Singson v. Carpio
REITERATIONFacts
The Antecedents: Respondents spouses Nar Christian Carpio and Cecilia Cao Carpio claimed ownership over a 51.24-square meter property in Tondo, Manila, covered by TCT No. 286305, which they acquired from Primitiva Cayanan Vda. De Caamic on February 16, 2007. They alleged that they had been paying realty taxes since then. Prior to and after the sale, petitioner Annaliza C. Singson and Primitiva occupied the property. After Primitiva's death on July 21, 2007, Enriquito C. Caamic, claiming to be her son and heir, asserted interest in the property. Despite demands, petitioner and Enriquito refused to vacate, leading respondents to file a complaint for recovery of possession and ownership with damages. Petitioner claimed she was Primitiva's grandniece who took care of her and helped secure a ₱135,000.00 loan from respondents to redeem the property. She alleged that respondents made Primitiva and her sign a "Bilihan ng Lupa" as assurance. Petitioner later received a "Kasunduan" indicating Primitiva sold the property for ₱450,000.00, which she claimed was the first time she saw it. Atty. Richard Anolin certified he did not notarize a Deed of Sale dated February 18, 2007, allegedly executed by Primitiva and petitioner. Petitioner and Enriquito filed a falsification case against respondents. Respondents eventually registered the property under their names. Petitioner asserted the "Bilihan ng Lupa" was an equitable mortgage and the transfer of title was fraudulent. Procedural History: The Regional Trial Court (RTC) of Manila, Branch 47, ruled in favor of the respondents, ordering petitioner to vacate, pay monthly rentals, and attorney's fees. The RTC considered the "Bilihan ng Lupa" as a contract of sale with conventional redemption, holding that Primitiva's right to redeem ended with her death. The Court of Appeals (CA) affirmed the RTC's decision, but characterized the "Bilihan ng Lupa" as an equitable mortgage. However, the CA found that neither petitioner nor Enriquito had the legal personality to redeem the property, thus affirming the transfer of title to respondents. The Petition: Petitioner seeks to reverse the CA's decision, arguing that the "Bilihan ng Lupa" is a pactum commissorium, making the transfer of ownership void. She contends that respondents automatically appropriated the mortgaged property instead of foreclosing it. She also questions the claims for rentals and attorney's fees.
Issue(s)
Whether the Court of Appeals gravely erred in affirming the Regional Trial Court despite proof that the "Bilihan ng Lupa" is in the nature of a pactum commissorium. Whether respondents have established their ownership and right to recover possession of the subject property. Whether respondents are entitled to moral damages and attorney's fees.
Ruling
The Supreme Court granted the petition, reversed and set aside the decisions of the CA and RTC, dismissed the respondents' complaint for lack of merit, declared Transfer Certificate of Title No. 286305 in the names of respondents void and cancelled, and ordered the reinstatement of Transfer Certificate of Title No. 267017 in the name of Primitiva Cayanan Caamic, subject to respondents' equitable mortgage right to foreclose the property.
Ratio Decidendi
On the nature of the "Bilihan ng Lupa" and pactum commissorium: The Court found that the "Bilihan ng Lupa" is an equitable mortgage, as supported by two circumstances under Article 1602 of the Civil Code: (1) Primitiva and petitioner remained in possession of the property for five years despite the purported sale, and (2) Primitiva was in dire need of money to redeem the property. The Court emphasized that a contract appearing as a sale with pacto de retro should be regarded as an equitable mortgage when given as security for a loan, especially in case of doubt, as it involves a smaller transmission of rights. The Court noted that respondents failed to present evidence of foreclosure and instead relied on their Torrens title. The registration of the property under respondents' names, without foreclosure, constituted a prohibited pactum commissorium under Article 2088 of the Civil Code, which prohibits a creditor from appropriating or disposing of the mortgaged property. Therefore, the transfer of title was void. On respondents' claim of ownership and right to possession: The Court held that respondents failed to prove by preponderant evidence their entitlement to ownership and possession. While they presented a Torrens title, tax declarations, and receipts, these were insufficient without proof of acquisition through foreclosure of the equitable mortgage. The "Bilihan ng Lupa" expressly allowed Primitiva and petitioner to remain in possession for five years, contradicting respondents' claim of immediate possession after purchase. The Court reiterated that a certificate of title is merely evidence of ownership and cannot be used to protect a usurper or as a shield for fraud. Since respondents did not prove they acquired ownership through foreclosure, their complaint for recovery of possession must be dismissed. On the award of moral damages and attorney's fees: The Court found no basis to award moral damages and attorney's fees to petitioner. Moral damages require proof of fraudulent or bad faith actions, which were not sufficiently substantiated by petitioner. The Court noted that the "Bilihan ng Lupa" was an equitable mortgage, and its transfer to respondents' names was void due to pactum commissorium, but this did not necessarily equate to fraudulent means or bad faith. Petitioner also failed to testify on any mental anguish or suffering. Regarding attorney's fees, the Court found no compelling reason under Article 2208 of the Civil Code to award them, as there was no proven bad faith on the part of respondents, and their persistence in the case could be attributed to an erroneous conviction of the righteousness of their cause.
Main Doctrine
The registration of a property under the name of the mortgagee in a manner that constitutes pactum commissorium is void, and the title issued pursuant thereto should be cancelled and reinstated in the name of the original owner-mortgagor, subject to the mortgagee's right to foreclose the equitable mortgage.