Enriquez v. Heirs of Spouses Nieves and Alfredo Baldonado
REITERATIONFacts
The Antecedents: Nieves Basaca, wife of Alfredo Baldonado, executed a real estate mortgage on May 3, 1990, in favor of Ricardo Enriquez Sr. for a loan of P36,000.00, payable within six months. Subsequently, on June 27, 1990, they entered into another agreement concerning additional loans, totaling P153,000.00, secured by the same property. The spouses Baldonado made payments amounting to P42,000.00. On August 1, 1990, Nieves Basaca, as vendor (nagbili), and Ricardo Enriquez, as vendee (bumili), executed a document denominated as Pagbibili na may Sanglaan (sale with mortgage) for P250,000.00, with an interest of P75,000.00, payable within six months, and a redemption price of P325,000.00. Ten days later, on August 10, 1990, the same parties executed a Kasulatan ng Bilihang Muling Mabibili (sale with right of repurchase) for P350,000.00, granting the vendor the right to repurchase the property between May 17 and November 17, 1990. The spouses Baldonado were in dire need of money for hospitalization expenses. Procedural History: Due to the failure of the spouses Baldonado to exercise their right of repurchase, petitioner Ricardo Enriquez Sr. filed a case for consolidation of ownership of the properties before the Regional Trial Court (RTC), Branch XXIV, Biñan, Laguna, docketed as Case No. B-3461. The spouses Baldonado admitted the execution of the Kasulatan but denied it was a true sale with right of repurchase, averring it was a contract of loan with mortgage. The RTC rendered a summary judgment in favor of the petitioner, declaring him the absolute owner and ordering the cancellation of titles and delivery of possession. On appeal, the Court of Appeals (CA) set aside the RTC's decision, declared the Kasulatan an equitable mortgage, and granted the respondents the right to redeem the properties upon payment of their outstanding indebtedness. The CA denied petitioner's motion for reconsideration but clarified that the redemption period should be fixed at 30 days from the finality of the judgment, citing Gloria-Diaz v. Court of Appeals. The Petition: Petitioner Ricardo G. Enriquez Sr. filed a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to set aside the CA's decision. The petitioner raised three issues: (1) whether the CA gravely erred in setting aside the summary judgment of the RTC when its decision purportedly supported the RTC's action; (2) whether the CA gravely erred in declaring the agreement as an equitable mortgage when the issue was merely the expiration of the redemption period; and (3) whether the CA gravely erred in not confirming the award of damages.
Issue(s)
Whether the Court of Appeals erred in setting aside the summary judgment rendered by the Regional Trial Court. Whether the Court of Appeals erred in declaring the agreement between the parties as an equitable mortgage. Whether the Court of Appeals erred in not confirming the award of damages in favor of the petitioner.
Ruling
The petition is DENIED. The Court of Appeals did not err in declaring the "KASULATAN NG BILIHANG MULING MABIBILI" as an equitable mortgage and in setting aside the summary judgment of the Regional Trial Court. The award of damages was dismissed for want of evidence.
Ratio Decidendi
On the issue of summary judgment: The Court held that the CA erred in upholding the trial court's recourse to summary judgment. The respondents' answer to the petitioner's complaint raised a genuine issue regarding the true nature of their contract, specifically whether it was a sale with right of repurchase or a loan with mortgage. According to Rule 35, Section 3 of the Rules of Court, a summary judgment can only be rendered if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Since a factual issue concerning the contract's nature was disputed, the trial court should have heard the case on the merits. The CA correctly identified this procedural anomaly when it set aside the summary judgment, even though it initially seemed to support the trial court's action. On the issue of equitable mortgage: The Court affirmed the CA's ruling that the "KASULATAN NG BILIHANG MULING MABIBILI" is an equitable mortgage, not a sale with right to repurchase. It reiterated the principle that courts are not bound by the title or name given to a contract by the parties; the decisive factor is the intention of the parties, which can be shown by their conduct, words, actions, and deeds. The Court cited Article 1602 of the Civil Code, which presumes a contract to be an equitable mortgage in cases of unusually inadequate price, vendor remaining in possession, execution of another instrument extending redemption, purchaser retaining part of the purchase price, vendor binding himself to pay taxes, or any other case where the real intention is to secure a debt. The Court found that the circumstances in this case, including the parties' prior agreements, the respondents' continued possession and payment of taxes, their enjoyment of the fruits of the property, and the potentially inadequate purchase price, strongly indicated that the transaction was intended to secure a debt. On the issue of damages: The Court noted that the petitioner's claim for moral and exemplary damages was dismissed by the trial court for want of evidence. The CA did not disturb this finding. Therefore, consistent with the trial court's ruling and the lack of any reversible error on this point by the CA, the dismissal of the damages claim stands.
Main Doctrine
The Supreme Court reiterated that the nature of a contract is determined by the intention of the parties, which can be inferred from their conduct, words, actions, and deeds prior to, during, and immediately after its execution, rather than solely from the terminology used. When a contract is presented as a sale with a right to repurchase, it is presumed to be an equitable mortgage if any of the circumstances under Article 1602 of the Civil Code are present, such as unusually inadequate price, vendor remaining in possession, execution of another instrument extending redemption, purchaser retaining part of the price, vendor binding himself to pay taxes, or any other case where the transaction is clearly intended to secure a debt.