUMENT TO
BE EXECUTED IS A DEED OF SALE,
INSTEAD OF A DEED OF REAL ESTATE
MORTGAGE, sir.
ATTY. MABBAYAD:
Q. What about other terms of payment or
period of payment of the loan that was agreed
upon between him and your mother?
A. To be paid in 2 years, sir.
Q. WHEN MR. DAVID TOLD YOUR MOTHER
THAT THE TRANSACTION WOULD BE
DOCUMENTED AS A DEED OF SALE NOT
AN ORDINARY COLLATERALIZED
DOCUMENT AS A DEED OF REAL ESTATE
MORTGAGE, WHAT, DID YOUR MOTHER
TELL HIM?
A. MY MOTHER TOLD HIM THAT COULD IT
BE POSSIBLE THAT INSTEAD OF A DEED
OF SALE A DEED OF REAL ESTATE
MORTGAGE WOULD BE EXECUTED
BECAUSE IF THE DOCUMENT WOULD BE
A DEED OF SALE, IT IS DANGEROUS.
Q. AND WHAT DID MR. DAVID REPLY TO
YOUR MOTHER?
A. HE SAID THAT THAT IS HIS POLICY.
Q. And what did your mother finally decide?
A. My mother told him that we will first talk
about it, sir.
Q. When you used the word "namin", to whom
in particular was your mother referring?
A. We, sir: my mother, myself and my sister.
Q. You are referring to your other sister
Josefina?
A. Yes, sir.
Q. Going back to the rate of interest, when Mr.
David told your mother that the rate of interest
would be 10% per month, did your mother
accept that condition of Mr. David?
ATTY. FIDELINO:
Already answered, your Honor. The answer is
"We would talk about the matter".
ATTY. MABBAYAD:
Referring to the documentation, this is a
different matter, your Honor.
COURT:
Answer.
WITNESS:
A. She did not readily agree because she said
we would talk about it first, your Honor.
ATTY. MABBAYAD:
Q. You would like to tell the Honorable Court
that in that second meeting that you and your
group had with Mr. David nothing definite yet
was arrived at or agreed upon?
A. None, sir, because of that deed of sale.
Q. And since there was no meeting of the
minds on that particular second meeting, was
there another meeting between you and your
group and Mr. David?
A. Yes, sir.
Q. When was that?
A. That was about May 19, I am not so sure
about the date, sir.
Q. And when you returned, using the word
"you" in the Plural form, to David, regarding
this transaction, were you able to talk to Mr.
David, using the word "you" to plural form?
xxx xxx xxx
Q. On that particular third time what did Mr.
David and your mother talk about?
A. MY MOTHER THEN REQUESTED
MR. DAVID IF IT COULD BE POSSIBLE
THAT INSTEAD OF A DEED OF SALE A
DEED OF REAL ESTATE DOCUMENT
WOULD BE EXECUTED BUT HE SAID HE
CANNOT DO ANYTHING AND HE ALSO
TOLD US NOT TO WORRY BECAUSE AS
LONG AS WE CAN PAY THE MONTHLY
INTEREST, HE WOULD NOT HAVE THE
DEED OF SALE REGISTERED, sir.
xxx xxx xxx
Q. IN SHORT, WHEN MR. DAVID REFUSED
TO GRANT THE REQUEST OF YOUR
MOTHER WITH RESPECT TO THE MANNER
OF DOCUMENTATION OF THE
TRANSACTION AND THE RATE OF
INTEREST, WHAT HAPPENED?
A. MY MOTHER FINALLY AGREED
BECAUSE WE ARE REALLY IN NEED OF
MONEY, sir.
(pp. 14-22, TSN, December 8, 1988;
Emphasis supplied.)
On the other end of this controversy is private respondent's indifference
throughout his comment (p. 81, Rollo) and memorandum as well (p.
200, Rollo) vis-a-vis the clarification made by petitioner herself and
petitioner's daughter which unconcerned and nonchalant attitude
inevitably leads to the conclusion that petitioner had established
her onus probandi by a preponderance of evidence and that private
respondent had failed to prove his positive allegations in support of his
stance (Section 1, Rule 131, Revised Rules on Evidence). Apart from
this procedural axiom is our belief that private respondent's demeanor
in retaining a portion of the alleged purchase price, as advance interest
for two months, is akin to it has precisely the very circumstance
mentioned by Article 1602(4) of the Civil Code that will warrant the legal
presumption of an equitable mortgage. Besides, it was erroneous for
respondent court to have made a sweeping insinuation that it was
petitioner as vendor who suggested the "purchase price" and is thus
precluded from assailing the sufficiency thereof (p. 66, Rollo), on
account of the admission in judicio of private respondent that it was he
who "placed the value of P150,000.00" as consideration on the
document (p. 33, Rollo; TSN, April 6, 1989, pp. 8-11). The fact that
petitioner was accompanied by her "businesswoman daughter" to the
office of private respondent is of no practical bearing because even
persons of average intelligence invariably find themselves in no position
whatsoever when bargaining with their creditor (Cabigao vs. Sales, et
al., (C.A.) 51 O. G. 5265; 5 Tolentino, Commentaries and
Jurisprudence on the Civil Code 1959 edition, p. 137) such as private
respondents corporation whose primary business concern includes
giving loans (TSN, March 30, 1989, pp. 8-10; p. 32, Rollo). Moreover, it
may be recalled that petitioner only received the sum of P1,000.00 out
of the P150,000.00 alleged as consideration for the "sale" (p.
18, supra). Such a measly sum is certainly another circumstance that
reinforces our belief that the entire transaction was but a loan
accommodation since no seller in her right senses will part with her
treasured possession via a tedious process only to end up with a small
sum of money in her pocket as certification therefor.
Court of Appeals, 190 SCRA 439 (1990); Labasan vs. Lacuesta, 86
SCRA 16 (1978). This is another circumstance where it may be fairly
inferred that the real intention of the parties is for the transaction to
secure the payment of a debt or the performance of any other obligation
(Article 1602 (6), New Civil Code).
WHEREFORE, the decision of respondent court dated October 10,
1991 is hereby SET ASIDE. The deed of absolute sale executed by Lea
O. Camus in favor of Conrado S. David is hereby declared as an
equitable mortgage and, petitioner is declared entitled to redeem the
property. Private respondent is hereby ordered to execute the
necessary deed of conveyance upon full payment of the total amount of
P110,000.00 with legal interest from May 20, 1986, the time the loan
matured until it is fully satisfied.
SO ORDERED.

At any rate substantive law mandates that a contract forfeited to

be venta con facto de retro or an outright to be construed as an
equitable mortgage for it involves a smaller transmission of rights (Olino
vs. Molina, 13 Phil. 379 (1909); Villa vs. Santiago, 38 Phil. 157 (1918);
5 Tolentino, supra, at p. 15). Moreover, there is no doubt that petitioner
agreed to the execution of the so-called sale in favor of private
respondent because of the urgent necessity for money of the apparent
vendor to liquidate her indebtedness to Mrs. Dimafelis (Claravall vs.
 This is to certify that Raymundo Dapiton has one year to
repurchase the property subject of this contract.

G.R. No. 107259 June 9, 1997

RAYMUNDO M. DAPITON, now substituted by ROWELLY

DAPITON, REPORME DAPITON, LINDA DAPITON, DENNIS
DAPITON and MEARLY DAPITON, petitioners,
vs.
COURT OF APPEALS and MELJOHN DELA PEÑA, respondents.

HERMOSISIMA, JR., J.:

This is a petition for the review of the Amended Decision1 of the Court of
Appeals2 affirming the judgment of the Regional Trial Court3 which
dismissed the complaint4 for "annulment of deed of sale" filed by
petitioner Raymundo M. Dapiton, now deceased and substituted in the
instant case by his heirs.
and another annotation at the back of the same deed, which
Although petitioners and private respondent disagree on the question
reads, to wit:
as to what transaction was actually entered into by the latter and the
late Dapiton on May 6, 1967, the parties agree that the written
This is to inform anyone that Raymundo Dapiton will have
document covering that transaction purports to be a deed of sale over
one (1) year to repurchase the land subject matter of this
the late Dapiton's house and lot in Almeria, Leyte. More significantly,
sale.
both petitioners and private respondent depicted said deed of sale to
have an annotation on the left hand margin of the said deed of sale,
which reads, to wit:

The antecedent facts of the case, according to petitioners, are as
follows:
The gravamen of petitioner's complaint before the trial
court can be gleaned from paragraphs II to VII of the
complaint filed with the lower court, to wit:
That sometime before May 5, 1967, . . .
[Raymundo Dapiton] who was then needing
money, approached the . . . [private
respondent] and requested for a loan of
P400.00 offering to place as security of said
loan his residential house and lot located at
Almeria, Leyte . . . .
j xxx xxx xxx
o
h That the fair market value of the same is not
n less than P3,000.00 more or less; it is the
house where . . . [Dapiton] has been living for
d thirty (30) years up to the present.
e
l That the . . . [private respondent] agreed to the
a request of . . . [Dapiton] and thereafter said . . .
[private respondent] prepared the
P corresponding document and . . . [Dapiton]
e was made to sign the same on the 5th day of
ñ May, 1967, before Notary Public, Dionisio R.
a dela Peña, father of herein defendant.
5
Thus, the petitioners contend that the
transaction between Raymundo Dapiton and
the private respondent was one of loan of
P400.00 to be paid within one years (sic) time
with the property subject of the questioned
deed as security for the payment of the said
loan.6
Private respondent, however, maintains that the transaction between
him and the deceased Dapiton was one of absolute sale. Private
respondent's version of the antecedent facts in the instant case, is as
follows:
The case has its source in the execution of the
Deed of Absolute Sale . . . by the . . .
[deceased Dapiton] as vendor and . . . [private
 respondent] as vendee on May 6, 1967. Two
days later, or on May 8, 1967, . . . [private
respondent] at the instant of the . . . [deceased
Dapiton], and without any consideration, made
an annotation on the left-hand margin and at
the back of the Deed of Absolute Sale to the
effect that the . . . [deceased Dapiton] was
given an option to repurchase the land within
one (1) year from the date of the notations.
This is the source of the controversy. . . .
[Petitioners claim] that the true intention of the
parties was one of venta con pacto de
rectro while the . . . [private respondent] claims
that their true intention was one of absolute
sale and that the annotation was void for lack
of consideration and, more importantly,
because from the beginning the parties did not
intend it to be complied with but only to
appease the children of . . . [deceased
Dapiton] who objected to the sale of the land
by . . . [their late father].7
Against the backdrop of conflicting factual claims of Petitioner and
Private Respondent, the following facts are not disputed by both
parties:
1. The deed of sale subject of the case involves both the house and the
lot of deceased Dapiton, said deed having stated that the sale of the lot
included all improvements thereon.
2. The purchase price of the house and lot, as indicated in the deed of
sale, is P400.00.
3. Dapiton, now deceased, turned over to private respondent Tax
Declaration No. 2555 covering the subject house and lot as well as
Official Receipt No. 211444 dated May 7, 1953, and Official Receipt No.
559150 dated May 30, 1952 involving tax payments made by Dapiton.
4. Private respondents caused the cancellation of Tax Declaration No.
2555 in the name of Dapiton and obtained Tax Declaration No. 4101 in
his name.
5. Private respondent paid realty taxed on the subject house and lot as
evidenced by Official Receipt No. 155719 dated May 8, 1968 and
Official Receipt No. 2041208 dated October 1, 1969, both receipts of
which are in the name of private respondent.
6. Dapiton sent a letter dated May 3, 1968 to private respondent and
enclosed therewith two (2) money orders worth P400.00 as final and full
satisfaction and/or redemption of the subject house and lot.
7. Private respondent's wife, Lolita de la Peña, received the aforesaid
letter and money orders on May 4, 1968.
8. In a letter dated May 9, 1968, private respondent rejected the
redemption of Dapiton of the subject house and lot on the ground that
the sale they executed was an absolute sale.
9. Dapiton had also entered into similar transactions in the past
involving the same house and lot with one Leodegario Alabarca in 1962
and one Manuel delos Reyes in 1964. On each of the two occasions,
Dapiton was given P400.00.
10. On April 7, 1968, Dapiton again entered into the same arrangement
involving his house and lot. This time, it was with one Sinforosa
Jaguros, but the amount involved remained the same, i.e., P400.00.
11. The deceased Dapiton, up to the time of his death, occupied the
property. His heirs, herein petitioners, remain in possession up to the
present.
The court a quo, confronted with all the aforementioned facts and
herein parties' respective claims, rendered judgment in favor of private
respondent and accordingly dismissed the complaint for annulment of
deed of sale filed by Dapiton, petitioner's deceased father. The court a
quo mainly found that the price of P400.00 was adequate and
conscionable and that the deed of sale in question is one of an absolute
nature. At any rate, the court a quo postulated that the redemption
made by Dapiton was undertake out of time and without compliance
with Articles 1601 and 1616 of the Civil Code.
Aggrieved, petitioners appealed from the decision of the court a
quo and asked the respondent Court of Appeals to reverse the same. In
a decision dated December 10, 1991, petitioners were granted the relief
they sought. The dispositive portion of that decision reads as follows:
CONFORMABLY TO THE FOREGOING, the decision
appealed from is hereby REVERSED AND SET ASIDE,
and a new one is rendered in lieu thereof, ordering
defendant-appellee to accept the P400.00 deposited by
plaintiff-appellant with the Municipal Court of Almeria,
Leyte, and to execute a deed of sale of the subject parcel
of land in favor of plaintiffs-appellants.
No pronouncement as to costs.
SO ORDERED.8
With that, petitioners had thought that they had finally won back
their land. Their triumph, however, was short-lived. Private
respondent filed his Motion for Reconsideration on April 15, 1992.
Respondent Court of Appeals found merit in private respondent's
Motion for Reconsideration and granted the same. Thus,
respondent appellate court rendered an Amended Decision in
favor of private respondent the entirety of which reads:
On December 10, 1991, a decision was rendered by this
Division in Civil Case No. 23256, reversing and setting
aside the decision of Branch 16, Regional Trial Court of
Biliran, Leyte, which decision dismissed the complaint and
counterclaims. In reversing the trial court's decision and
deciding in favor of the . . . [petitioner] When quote the
pertinent portion of the decision:
What We thus have is a contract of absolute
sale between the parties. We need not look at
extraneous circumstances, such as . . .
[Dapiton's] motive into entering a contract of
conveyance, as the terms and conditions
thereof are clear and explicit, and leave no
doubt upon the intention of the contracting
parties. Therefore, the literal meaning of its
 stipulations should control (Article 1370, Civil
Code of the Philippines). . . . [Petitioner's]
cannot deny the "Deed of Absolute Sale"
executed by . . . [Dapiton] in favor of private
respondent on May 6, 1967.
However, the subject annotation made on May
8, 1967, does not also escape Us. The same
raises an issue of whether or not it novated the
deed of absolute sale into one of sale with a
right to repurchase.
It did not. In conventional redemption, the right
to redeem must be reversed or stipulated at
the moment of the perfection of the contract,
and not afterwards (Article 1601, Civil Code of
the Philippines). An agreement granting such
right to redeem subsequent to the perfection of
the contract of sale is a mere promise to sell (5
Ambrosio Padilla, Civil Law, Civil Code
Annotated, p. 275 [1968] citing 10 Manresa
311). (Decision, pp. 7-8; Rollo, pp. 73-74).
In the light of the above holding We feel constrained to
reconsider Our conclusion that "the subject annotation is a
contract to buy and sell" and "is not an accepted unilateral
promise to sell" for the following reasons:
1) There is no allegation or proof that . . . [Dapiton]
promised to buy or repurchase the land subject of this suit,
for a specific price; neither is there proof that the . . .
[private respondent] promise [sic] to sell the same at a
specific price agreed upon.
2) The agreement between the parties which was entered
into on May 8, 1967 was not a "promise to sell for a certain
price" but a mere option give to . . . [Dapiton] to repurchase
the property within one year. It was clearly a mere option
for . . . [Dapiton] to buy back the property, subject to (1) an
exercise by the . . . [Dapiton] of the option; and (2) subject
also to an agreement as to the price. The option maybe
withdrawn by the . . . [private respondent] in case of
disagreement as to the price and?/or failure of the . . .
[Dapiton] to exercise the option. There was no clear
indication of the . . . [Dapiton's] promise to buy or accept
the option to repurchase. This was clearly indicated when .
. . [private respondent] wrote . . . [Dapiton] a letter on May
9, 1968 refusing . . . [his] offer to buy. Article 1479 of the
Civil Code provisions that "a promise to buy and sell a
determinate thing for a price certain is reciprocally
demandable" is not applicable because there was no
agreement as to price so that the price was not certain and
refusal by . . . [private respondent] is a clear manifestation
of this fact.
A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or sell a
determinate thing for a period certain is
binding upon the promissory if the promise is
 supported by a consideration distinct from the
price.
There is nothing on record to show that the parties had
agreed on a consideration distinct from the price of the
sale, which is construed as a separate consideration to
support the unilateral promise to sell.
For reasons above stated and in the light of the applicable
law and jurisprudence on the matter, the Motion for
Reconsideration is GRANTED. Our decision dated
December 10, 1991 is reversed and set aside and the
judgment of the trial court is AFFIRMED, without
pronouncement as to costs.
SO ORDERED.9
Essentially, respondent appellate court declared that the transaction
entered into by Dapiton and private respondent was an absolute sale of
the former's house and lot to the latter, and that the two annotations
regarding Dapiton's right to repurchase the subject house and lot
constituted a mere promise to sell which is null and void, because there
was no determinate purchase price indicated and there was no
consideration therefor.
Unable to accept the ultimate conclusion of respondent appellate court,
petitioners resorted to the instant petition to obtain a reversal of the
aforegoing Court of Appeals decision. Petitioners now exhort us to
declare the transaction between their deceased father, Raymundo
Dapiton, and private respondent, to be either a loan, as claimed by
Dapiton in the complaint for amendment of deed of sale which he filed
in the court a quo, or in the alternative, an equitable mortgage, in
application of legal the presumption under Article 1602 of the Civil
Code.
We rule in favor of the petitioners.
Article 1602 of the New Civil Code provides for the instances when an
equitable mortgage may be presumed:
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
usually 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.
In any of the foregoing cases, any money, fruits or other
benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the
usury law.
Closely examining the facts of this case, we find that, contrary to the
findings of the Court of Appeals, there are numerous indications that
the contract effected between the parties is actually an equitable
mortgage and not an absolute deed of sale.
Firstly, it is without dispute that private respondent Dela Peña made two
(2) annotations on the deed of sale, one at the left hand margin and
another at the back of the page. These annotations grant Raymundo
Dapiton the right to repurchase his property within one year. This right
of repurchase is a clear contravention of private respondent's claim that
the deed of sale was meant to be absolute.
Secondly, it has been established that the deceased Dapiton habitually
borrowed money from numerous acquaintances, using the said
property as security for the loan. The amount borrowed, amounting to
Four Hundred Pesos (P400.00), invariably remained the same.
Although these loans were constantly denoted as "sale with right of
repurchase," the deceased Dapiton continuously remained in
possession of the property despite a succession of such loan
transactions. Evidently, all these transactions were equitable
mortgages.
Thirdly, we find it difficult to believe that the private respondent would
tolerate the uninterrupted occupation of the property by the Dapitons
simply because he has no need for it just yet. In the light of the fact that
the private respondent has been in dispute with the Dapitons since
1968, and considering his claim of absolute ownership, it is unthinkable
for private respondent to let Dapiton and his heirs remain and make use
of the property for almost thirty (30) years. In addition, although the tax
declarations for the property have been transferred to private
respondent's name and he has been continuously paying the realty
taxes thereon, he has made no move to oust the petitioners from their
possession. This circumstance clearly falls within the ambit of Article
1602 as a badge of an equitable mortgage.
Fourthly, the private respondent is a member of the bar, well-versed in
the intricacies of the law. We thus find it improbable that he would
agree to add the annotations pertaining to the deceased Dapiton's right
of repurchase only to appease Dapiton's children. If, as he claims, the
sale was indeed absolute, the fact that he would place such annotations
as would put in question the absoluteness of the sale raises some
doubt as to the true nature of the transaction involved. After all, if the
property is truly his by right, no amount of objections raised by the
children of the elder Dapiton would change the fact that the sale is
already a fait accompli. No vendee in his right mind would agree to any
act which would weaken his absolute claim to a property sold to him
without any restraint or condition. If the sale was indeed absolute, why
grant Dapiton a right to repurchase at all?
Lastly, Article 1603 of the New Civil Code provides:
 Art. 1603. In case of doubt, a contract purporting to be a SO ORDERED.
sale with right to repurchase shall be construed as an
equitable mortgage.

In the case at bar, the true nature of the contract between Dapiton and
dela Peña is the crux of the issues raised in this petition. Considering
the circumstances of this case, we resolve the doubt in favor of the
petitioner. The actuations of the private respondent are highly suspect,
if not downright dishonorable. AS A JUDGE and member of the bar, he
is charged with the duty to act fairly and equitably. He has not been fair,
nor has he been forthright in his dealings with Raymundo Dapiton.

Consider these proven facts: the private respondent first tried to change
the nature of the transaction by preparing a contract which did not
reflect the true intent of the parties. Next, caught in his duplicitousness,
he pretended to rectify his mistake by adding an annotation granting the
elder Dapiton the right of repurchase. Then, he deliberately evaded
receiving payment from the elder Dapiton so that the one year period
would eventually lapse and the transfer of ownership to him would
become absolute. And as if these were not enough, he now seeks to
convince this court that the annotation granting the elder Dapiton the
right of repurchase, which he himself prepared, is not valid for lack of
consideration. This travesty must not be permitted to go on. We now
write finis to the private respondent's underhandedness.

WHEREFORE, premises considered, the petition for certiorari is

GRANTED, the amended decision of the respondent Court of Appeals
is REVERSED and SET ASIDE. Private respondent Meljohn dela Peña
is ordered to accept the P400.00 deposited by the petitioners with the
Municipal Trial Court of Almeria, Leyte, and to execute a Deed of Sale
over the subject property in favor of the petitioners.