Lapat v. Rosario
REITERATIONFacts
The Antecedents: Petitioner Lydia R. Lapat filed a complaint for consolidation of ownership against respondents Josefino and Maria Rosario, alleging that the latter sold to her two parcels of land via two Deeds of Sale with Right to Repurchase. Respondents failed to redeem the property within the stipulated period. Respondents, in their answer, denied selling the lands and instead claimed that the transaction involved the purchase of an Isuzu Elf truck, which they later returned due to a defective engine. They alleged that petitioner proposed a loan of P60,000.00 at 40% interest to cover the repair costs, which was deducted in advance, resulting in respondents receiving P36,000.00. To secure the payment of the truck's purchase price and the loan, respondents claimed petitioner required them to sign the two Deeds of Sale with Right to Repurchase, which they did based on trust. They also allowed petitioner to till the lands, with the fruits to be credited to the truck's purchase price. Subsequently, due to setbacks, respondents returned the truck, and petitioner accepted it, releasing them from the balance of the purchase price and the loan, promising to cancel the deeds. Respondents asserted that the deeds were equitable mortgages under Article 1602 of the New Civil Code. Procedural History: The Regional Trial Court (RTC) dismissed petitioner's complaint, declared the Deeds of Sale as equitable mortgages, ordered the return of the lands to respondents, and awarded attorney's fees and costs. The Court of Appeals (CA) affirmed the RTC's decision in toto. The Petition: Petitioner sought reversal of the CA decision, arguing that the CA erred in interpreting the Deeds of Sale as equitable mortgages and in giving credence to respondents' denial of receiving the purchase price against documentary evidence.
Issue(s)
Whether the two (2) Deeds of Sale with Right to Repurchase are equitable mortgages or genuine sales. Whether the Court of Appeals committed reversible error in affirming the RTC's decision.
Ruling
The petition is without merit. The Supreme Court affirmed the decision of the Court of Appeals, which upheld the Regional Trial Court's ruling that the two (2) Deeds of Sale with Right to Repurchase were equitable mortgages, dismissed the complaint for consolidation of ownership, ordered the return of the properties, and awarded attorney's fees and costs.
Ratio Decidendi
On the issue of whether the two (2) Deeds of Sale with Right to Repurchase are equitable mortgages or genuine sales: The Supreme Court held that the purported Deeds of Sale with Right to Repurchase were, in fact, equitable mortgages, falling squarely under paragraph (6) of Article 1602 of the New Civil Code. Several circumstances supported this conclusion: (1) the respondents' inability to afford the repair of the Isuzu Elf truck, despite petitioner's claim of having paid P500,000.00 for the lands, and their willingness to borrow P60,000.00 at a high interest rate; (2) the lack of prudence in petitioner, an astute businesswoman, not setting off the P60,000.00 debt against the P500,000.00 purchase price if the transaction were a genuine sale; (3) the coinciding redemption period of the lands with the due date for the remaining balance of the truck's purchase price; (4) the questionable nature and origin of the cash receipts, which were worded as advances for palay/corn purchase and not as payment for the lands, and were offered only as rebuttal evidence; and (5) the suspicious circumstances surrounding the execution of the Deeds of Sale, including the use of different typewriters for amounts, handwritten TCT numbers, blank execution dates, and a fictitious residence certificate. The Court emphasized that the form of the instrument cannot prevail over the true intent of the parties, which is determined by their conduct, words, actions, and deeds. In cases of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. On the issue of whether the Court of Appeals committed reversible error in affirming the RTC's decision: The Supreme Court found no reversible error in the CA's affirmation of the RTC's decision. The Court reiterated that factual findings of the trial court, adopted and confirmed by the Court of Appeals, are final and conclusive and may not be reviewed on appeal, except under specific exceptions. None of these exceptions were found to be availing in the instant case. Both lower courts meticulously examined the testimonial and documentary evidence and arrived at the consistent conclusion that the true intention of the parties was to secure a debt through the execution of the deeds, thus constituting equitable mortgages. The Court noted that the RTC correctly reasoned that if the defendants had sold the lands for P500,000.00, they would not have returned the truck due to inability to pay for its repair. The return of the truck and the subsequent release from obligations rendered the equitable mortgages, which were intended to secure these obligations, null and void.
Main Doctrine
A contract purporting to be a Deed of Sale with Right to Repurchase will be construed as an equitable mortgage if the real intention of the parties, as inferred from their conduct, words, actions, and deeds prior to, during, and immediately after its execution, is that the transaction shall secure the payment of a debt or the performance of an obligation, pursuant to Article 1602 of the New Civil Code.