Uy v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent Maria del Rosario-Tanjuakio executed a Deed of Absolute Sale dated June 11, 1979, over her house and lot to petitioner Felimon Uy for P70,000.00. Petitioner obtained a new Transfer Certificate of Title (TCT) No. 283384. A separate document, an "Option To Repurchase," was granted to private respondent, giving her 60 days from June 11, 1979, to repurchase the property. Private respondent failed to exercise this option within the stipulated period. Procedural History: The Regional Trial Court (RTC) dismissed private respondent's complaint, finding no justification to consider the Deed of Absolute Sale as an equitable mortgage. The Court of Appeals (CA) initially set aside the RTC decision and remanded the case for trial. After a petition for review on certiorari was denied by the Supreme Court, the case proceeded to trial. The RTC again dismissed the complaint. Upon appeal, the CA reversed its earlier stance and declared the Deed of Absolute Sale as an equitable mortgage, entitling private respondent to redeem the property upon payment of P70,000.00 with legal interest. The Petition: Petitioner assails the CA's decision, arguing that the true intention of the parties was an absolute sale, not an equitable mortgage. He contends that the CA erred in finding the sale price inadequate, that private respondent remained in possession, and that she paid real estate taxes.
Issue(s)
Whether the Deed of Absolute Sale executed by private respondent in favor of petitioner, coupled with an option to repurchase, constitutes an equitable mortgage or a genuine sale. Whether the Court of Appeals committed reversible error in declaring the Deed of Absolute Sale as an equitable mortgage.
Ruling
The petition is denied for lack of merit. The assailed decision of the Court of Appeals is affirmed in toto, declaring the Deed of Absolute Sale as an equitable mortgage.
Ratio Decidendi
On the issue of whether the Deed of Absolute Sale constitutes an equitable mortgage: The Court affirmed the appellate court's finding that the transaction was an equitable mortgage. Article 1604 of the Civil Code provides that a contract purporting to be an absolute sale shall be presumed to be an equitable mortgage if any of the conditions in Article 1602 are present. The Court found several circumstances persuasive of this conclusion. Firstly, private respondent signed the deed knowing it did not express the real intention of the parties, having been led to believe by petitioner that it was their policy to execute such a deed as a mere formality before extending a loan, especially since she was in urgent need of funds. This aligns with the principle that "necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any terms that the crafty may impose upon them." Secondly, the amount of P70,000.00 was considered inadequate for a house and lot with improvements in Novaliches, Quezon City, in 1979, a circumstance explicitly mentioned in Article 1602(2) of the Civil Code as indicative of an equitable mortgage. Thirdly, despite the symbolic transfer of possession, private respondent physically remained in possession of the property, which is another ground for presumption under Article 1602(3). Fourthly, private respondent continued to pay the realty taxes on the property even after the execution of the document in 1979, with the alleged vendees only starting to pay in 1982, a fact considered significant in similar cases affirming equitable mortgages. Finally, applying the rule that in onerous contracts, doubt should be settled in favor of the greatest reciprocity of interest, the Court favored the interpretation of an equitable mortgage, which involves a lesser transmission of rights and interests compared to an absolute sale. The testimony of private respondent's witness, Mr. Jesus Morales, corroborated by private respondent's own testimony, indicated that the agreement was for a mortgage and that redemption was possible even beyond the 60-day period as long as interest was paid, further supporting the equitable mortgage character of the transaction. On the issue of whether the Court of Appeals committed reversible error in declaring the Deed of Absolute Sale as an equitable mortgage: Since the Court of Appeals correctly determined that the Deed of Absolute Sale was indeed an equitable mortgage based on the evidence and applicable provisions of the Civil Code, no reversible error was committed.
Main Doctrine
A contract purporting to be an absolute sale shall be presumed to be an equitable mortgage if any of the conditions in Article 1602 of the Civil Code are present, as the presence of even one circumstance is sufficient to give rise to this presumption.