Ramos v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent Adelaida Ramos borrowed P5,000.00 and P9,000.00 from her brother, petitioner Oscar D. Ramos, for business transactions. As security, Adelaida executed two deeds of conditional sale in favor of Oscar and his wife, Luz Agudo, covering her rights, shares, and interests in two lots. Upon failure to repurchase within the redemption period, Oscar and Luz filed petitions for consolidation of ownership, which were approved by the probate court for Lot No. 4033 and the cadastral court for Lot No. 4221. Procedural History: Private respondents filed a complaint for declaration of nullity of orders, reformation of instrument, recovery of possession, and damages, alleging the deeds were equitable mortgages vitiated by fraud and undue influence, and the consolidation orders were void for lack of jurisdiction. The trial court declared the deeds as loan transactions secured by real estate mortgages, annulled the consolidation orders, and ordered the payment of the loan amounts with interest, or foreclosure in default. The Court of Appeals affirmed this decision. The Petition: Petitioners seek review, arguing the Court of Appeals erred in interpreting the deeds as equitable mortgages, ordering reformation, holding the consolidation orders void, and not dismissing the complaint due to prescription.
Issue(s)
Whether the deeds of conditional sale are equitable mortgages. Whether the orders of the probate and cadastral courts approving the consolidation of ownership are void for lack of jurisdiction. Whether the action for reformation and declaration of nullity has prescribed.
Ruling
The petition is denied, and the assailed decision of the Court of Appeals is affirmed.
Ratio Decidendi
On whether the deeds of conditional sale are equitable mortgages: The Court affirmed the findings that the deeds were equitable mortgages, citing Article 1602 of the Civil Code. Several circumstances supported this conclusion: the vendor (private respondent) remained in possession of the properties, the sums advanced were by way of loans, and the properties were not declared for taxation in the petitioners' names. The Court emphasized that only one circumstance enumerated in Article 1602 is sufficient to give rise to the presumption of an equitable mortgage. The true intention of the parties was to secure the payment of a debt, not to effect a sale. The Court also noted that in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage under Article 1603 of the Civil Code. The admission of parol evidence to prove the true intention was justified under the exception to the parol evidence rule where the validity of the agreement is put in issue. On the voidness of the probate and cadastral court orders: The Court held that the orders of the probate and cadastral courts were void for lack of jurisdiction. The probate court's approval of the deed of conditional sale was merely a recognition of the heir's right to dispose of her interest and not a conclusive determination of the contract's validity. The probate court's jurisdiction is limited to settling estates and does not extend to determining ownership disputes. Similarly, the cadastral court acted with limited competence in issuing an order of consolidation of ownership, which requires a separate action in the exercise of general jurisdiction. Article 1607 of the Civil Code requires a judicial order after the vendor has been duly heard for consolidation of ownership in real property, and an order issued without the vendor being named respondent and heard is a patent nullity. On prescription of action: The Court ruled that the action had not prescribed. The complaint was filed on February 28, 1968, approximately seven years from the execution of the deeds in 1959. The prescriptive period for actions based upon a written contract and for reformation is ten years under Article 1144 of the Civil Code. Therefore, the action was seasonably instituted within the prescribed period.
Main Doctrine
Deeds of conditional sale, regular on their face, executed in consideration of a loan, are presumed to be equitable mortgages under Article 1602 of the Civil Code, especially when the vendor remains in possession, the price is advanced by way of loan, and the property is not declared for taxation in the vendee's name. Orders of probate and cadastral courts approving such deeds or consolidating ownership without proper jurisdiction or due process are void.