Bellido v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners Flordeliz and Villamor Bellido offered a house and lot, valued at P900,000.00, as collateral for a loan of P300,000.00 from respondents Spouses Mamerto and Estelita del Rio due to financial distress. Petitioners received an advance of P85,284.39 to pay the balance of their loan with the Central Bank Provident Fund. Before receiving the remaining loan amount, respondents allegedly demanded the execution of a deed of absolute sale and the surrender of the title, assuring petitioners it was merely for collateral. Petitioners executed the deed on March 5, 1987, but received only a total of P240,000.00, with P60,000.00 deducted as interest for one year. Respondents later attempted to evict the caretaker and occupied the property. Procedural History: Petitioners filed a complaint for annulment of the deed of absolute sale. The Regional Trial Court (RTC) dismissed the complaint, upholding the deed. The Court of Appeals (CA) affirmed the RTC decision but deleted the awards of moral damages and attorney's fees. The Petition: Petitioners seek to set aside the CA decision, arguing that the CA erred in overlooking vital evidence and in not applying Article 1602, No. 6 of the Civil Code.
Issue(s)
Whether the Deed of Absolute Sale should be treated as an equitable mortgage. Whether the Court of Appeals erred in not applying Article 1602, No. 6 of the Civil Code.
Ruling
The Supreme Court set aside the decision of the Court of Appeals. The transaction between the petitioners and private respondents was declared an equitable mortgage. The deed of absolute sale dated March 5, 1987, was declared null and void, and the Register of Deeds of Quezon City was ordered to cancel Transfer Certificate of Title No. 357776. Transfer Certificate of Title No. 277097 in the name of petitioner Flordeliz Lucindo-Bellido was ordered reinstated.
Ratio Decidendi
On the issue of whether the Deed of Absolute Sale should be treated as an equitable mortgage: The Court found that the agreement between the parties was an equitable mortgage, not an absolute sale. The Court found it difficult to believe that the respondents loaned over P85,000.00 without any security, not even a promissory note. The petitioners' version, where the deed of sale and title served as security for the loan, was deemed more consistent with ordinary care. Several factors supported the existence of an equitable mortgage: (1) petitioners filed the complaint promptly upon discovering the cancellation of their title; (2) petitioners were financially distressed, which was admitted by respondents; and (3) while the appraisal report was inadmissible, the stated market value of the property (P1,421,000.00) was significantly higher than the alleged purchase price of P300,000.00, indicating potential inadequacy of price. The Court reiterated that a transaction can be shown to be a loan with security through surrounding circumstances and parole evidence. On the issue of whether the Court of Appeals erred in not applying Article 1602, No. 6 of the Civil Code: The Court found that Article 1602, No. 6 of the Civil Code was applicable. This provision states that a contract shall be presumed to be an equitable mortgage in any 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. The Court's analysis of the facts, including the financial distress of the petitioners, the demand for the deed of sale and title as security, the pre-deduction of interest, and the significant disparity between the alleged sale price and the property's market value, led to the fair inference that the true intention was to secure a debt. The Court noted that the stated purchase price of P300,000.00 was intentionally fixed to prevent the application of Articles 1602 and 1604 of the Civil Code.
Main Doctrine
A contract purporting to be an absolute sale may be presumed to be an equitable mortgage under Article 1602 of the Civil Code if it can 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. Factors such as the financial distress of the vendor, the inadequacy of the price, and the retention of possession by the vendor can support this presumption.