Legaspi v. Ong
REITERATIONFacts
1. The Antecedents: Respondent spouses Francisco and Rita Ong owned a parcel of land with a two-storey house, which they had mortgaged to Permanent Savings and Loan Bank (PSLB) to secure a loan. Upon their failure to pay, PSLB foreclosed the mortgage, and the property was sold at auction with the bank as the highest bidder. The spouses failed to redeem the property within the redemption period, leading to the consolidation of title in PSLB's name. Subsequently, during PSLB's liquidation, the Central Bank offered the original owners, the Ongs, the first priority to buy back their property for P2,655,000.00. Lacking funds, the Ongs approached petitioner Bernice Legaspi's father for assistance. 2. Procedural History: An agreement was reached, formalized in a Deed of Sale with Right to Repurchase, executed by the Ongs and Legaspi on June 13, 1989. Legaspi paid the redemption price to the Central Bank, and a Deed of Absolute Sale was executed between PSLB's Liquidator and the Ongs. Legaspi subsequently sent notices to the Ongs regarding the expiration of their repurchase period, which was extended multiple times. When the Ongs failed to repurchase the property, Legaspi filed a petition for consolidation of ownership with the Regional Trial Court (RTC). The RTC ruled in favor of Legaspi, ordering the consolidation of title. Concurrently, Legaspi filed an unlawful detainer case, which the Metropolitan Trial Court (MeTC) decided in her favor, ordering the Ongs to vacate. The RTC's decision was later reversed by the Court of Appeals (CA), which declared the Deed of Sale with Right to Repurchase an equitable mortgage and ordered the Ongs to redeem the property, with Legaspi ordered to pay rentals and attorney's fees. The CA denied Legaspi's motion for reconsideration. 3. The Petition: Petitioner Bernice Legaspi filed this petition for review on certiorari under Rule 45 of the Rules of Court, seeking to annul the CA's decision. The core issue is whether the Deed of Sale with Right to Repurchase should be interpreted as an equitable mortgage, as found by the CA. Legaspi argues that the transaction was a genuine sale, not a loan secured by a mortgage, and that the CA erred in its findings regarding the inadequacy of price, the Ongs' continued possession, and the extensions of the repurchase period. The Supreme Court agreed to review the case due to conflicting findings between the trial court and the appellate court. The Court ultimately affirmed the CA's finding that the transaction was an equitable mortgage, but modified the decision by deleting the award of monthly rentals and attorney's fees in favor of the respondents.
Issue(s)
Whether the Deed of Sale with Right to Repurchase executed by the respondent spouses in favor of the petitioner constitutes an equitable mortgage. Whether the Court of Appeals erred in ordering the petitioner to pay monthly rentals and attorney's fees to the respondents.
Ruling
The petition is PARTIALLY GRANTED. The decision of the Court of Appeals is AFFIRMED with MODIFICATION to the effect that the award of monthly rentals on the subject property and attorney's fees in favor of respondents is DELETED.
Ratio Decidendi
On the issue of whether the Deed of Sale with Right to Repurchase constitutes an equitable mortgage: The Supreme Court affirmed the Court of Appeals' finding that the transaction was an equitable mortgage, not a sale with right to repurchase. The Court reiterated that the nomenclature used by the parties does not determine the nature of the contract; rather, the intent of the parties, as shown by surrounding circumstances, is decisive. The Court found the presence of several circumstances enumerated under Article 1602 of the Civil Code, which are sufficient to presume an equitable mortgage. Firstly, the respondent spouses remained in possession of the subject property even after the execution of the deed. The Court noted that if the transaction were a true sale with right to repurchase, the petitioner should have asserted her right to immediate possession. Secondly, the period to repurchase the property was extended by the petitioner on multiple occasions, which is indicative of an equitable mortgage. The Court cited established jurisprudence that extensions of the redemption period are indicative of an equitable mortgage. Thirdly, the stipulation that the property would become the vendee's by virtue of failure to comply with the terms (paragraph 8 of the deed) is contrary to the nature of a true pacto de retro sale and is considered a pactum commissorium, a nullity. This stipulation shows an intention to mortgage rather than sell. Fourthly, the provision allowing the vendor to resell the property to any party other than the vendee (paragraph 3 of the deed) clearly indicates that the petitioner recognized the respondent spouses' right to exercise ownership, implying the transaction was merely to secure a debt. The Court also noted that the respondent spouses bought back the property at the same amount they paid the liquidator, suggesting no intention to profit from a sale, but rather to retain ownership of their property. On the issue of monthly rentals and attorney's fees: The Supreme Court deleted the award of monthly rentals and attorney's fees in favor of the respondents. The Court found no basis for the award of monthly rentals, as the respondents' appeal brief did not specifically claim back rentals, and the CA did not discuss the basis for the P25,000.00 monthly rental in the body of its decision. Regarding attorney's fees, the Court held that an award for attorney's fees must be stated in the text of the decision with a clear legal justification, not merely in the dispositive portion. Since the CA failed to provide such justification, the award was disallowed. The Court emphasized that the award of attorney's fees requires factual, legal, and equitable justification.
Main Doctrine
A contract denominated as a Deed of Sale with Right to Repurchase may be considered an equitable mortgage if any of the circumstances enumerated under Article 1602 of the Civil Code are present, indicating that the real intention of the parties was to secure the payment of a debt.