Molina v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Pedro Molina and his siblings were co-owners of a parcel of land in Naic, Cavite. On April 23, 1984, petitioner conveyed his share to his sister, Felisa Molina, via a Deed of Absolute Sale, which was not registered. Subsequently, on June 13, 1988, at Felisa's request, petitioner executed a second Deed of Absolute Sale for the same share, this time in favor of Felisa's son, respondent Margarito Flores, and his wife, respondent Nerisa Herrera, for a stated consideration of P8,000.00. A new title, TCT No. T-170585, was issued in the names of the respondent spouses. Petitioner later filed an action for reformation of instrument and/or annulment of document and title with reconveyance and damages, alleging that the second Deed of Absolute Sale did not express the true intention of the parties. Procedural History: The Regional Trial Court of Cavite, Branch 15, initially ruled in favor of petitioner Pedro Molina, ordering the annulment of the Deed of Absolute Sale dated June 13, 1988, the cancellation of TCT No. 170585, and the payment of attorney's fees. However, upon appeal to the Court of Appeals, the trial court's decision was reversed, and petitioner's complaint was dismissed. Petitioner then filed a motion for reconsideration, which was denied, leading to the present petition for review on certiorari before the Supreme Court. The Petition: Petitioner seeks to set aside the decision of the Court of Appeals, arguing that the Deed of Absolute Sale does not express the true intent and agreement of the parties and should be considered an equitable mortgage under Articles 1602 and 1604 of the Civil Code, not a consummated contract of sale. He claims he was defrauded by his sister, Felisa Molina, who allegedly misrepresented the document as a receipt for an indebtedness, taking advantage of his lack of education. Petitioner points to the alleged inadequacy of the P8,000.00 consideration and his continued receipt of rentals as badges of an equitable mortgage. He also contends the sale was not consummated as the full purchase price was not paid. The petition raises four assigned errors concerning the appellate court's failure to find the transaction as an equitable mortgage, to hold that the deed did not express the true intent, and to find that the sale was not consummated or that petitioner was defrauded.
Issue(s)
Whether the Deed of Absolute Sale executed by petitioner in favor of respondent spouses expresses the true intent and agreement of the parties and whether the transaction constitutes an equitable mortgage under Article 1602 of the Civil Code. Whether the alleged sale was a consummated contract of sale. Whether petitioner was defrauded by his sister in signing a simulated and fictitious Deed of Sale.
Ruling
The petition is denied, and the decision of the Court of Appeals is affirmed. The Deed of Absolute Sale is upheld as a valid contract of sale, and the transaction is not considered an equitable mortgage.
Ratio Decidendi
On the issue of whether the Deed of Sale expresses the true intent and agreement of the parties and whether the transaction was an equitable mortgage: The Court held that for the presumption of an equitable mortgage to arise under Article 1602 of the Civil Code, two requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale, and (b) that their intention was to secure an existing debt by way of a mortgage. In this case, the second requisite was conspicuously absent. Petitioner's own testimony regarding his alleged loan of P10,000.00, received in installments without collateral, indicated that the transaction was not a loan but a sale on installment. The alleged inadequacy of the price of P8,000.00 for the 92 sq. m. property did not, by itself, support the conclusion that the property was not sold or that the contract was a loan, especially in the absence of proof that the property's value was considerably higher at the time of the sale. Furthermore, the continued receipt of rentals by the petitioner was considered a gesture of generosity from his relatives, not a badge of an equitable mortgage. The Court emphasized that the intention of the parties is shown not necessarily by the terminology used but by all surrounding circumstances, and in this case, the circumstances did not indicate an intention to secure a debt. On the issue of whether the alleged sale was a consummated contract of sale: The Court found that even assuming the entire purchase price was not paid, this did not bar the transfer of ownership or possession, nor did it dissolve the contract of sale. The payment of the price is a resolutory condition, and the seller's remedy is to exact fulfillment or, in case of substantial breach, to rescind the contract under Article 1191 of the Civil Code. The Deed of Sale itself acknowledged receipt of the P8,000.00 purchase price. Moreover, prior to the execution of the impugned Deed, petitioner had signed receipts denominated as "Kasunduan" which clearly stated that he was selling his share of the property, confirming that the transaction was one of sale on installment. On the issue of whether petitioner was defrauded: The Court found no evidence of fraud. Petitioner's claim of lack of sufficient education and knowledge of English was belied by the fact that the Deed of Absolute Sale was explained to him in the vernacular by the notary public, with the assistance of a translator, and was witnessed by two other persons. One of the witnesses, Nemecio Molina, testified that the notary public read the document in English and then had it translated into Tagalog before the parties signed. Another witness, Atty. Edwina Mendoza, testified that petitioner readily acceded when informed that he would be selling his property. The Court concluded that the parties were fully aware of the contents and meaning of the Deed, and there were no acts or events that indicated an intention other than to sell the property to the respondent spouses.
Main Doctrine
The presumption of an equitable mortgage under Article 1602 of the Civil Code requires two requisites: (a) that the parties entered into a contract denominated as a contract of sale, and (b) that their intention was to secure an existing debt by way of a mortgage. The alleged inadequacy of the price and the continued receipt of rentals do not, by themselves, establish the existence of an equitable mortgage if the second requisite, the intention to secure a debt, is absent.