SPOUSES
CESAR R. ROMULO G.R. No.
151217
and NENITA S. ROMULO,
Petitioners, Present:
QUISUMBING, J.,
Chairperson,
-
versus - CARPIO,
CARPIO MORALES,
TINGA, and
SPOUSES
MOISES P. LAYUG, JR., VELASCO,
JR., JJ.
and FELISARIN LAYUG,
Respondents.
Promulgated:
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Tinga,
J.:
This
is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the Court of Appeals’ Decision[1] and
Resolution[2] in
CA-G.R. CV No. 63965. Said Decision reversed and set aside the Decision[3] of
the Regional Trial Court (RTC), Branch 258,
The
following factual antecedents are matters of record.
On
Petitioners averred in their
complaint that sometime in 1986, they obtained from respondents a loan in the
amount of P50,000.00 with a monthly interest of 10%, which subsequently
ballooned to P580,292.00. To secure the payment of the loan, respondents
allegedly duped petitioners into signing a Contract of Lease and a Deed of
Absolute Sale covering petitioners’ house and lot located at Phase II, BF
Homes, Sucat, Parañaque and covered by Transfer Certificate of Title (TCT) No.
S-71528. The Deed of Absolute Sale purportedly facilitated the cancellation of
petitioners’ title on the house and lot and the issuance of TCT No. 20489 in
the name of respondents. Thus, petitioners prayed for the nullification of the
Deed of Absolute Sale, the contract of lease and TCT No. 20489, and the award
of moral and exemplary damages.[5]
Respondents
denied petitioners’ allegations. In their Answer,[6]
they vouched for the validity of the Deed of Absolute Sale, particularly as having
been voluntarily executed by the parties for the purpose of extinguishing
petitioners’ indebtedness to respondents. As consideration of the sale,
respondents allegedly paid the amount of P200,000.00 in addition to the
writing off of petitioners’ obligation to them. That they allowed petitioners
to occupy the house and lot as lessees thereof was founded on the trust they
reposed on petitioners, claimed respondents.[7]
Prior
to the filing of Civil Case No. 96-0172, respondent Moises Layug, Jr. (“Moises”)
filed Civil Case No. 9422, an action for ejectment, against petitioners to
compel the latter to vacate the house and lot allegedly sold by petitioners to Moises
and subsequently rented out by him to petitioners. Moises alleged that petitioners
violated the terms of the Contract of Lease when the latter failed to pay any
rental or exercise their option to repurchase the house and lot and refused to
vacate the property despite demand. The Metropolitan Trial Court (MeTC), Branch
77, Parañaque dismissed the complaint for lack of cause of action.[8]
The RTC, Branch 257, Parañaque, likewise dismissed Moises’ appeal based on its
finding that the parties did not intend to enter into a lease agreement.[9]
The Court of Appeals denied Moises’ petition for review on the ground of late
filing.[10] Upon
elevation to this Court, Moises’ petition for review on certiorari was denied
with finality by this Court.[11]
On
WHEREFORE, the plaintiffs having been able to prove
their claim by preponderance of evidence, judgment is hereby rendered in their
favor and against spouses Moises P. Layug and Felisarin Layug whereby the
Contract of Lease as well as the Deed of Sale allegedly executed by the herein
parties are hereby declared NULL and VOID and of no force and effect and the
Register of Deeds of the City of Parañaque is hereby ordered to cancel Transfer
Certificate of Title No. 20489 registered in the names of MOISES P. LAYUG
married to FELISARIN LAYUG and to issue a new one in the name of Spouses Cesar
R. Romulo and Nenita S. Romulo, upon the payment of the required fees by the
plaintiffs.
Likewise,
defendants Spouses Moises P. Layug and Felisarin Layug are hereby ordered to
pay jointly and severally Spouses Cesar R. Romulo and Nenita S. Romulo the
following, to wit:
1. The amount of P100,000.00 as and by way of moral
damages;
2. The amount of P80,000.00 as exemplary damages;
3. The amount of P50,000.00 as and by way of
attorney’s fees; and
4. The costs of suit.
SO ORDERED.[12]
Respondents elevated the matter to
the Court of Appeals, questioning, among others, the trial court’s finding that
the contract between petitioners and respondents was an equitable mortgage.[13]
The Court of Appeals reversed and set aside the RTC Decision, mainly on the
ground that petitioners failed to present sufficient evidence to prove their allegation
that their signatures to the Deed of Absolute Sale were obtained fraudulently.
Their motion for reconsideration rebuffed,[14]
petitioners filed the instant petition raising the lone issue of whether or not
the transaction between the parties constitutes an equitable mortgage.
On
this issue, the RTC and the Court of Appeals differ in opinion. The trial court
based its declaration that an equitable mortgage was intended by the parties on
the finding that petitioners remained in possession of the house and lot even
after the property was supposedly sold to respondents. The trial court also
gave evidentiary weight to the decisions of the MeTC and RTC dismissing the
action for ejectment in Civil Case No. 9422, where both courts found that petitioners
neither vacated the property nor paid any rental even after the execution of
the Deed of Absolute Sale. The Court of
Appeals disagreed and declared that an absolute sale was contemplated by the
parties based on the express stipulations in the Deed of Absolute Sale and on
the acts of ownership by respondents subsequent to its execution.
Whether or not the parties intended
an equitable mortgage is a factual issue. As a general rule, factual review is
beyond the province of this Court. One of the exceptions to the rule is
exemplified by the instant case where the factual findings of the RTC and Court
of Appeals are contradictory.
That petitioners obtained loans from
respondents between 1985 and 1987, which remained unpaid up to the time of the
execution of the assailed Deed of Absolute Sale, is established.[15] That
petitioners signed the assailed instrument is also not disputed. Indeed, they admitted
having signed said document qualifying, however, that they were forced by
respondents to execute the same for the purpose of securing their indebtedness to
respondents.[16]
Respondents, on the other hand, insisted that the parties executed the Deed of
Absolute Sale as an honest-to-goodness sales transaction.
Respondents, however, admitted further
that in addition to the amount of P200,000.00 stipulated in the Deed of
Absolute Sale, the parties agreed to write off petitioners’ loan as
consideration of the sale, although this clause was not expressed in the instrument.[17]
From respondents’ admission, it can be gathered that the assailed Deed of
Absolute Sale does not reflect the true arrangement of the parties. Now, is petitioners’
submission that the parties actually agreed to subject the house and lot as
security for their unpaid obligation supported by the evidence? Did the parties
execute the assailed Deed of Absolute Sale with the intention of subjecting petitioners’
house and lot covered by the deed as a mere security for the payment of their
debt?
The form of the instrument cannot
prevail over the true intent of the parties as established by the evidence. We
have also decreed that in determining the nature of a contract, courts are not
bound by the title or name given by the parties. The decisive factor in evaluating such agreement
is the intention of the parties, as shown not necessarily by the terminology
used in the contract but by their conduct, words, actions and deeds prior to,
during and immediately after execution of the agreement.[18] In
order to ascertain the intention of the parties, their contemporaneous and
subsequent acts should be considered. Once the intention of the parties has
been ascertained, that element is deemed as an integral part of the contract as
though it has been originally expressed in unequivocal terms.[19]
As such, documentary and parol evidence may be submitted and admitted to prove
such intention. And, in case of doubt, a
contract purporting to be a sale with right to repurchase shall be construed as
an equitable mortgage.[20]
Between 1985 and 1987, petitioner
Nenita Romulo (“Nenita”) obtained from respondent Felisarin Layug (“Felisarin”)
loans in various amounts totaling around P500,000.00. Being close
friends at that time, Felisarin did not require any written instrument to
secure payment, other than the title to the house and lot, which Nenita handed to
Felisarin sometime in 1988.[21] When
respondents demanded payment of the loan, petitioners defaulted. Nevertheless, as
admitted by Layug, despite her repeated demands, she allowed petitioners some
more time within which to pay their debts.[22] Felisarin
claimed that eventually petitioners offered their house and lot as payment for
their debt because petitioners no longer had any money.[23] However,
even after the execution of the assailed Deed of Absolute Sale, respondents
continued to grant petitioners loan accommodations as evidenced by the three
promissory notes executed by petitioner Cesar Romulo.[24]
Respondents’ continuing to lend money
to petitioners does not make sense if the intention of the parties was really to
extinguish petitioners’ outstanding obligation. The logical and inevitable
conclusion is that respondents deemed it wise to formalize a security
instrument on petitioners’ house and lot by executing the Deed of Absolute Sale
after realizing that petitioners could no longer fully satisfy their obligation
to respondents. At that time, as petitioners were hard-pressed to come up with
funds to pay their loan, they were hardly in a position to bargain. The
preponderance of evidence shows that they signed knowing that said documents did
not express their real intention, and if they did so notwithstanding this, it
was due to the urgent necessity of obtaining funds. “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.”[25] The
circumstances surrounding the execution of the Deed of Absolute Sale,
particularly the fact that respondents continued to extend some loans to
petitioners after its execution, precludes the Court from declaring that the
parties intended the transfer of the property from one to the other by way of
sale.
Consistent with the foregoing state
of the evidence, Articles 1604 and 1602 of the Civil Code come into play. The
articles provide that when the parties to a contract of sale actually intended
such contract to secure the payment of an obligation, it shall be presumed to
be an equitable mortgage:
Art. 1602. The contract shall be 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
vendor binds himself to pay the taxes on the thing sold;
5) When the
purchaser retains for himself a part of the purchase price;
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. (Emphasis
supplied.)
Art. 1604. The provisions of Article 1602 shall also
apply to a contract purporting to be an absolute sale.
For the presumption of equitable mortgage
to arise, two requisites must be satisfied, namely: that the parties entered
into a contract denominated as a contract of sale and that their intention was
to secure an existing debt by way of mortgage.
Under Article 1604 of the Civil Code, a contract purporting to be an
absolute sale shall be presumed to be an equitable mortgage should any of the
conditions in Article 1602 be present.[26] To
stress, the existence of any one of the conditions under Article 1602, not a
concurrence, or an overwhelming number of such circumstances, suffices to give
rise to the presumption that the contract is an equitable mortgage.[27]
It must be emphasized too, however, that there is no conclusive test to
determine whether a deed absolute on its face is really a simple loan accommodation
secured by a mortgage. In fact, it is often a question difficult to
resolve and is frequently made to depend on the surrounding circumstances of
each case. 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.[28]
The Court has not hesitated to
declare a purported contract of sale as an equitable mortgage even when only
one of the enumerated circumstances under Article 1602 is proved.[29] In
the case at bar, petitioners remained in possession of the house and lot even
after the execution of the Deed of Absolute Sale. Moreover, they remained in
possession of the property for more than the reasonable time that would suggest
that petitioners were mere lessees thereof. For one, it took respondents more
than five years from the time of the execution of the Deed of Absolute Sale and
the Contract of Lease to file the action for ejectment. Within this period,
petitioners neither paid any rental nor exercised the option to buy purportedly
the leased property from respondents. Incidentally, in the decisions of the
MeTC and the RTC in the separate action for ejectment, both lower courts
observed that when petitioners were made to sign a blank document, which turned
out to be a Contract of Lease of their house and lot, they were of the belief
that the blank document would serve only as guaranty for the payment of their
obligation to respondents.
The claim that petitioners’
possession of the house and lot was by sheer tolerance of respondents is
specious. Respondents could not explain why they allowed petitioners more than
five years to look for another place to transfer. These circumstances only support
the conclusion that the parties never really intended to transfer title to the property.
Under paragraph 2 of Article 1602, where the purported vendor remains in
possession of the property subject of the sale and it can be inferred that the
true intention of the parties was to secure an existing debt, the transaction shall
be deemed an equitable mortgage.
Under paragraph 1 of Article 1602,
where the purchase price is inadequate, a contract of sale is also presumed to
be an equitable mortgage. Based on respondents’ evidence, petitioners’ property
was valued at P700,000.00 but the assailed Deed of Absolute Sale stated
a consideration of only P200,000.00. Contrary to the appellate court’s
declaration that the inadequacy of the purchase price is not sufficient to set
aside the sale, the Court finds the same as clearly indicative of the parties’
intention to make the property only a collateral security of petitioners’ debt.
The Court is not convinced that petitioners would allow the sale of their
residential property for even less than half of its market value.
The appellate court ruled that petitioners
failed to rebut the presumption of the genuineness and due execution of the
questioned Deed of Absolute Sale. Based on the examination of the assailed instrument
and the Contract of Lease and the testimonies of the parties, the Court cannot
sustain respondents’ claim that petitioners offered to sell their house and lot
in satisfaction of their indebtedness. As observed by the trial court, the
Contract of Lease appears to have been signed sometime in November 1988 or
before the execution of the Deed of Sale. Respondents were unable to explain
why they had leased the property to petitioners before its supposed purchase by
respondents. Furthermore, the records disclose that it was only after the
institution of the ejectment case did petitioners learn about the cancellation
of their title to the property although under the assailed Deed of Absolute
Sale, petitioners were obliged to bear the expenses of its execution and
registration. These circumstances lend credence to petitioners’ claim of the
surreptitious manner by which respondents made them sign certain documents
without completely disclosing the real import thereof.
The Supreme Court is clothed with
ample authority to review matters, even if they are not assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a just
decision of the case.[30]
Though petitioners did not raise in issue the appellate court’s reversal of the
award of damages in their favor, the Court has the discretion to pass upon this
matter and determine whether or not there is sufficient justification for the
award of damages.
The trial court described
respondents’ acts as “malevolent,” necessitating the award for moral and
exemplary damages. An award of moral damages would require certain conditions
to be met, to wit: (1) first, there must
be an injury, whether physical, mental or psychological, clearly sustained by
the claimant; (2) second, there must be a culpable act or omission factually
established; (3) third, the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) fourth, the
award of damages is predicated on any of the cases stated in Article 2219.[31]
However, petitioners are not
completely without fault. Had they exercised ordinary diligence in their
affairs, petitioners could have avoided executing documents in blank. Respondents’
wrongful act, although the proximate cause of the injury suffered by
petitioners, was mitigated by petitioners’ own contributory negligence. Hence, the
award of moral and exemplary damages must be reduced to one-half of the amounts
awarded by the trial court.[32]
WHEREFORE, the petition is GRANTED. The
Decision and Resolution of the Court of Appeals in CA-G.R. CV 63965 are REVERSED
and SET ASIDE and the Decision of the Regional Trial Court, Branch 258, P50,000.00 and P40,000.00, respectively. Costs against
respondents.
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate
Justice
PRESBITERO J. VELASCO,
JR.
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
ARTEMIO V. PANGANIBAN
Chief
Justice
[1]Promulgated
on
[19]Lorenzo Shipping Corp. v. BJ Marthel International, Inc., G.R. No. 145483, November 19, 2004, 443 SCRA 163, 175.
[22]TSN,
[23]
[29]See
Lustan v. Court of Appeals, 334 Phil. 609 (1997); Ramirez v. Court of
Appeals, 356 Phil. 1 (1998);
[32]Civil Code, Art. 2179, states: “When the plaintiff’s own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant’s lack of due care, the plaintiff ,may recover damages, but the courts shall mitigate the damages to be awarded.”