SECOND DIVISION
G.R. No. 229243, June 26, 2019
MAXIMA P. SACLOLO AND TERESITA P. OGATIA, PETITIONERS, v. ROMEO MARQUITO, MONICO MARQUITO, CLEMENTE MARQUITO, ESTER M. LOYOLA, MARINA M. PRINCILLO, LOURDES MARQUITO AND LORNA MARQUITO, RESPONDENTS.
D E C I S I O N
CAGUIOA, J.:
This is a petition for review on certiorari (Petition) under Rule 45 of the Rules of Court assailing the Decision1 of the Court of Appeals (CA) dated July 10, 2015 and the Resolution2 dated November 14, 2016 in CA-G.R. CEB-CV. No. 01796. The CA Decision denied the appeal and affirmed the Decision3 dated July 26, 2006 of Branch 3, Regional Trial Court, Guiuan, Eastern Samar (RTC), in Civil Case No. 1159, denying the Complaint on the ground that the right to repurchase/redeem the subject property had already expired.
Article 1602 of the New Civil Code of the Philippines provides that a contract shall be presumed to be an equitable mortgage, in any of the following cases:In the instant case, the RTC and CA both held that the subject Memorandum of Deed of Sale with Right of Repurchase, while purporting to be a sale with right to repurchase, was, in fact, an equitable mortgage.38 Factual findings of the lower court, more so when supported by the evidence, as in this case, command not only respect but even finality and are binding on the Court.39 Further, the findings of the RTC and the CA on the nature of the transaction have attained finality considering that the respondents never challenged the same.40The provision shall apply to a contract purporting to be an absolute sale. In case of doubt, a contract purporting to be a sale with right to repurchase shall be considered as an equitable mortgage. In a contract of mortgage, the mortgagor merely subjects the property to a lien, but the ownership and possession thereof are retained by him.
(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 case, 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.
For the presumption in Article 1602 of the New Civil Code to arise, two requirements 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. The existence of any of the circumstances defined in Article 1602 of the New Civil Code, not the concurrence nor an overwhelming number of such circumstances[,] is sufficient for a contract of sale to be presumed an equitable mortgage.
If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. However, if the records appear to be contrary to the evident intention of the contracting parties, the latter shall prevail.
The nomenclature given by the parties to the contract is not conclusive of the nature and legal effects thereof. Even if a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with mortgage, and that the document does not express the true intent of the parties.
There is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. The decisive factor in evaluating such deed is the intention of the parties as shown by all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct, and declarations of the parties before, during and after the execution of said deed, and generally all pertinent facts having a tendency to determine the real nature of their design and understanding. As such, documentary and parol evidence may be adduced by the parties. When in doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser transmission of rights and interests over the property in controversy.37
The provisions of the Civil Code governing equitable mortgages disguised as sale contracts, like the one herein, are primarily designed to curtail the evils brought about by contracts of sale with right to repurchase, particularly the circumvention of the usury law and pactum commissorium. Courts have taken judicial notice of the well-known fact that contracts of sale with right to repurchase have been frequently resorted to in order to conceal the true nature of a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hard-pressed to meet even their basic needs or to respond to an emergency, leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain the much-needed loan from unscrupulous money lenders.48Respondents, for their part, are not without remedy. They are entitled to collect the outstanding amount of petitioners' loan, plus interest, and to foreclose on the subject property should the latter fail to pay the same.49 To allow respondents to appropriate the subject lot without prior foreclosure would produce the same effect as a pactum comissorium.50 Upon full satisfaction of the debt, the mortgage, being a security contract, shall be extinguished51 and the property should be returned to herein petitioners. As the records are bereft of any basis for the determination of the outstanding amount of the loan, the Court is left with no choice but to remand the instant case to the RTC for a determination of the outstanding amount of the loan and the imposition of the applicable interest, and for a declaration of whether or not respondents are entitled to foreclose on the equitable mortgage.
Endnotes:
1Rollo, pp. 33-42. Penned by Associate Justice Germano Francisco D. Legaspi, with Associate Justices Pamela Ann Abella Maxino and Jhosep Y. Lopez concurring.
2 Id. at 44-46. Penned by Associate Justice Germano Francisco D. Legaspi, with Associate Justices Edgardo L. Delos Santos and Pamela Ann Abella Maxino concurring.
3 Id. at 69-80. Penned by Presiding Judge Rolando M. Laode-o.
4 Id. at 34.
5 Id.
6 Id.
7 Id. at 35.
8 Id. at 34.
9 Id.
10 Id.
11 Id.
12 Id.
13 Id.
14 Id. at 35.
15 Id.
16 Id.
17 Id.
18 Id. at 40 and 79.
19 Art. 1606. The right referred to in article 1601, in the absence of an express agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.
20Rollo, p. 80.
21 Id.
22 Id. at 36.
23 Id. at 41.
24 Id.
25 Id. at 36.
26 Id. at 37.
27 Id.
28 Id. at 42.
29 Id. at 41.
30 Id. at 40.
31 Art. 1142. A mortgage action prescribes after ten years.
32 Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
33Rollo, p. 41.
34 Id.
35 Id. at 45.
36 507 Phil. 287 (2005).
37 Id. at 302-304. Citations omitted. Emphasis supplied.
38Rollo, pp. 39-40.
39Spouses Lumayag v. Heirs of Nemeño, 553 Phil. 293, 303 (2007).
40Rollo, p. 41.
41 Id. at 45 and 80.
42 CIVIL CODE, Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.
Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
43 Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
44Rollo, pp. 34 and 39.
45 Id. at 81-84.
46 Id. at 85-87.
47 CIVIL CODE, Art. 1607. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded i the Registry of Property without a judicial order, after the vendor has been duly heard.
48 See Heirs of Reyes, Jr. v. Reyes, 641 Phil. 69, 86-87 (2010).
49Montevirgen v. CA, 198 Phil. 338, 346-347 (1982).
50 Id. at 346.
51 CESAR L. VILLANUEVA, LAW ON SALES 547 (2009 ed).