SECOND DIVISION
[G.R. No. 201211. November 21, 2018.]
FELIPE C. BAREZ AND MARIE YVETTE C. BAREZ, petitioners, vs. ALAY A. LINSAG, TARAMIHIN LINSAG, TERESITA L. LINSAG-SAYGADAN, LANDO C. LINSAG, JOVY L. BAREDA, CARANGAN C. DAVAO (LINSAG), LANIE L. GALAMINTUN AND BELEN LINSAG, respondents.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated 21 November 2018which reads as follows:
"G.R. No. 201211 (Felipe C. Barez and Marie Yvette C. Barez vs. Alay A. Linsag, Taramihin Linsag, Teresita L. Linsag-Saygadan, Lando C. Linsag, Jovy L. Bareda, Carangan C. Davao (Linsag), Lanie L. Galamintun and Belen Linsag). — This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to annul and set aside the Decision 2 of the Court of Appeals (CA) dated April 29, 2011, which reversed the decision of the Regional Trial Court (RTC), and the Resolution 3 dated March 06, 2012, likewise issued by the CA in CA-G.R. CV. No. 00731.
The Factual Antecedents
Petitioner Felipe C. Barez (Felipe), married to the late Yolanda C. Barez (Yolanda), and his daughter, petitioner Marie Yvette C. Barez (Marie) are residents of Barangay Tigatto, 51-D, Buhangin District, Davao City. 4 Respondents are the children and only heirs of spouses Davao (Moro) and Darangen (Mora) (spouses Davao and Darangen) who are now deceased. 5 The subject of this dispute is a 2.4826 hectares of land planted with coconuts, corn and vegetable and located in Tigatto, Buhangin, Davao City, hereinafter referred to as the subject land. 6
On December 4, 1951, the subject land was registered in the name of the spouses "Davao (Moro)" and "Darangen (Mora)" under Transfer Certificate of Title (TCT) No. T-3350. 7 However, on July 22, 1957, spouses Davao and Darangen mortgaged the subject lot to the Philippine National Bank (PNB) to secure a loan worth P600.00. 8
Various events relevant in this case happened on March 26, 1963. On this day, the entire obligation to PNB worth P676.45 was paid by spouses Barez, in the name of spouses Davao and Darangen. 9 Considering that the subject land was previously sold by Davao to a certain Isabel Odal (Isabel), a Deed of Resale between Isabel and Davao was executed on the same date for a sum of P900.00, which was also financed by spouses Barez. 10 Afterwards, Davao sold the subject land to Yolanda for P3,300.00 evidenced by a Deed of Sale of Land. 11 Notably, the title of the subject land was transferred and registered in the name of Yolanda under TCT No. 11655 on the same day, March 26, 1963. 12 CAIHTE
Several years later, Yolanda donated the subject lot to her daughter, Marie, who became the registered owner under TCT No. 127843, through a Deed of Donation dated July 15, 1987. 13
On May 7, 1997, Alay A. Linsag, Taramihin Linsag, Teresita L. Linsag Saygadan, Lando C. Linsag, Jovy L. Bareda, Carangan C. Davao, Lanie L. Galamitun, and Belen Linsag (respondents) filed Civil Case No. 25, 275-97 against spouses Barez, and later included petitioner Marie. 14 The civil case sought the declaration of the Deed of Sale dated March 26, 1963 as null or, in the alternative, an equitable mortgage. 15
The respondents claim that the real intention of their parents in executing the Deed of Sale was not to sell but only to transfer the mortgage of the subject land from PNB to spouses Barez for a period of ten (10) years. 16
Hence, on May 7, 1997, respondents filed a complaint for Declaration of Nullity of Sale and Mortgage, Reconveyance, Accounting and Damages before the RTC of Davao City. 17 This complaint was later amended to include petitioner Marie. 18
Decision of the RTC
The RTC of Davao City issued a Decision dated March 31, 2005 dismissing respondents' complaint. The dispositive portion of the Decision reads: 19
WHEREFORE, judgement is hereby rendered in favor of the defendants. The Amended Complaint is hereby ordered DISMISSED.
No pronouncement as to costs.
SO ORDERED.
The RTC found that the transaction between spouses Davao and Darangen with the spouses Barez is a genuine Deed of Sale over the subject land, and not an equitable mortgage. 20 The said Deed of Sale which was notarized and approved by the then City Mayor Carmelo Porras is valid and binding upon the whole world, including the respondents. 21 However, the RTC did not grant any damages against the respondents as the latter merely attempted to exercise a right over the land which they believed was theirs. 22
This prompted the respondents to file a Notice of Appeal dated April 18, 2005 to the CA. 23
Decision of the CA
On April 29, 2011, the CA of Cagayan de Oro City promulgated a Decision granting the appeal of the respondents, to wit: 24
ACCORDINGLY, the appeal is GRANTED. The Decision dated March 31, 2005 of the Regional Trial Court, 11th Judicial Region, Branch 11, Davao City, is REVERSED. The Registrar of Deeds of Davao City is DIRECTED to cancel TCT No. 1127843 issued in the name of Marie Yvette C. Barez and to issue a new title in the name of the heirs of Davao (Moro) and Daragen (Mora), subject to the equitable mortgage rights of the spouses Yolanda and Felipe Barez.
SO ORDERED.
The CA found that the Deed of Sale over the subject land is a transaction for equitable mortgage. 25 This finding is based on Article 1602 of the New Civil Code which provides for a presumption that a contract is an equitable mortgage when either (1) the vendee remains in possession of the land as a lessee and/or, (2) it can fairly be inferred that the real intention of the parties is for the transaction to secure the payment of a debt, to wit: 26 DETACa
ARTICLE 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
xxx xxx xxx
(2) When the vendor remains in possession as lessee or otherwise;
xxx xxx xxx
(6) In any other case where it may be fairly be inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. (Emphasis supplied)
Moreover, considering the alleged loan of spouses Davao and Darangen to the spouses Barez, the CA found the direct transfer of title of the subject land to the spouses Barez as a pactum commissorium. 27 This is clearly prohibited under Article 2088 of the New Civil Code to the effect that "the creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to the contrary is null and void." 28
Dissatisfied with the decision of the CA, petitioners filed a Motion for Reconsideration dated May 24, 2011, which was likewise denied in a Resolution promulgated on March 6, 2012. 29
Undeterred, the petitioners filed the instant petition for review on certiorari dated May 4, 2012. 30
The Issue
The petitioners anchor their plea for the reversal of the assailed decisions on the following issue: 31
WHETHER OR NOT THE PARTIES EFFECTIVELY ENTERED INTO A CONTRACT OF ABSOLUTE SALE OR AN EQUITABLE MORTGAGE OF THE SUBJECT LAND
The Court's Ruling
The petition is bereft of merit.
The transaction between spouses Davao and Darangen, and spouses Barez is an equitable mortgage.
In Rockville Excel International Exim Corporation v. Spouse Culla and Miranda, this Court defined an equitable mortgage "as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent." 32
Under Article 1604 of the Civil Code, a transaction purporting to be an absolute sale shall be deemed an equitable mortgage if any of the circumstances in Article 1602 of the Civil Code is present. Article 1602 of the Civil Code provides that the transaction is presumed to be an equitable mortgage in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. — (Emphasis supplied) aDSIHc
This means that the existence of any single circumstance under Article 1602, not a concurrence or an overwhelming number of such circumstances, is enough to give rise to the presumption of an equitable mortgage. In a number of cases, this Court has not hesitated to declare a supposed deed of absolute sale to be an equitable mortgage based solely on one of the enumerated circumstances under Article 1602. 33
In the instant case, paragraphs 2 and 6 of Article 1602 are present because (1) the vendor remained in possession of the property as a lessee after the purported sale, and (2) based on the circumstances surrounding the Deed of Sale, it can fairly be inferred that the parties' real intention was for the transaction to secure the payment of a debt.
Moreover, in Rockville Excel International Exim Corporation, 34 this Court discussed the (2) two requisites that must concur for the presumption of an equitable mortgage under Article 1602 of the Civil Code to arise, to wit:
(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 presence of the first requisite is undisputed. Spouses Barez and spouses Davao and Darangen entered into a contract denominated as a Deed of Sale of Land over the subject property. 35 The center of the controversy is the second requisite of the presumption which is the true intention of the parties.
Based from the facts and evidence presented, the following circumstances show that the true intention of the parties is to execute an equitable mortgage transaction:
First, the supposed vendors, spouses Davao and Darangen, became lessees and tillers of the subject land immediately after the purported sale. This was established by spouses Barez themselves, and evidenced by a "Kasabotan" executed on November 4, 1963 by Davao and respondent Taramihan. 36
Although Felipe testified that the lease was terminated after a year, it is immaterial. Paragraph 2 of Article 1602 expressly provides that when a vendor remained in possession of the subject lot even after the alleged sale, the presumption arises. This is because retention of possession over the land by the vendor is inconsistent with the acquisition of ownership under a true sale. 37
Second, it is undeniable that spouses Davao and Darangen were "sorely pressed for money" when they executed the Deed of Sale over the subject land. In Benjamin Bautista v. Shirley Unangst and Other Unknown Persons, 38 this Court reiterated the ruling that when a vendor is in urgent need of money when he executed the sale, the alleged sale will be construed as an equitable mortgage. This Court further explained that while a vendor may be aware of the terms of the contract, the urgency of obtaining the fund may force him to sign it despite knowing that the contract did not express the real agreement of both parties, to wit: 39
In several cases involving similar situations, has declared that while it was true that plaintiffs were aware of the contents of the contracts, the preponderance of the evidence showed, however, that they signed knowing that said contracts did not express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining funds. (Emphasis supplied)
It is important to remember that "necessitous men are not, truly speaking, free men; but to answer a present emergency will submit to any terms that the crafty may impose upon them." 40 ETHIDa
In the instant case, on the day of the alleged sale, spouses Barez paid the loan to PNB and the resale price to Isabel on behalf of spouses Davao and Darangen. In effect, this has saved the subject land from an impending foreclosure. Spouses Davao and Darangen were also spared from further financial distress.
From the foregoing facts and jurisprudence, it is evident that spouses Davao and Darangen, wanting to save the subject land from foreclosure, obtained funds from spouses Barez. Afterwards, a Deed of Sale over the subject land was executed. However, the real intention of spouses Davao and Darangen was not to give up or convey ownership of the land they just saved to spouses Barez. Instead, the Deed of Sale was executed simply to guarantee the payment of the funds which spouses Davao and Darangen obtained from spouses Barez.
Third, spouses Davao and Darangen are both uneducated Muslims, and the Deed of Sale they executed is written in English, a language that they do not comprehend. There is no showing that they were made to understand the contents of the Deed of Sale before they signed it. Thus, they could not have known that they were signing a contract of sale instead of a mortgage contract.
Moreover, the fact that the Deed of sale was notarized and approved by the then Mayor of Davao City pursuant to the Administrative Code of Mindanao and Sulu do not invalidate in any way the presumption of equitable mortgage. Petitioners failed to even argue that the Deed of Sale was actually explained to and understood by spouses Davao and Darangen.
Finally, the Arbitration Award dated October 9, 1981 issued by the Barangay Captain of Tigatto, Buhangin, Davao City cannot overturn the overwhelming facts and evidence showing that the transaction is an equitable mortgage. The Linsags allegedly acknowledged the valid possession and ownership of the petitioners in the Arbitration Award for a consideration of Two Hundred pesos (P200.00). However, it is important to note that out of the eight (8) respondents only the thumbmark of Tarahimin appears therein, and no explanation for it was presented. Thus, this evidence is unconvincing.
While the Deed of Sale over the subject land is found to be an equitable mortgage, the foregoing pronouncement is not a bar to the collection of any unpaid loan to the petitioners. Let it be made clear that the petitioners have the right to foreclose the mortgage through filing the proper legal actions.
WHEREFORE, premises considered the instant petition is DENIED. The Decision dated April 29, 2011 and Resolution dated March 06, 2012 of the Court of Appeals in CA-G.R. CV. No. 00731 are AFFIRMED.
SO ORDERED." (Reyes, J., Jr., J., designated as additional Member per S.O. No. 2587 dated August 28, 2018)
Very truly yours,
(SGD.) MARIA LOURDES C. PERFECTODivision Clerk of CourtBy:TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 12-41.
2. Penned by Associate Justice Romulo V. Borja with Associate Justices Rodrigo F. Lim, Jr. and Edgardo T. Lloren concurring; id. at 45-60.
3.Id. at 63-68.
4.Id. at 88.
5.Id. at 147-170.
6.Id. at 148-149.
7.Id. at 48.
8.Id. at 46.
9.Id. at 151.
10.Id.
11. Id. at 89.
12. Id.
13. Id. at 95.
14. Id. at 88-92.
15. Id. at 49.
16. Id. at 53.
17. Id. at 88-92.
18. Id. at 93-99A.
19. Id. at 158.
20. Id.
21. Id.
22. Id.
23. Id. at 159.
24. Id. at 59-60.
25. Id. at 56-57.
26. Id.
27. Id. at 58.
28. Id.
29. Id. at 63-67.
30. Id. at 12-43.
31. Id. at 30.
32. 617 Phil. 328, 336 (2009).
33. Lustan v. Court of Appeals, 334 Phil. 609, 615 (1997); Ramirez v. Court of Appeals, 356 Phil. 1, 13 (1998); Martinez v. Court of Appeals, 415 Phil. 241, 258 (2001).
34. Supra note at 32, at 337.
35. Rollo, p. 48.
36. Id. at 56.
37. Id. at 56-57.
38. 579 Phil. 528 (2008).
39. Id. at 540.
40. Id.