THIRD DIVISION
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SPS. CARLOS AND EULALIA RAYMUNDO and SPS. ANGELITO AND JOCELYN BUENAOBRA, Petitioners, - versus - SPS. DOMINADOR and ROSALIA BANDONG, Respondents. |
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G.R. No. 171250 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and NACHURA, JJ. Promulgated: |
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CHICO-NAZARIO,
J.:
This is a
Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court, filed by petitioners Spouses Carlos and Eulalia
Raymundo and Spouses Angelito
and Jocelyn Buenaobra seeking the reversal and setting
aside of the Decision[1]
of the Court of Appeals dated 26 September 2005 and its Resolution[2]
dated 24 January 2006 in CA-G.R. CV No. 59557. The Court of Appeals, in its assailed
Decision and Resolution, reversed the Decision[3]
of the Regional Trial Court (RTC) dated
WHEREFORE, premises considered, we
hereby GRANT the appeal. The
1. ANNULLING the Deed of Absolute Sale
dated P70,000.00 the
plaintiffs-appellants spouses Bandong owe the
defendants-appellees spouses Raymundo. The spouses Bandong
are given one (1) year from the finality of this Decision within which to pay
the P70,000.00 owed to the spouses Raymundo,
at 12% interest per annum computed from
2. ANNULLING the Deed of Absolute Sale
dated
3. ORDERING the Register of Deeds of Caloocan City to issue a new Transfer Certificate of Title covering Lot 18, Block 2 of the subdivision plan PSD 16599, a portion of Lot 1073 of the Cadastral Survey of Caloocan, in the names of the spouses Dominador and Rosalia Bandong, after the cancellation pursuant to this Decision of TCT No. 222871 currently in the names of the spouses Angelito and Jocelyn Buenaobra; and FURTHER ORDERING the said Register of Deeds to annotate in the new Transfer Certificate of Title in the names of the spouses Bandong a real estate mortgage in favor of the spouses Carlos and Eulalia Raymundo reflecting the terms of this Decision.
4. AWARDING – moral damages in the amount
of P50,000.00; exemplary damages of P20,000.00; and attorney’s
fees and expenses of litigation of P20,000.00, plus P500.00 per
proven appearance of the plaintiffs-appellants’ counsel in court – all solidarily payable by the spouses Carlos and Eulalia Raymundo and the spouses Angelito and Jocelyn Buenaobra,
to the spouses Dominador and Rosalia
Bandong.
5. ORDERING the payment of the costs of the suit, payable by the spouses Carlos and Eulalia Raymundo and the spouses Angelito and Jocelyn Buenaobra.[4]
The
factual and procedural backdrop of this case are as follows:
Eulalia was engaged in the business of buying and selling large cattle from
different provinces within the
Dominador had been working for Eulalia as one of her biyaheros for
three decades. Considering his long
years of service without any previous derogatory record, Eulalia
no longer required Dominador to post any security in
the performance of his duties.[5]
However, in 1989, Eulalia found that Dominador
incurred shortage in his cattle procurement operation in the amount of P70,000.00. Dominador
and his wife Rosalia Bandong
(Rosalia) then executed a Deed of Sale[6] in
favor of Eulalia on 3 February 1989, covering a
parcel of land with an area of 96 square meters, more or less, located at Caloocan City and registered under TCT No. 1421 (subject
property), in the name of the Spouses Bandong. On the strength of the aforesaid deed, the
subject property was registered in the names of Eulalia
and her husband Carlos Raymundo (Carlos). The subject property was thereafter sold by
the Spouses Raymundo to Eulalia’s
grandniece and herein co-petitioner, Jocelyn Buenaobra
(Jocelyn). Thus, the subject property came
to be registered in the name of Jocelyn and her husband Angelito
Buenaobra (Angelito).
After the TCT of the subject
property was transferred to their names, the Spouses Buenaobra
instituted before the Metropolitan Trial Court (MeTC)
of Caloocan City, an action for ejectment
against the Spouses Bandong, docketed as Civil
Case No. 20053, seeking the eviction of the latter from the subject
property, which the Spouses Bandong opposed on the
ground that they are the rightful owners and possessors thereof. The MeTC ruled in
favor of the Spouses Buenaobra which, on appeal, was
affirmed in toto
by the RTC[7]
and subsequently, by the Court of Appeals.[8] Finally, when the case was raised on appeal
before us in G.R. No. 109422, we
issued a Resolution[9]
dated
To assert their right to the
subject property, the Spouses Bandong instituted an
action for annulment of sale before the RTC against Eulalia
and Jocelyn on the ground that their consent to the sale of the subject
property was vitiated by Eulalia after they were
served by Jocelyn’s counsel with the demand to vacate. This was docketed as Civil Case No. C-14980. The Spouses Bandong
alleged that there was no sale intended
but only equitable mortgage for the purpose of securing the shortage incurred
by Dominador in the amount of P70,000 while employed as “biyahero” by Eulalia.
Eulalia countered that Dominador received from her a significant sum of money,
either as cash advances for the purpose of procuring large cattle or as
personal loan, and when he could no longer pay his obligations, the Spouses Bandong voluntarily ceded the subject property to her by
executing the corresponding deed of sale in her favor. Indeed, the Spouses Bandong
personally appeared before the Notary Public and manifested that the deed was
their own voluntary act and deed.
For
her part, Jocelyn maintained that she was a buyer in good faith and for value
for she personally inquired from the Register of Deeds of the presence of any
liens and encumbrances on the TCT of the subject property and found that the
same was completely free therefrom. While she admitted that she had previous
notice that Dominador and a certain Lourdes Santos (
On
WHEREFORE, judgment
is hereby rendered DISMISSING the complaint filed by the [Spouses Bandong] and ordering said [Spouses Bandong]
to pay [herein petitioners] spouses Raymundo and Buenaobra the amount of P50,000 and P30,000,
respectively, as attorney’s fees and costs of the suit.
On appeal in CA-G.R. SP No.
59557, the Court of Appeals reversed the RTC Decision and found that the
transaction entered into by Dominador and Eulalia was not one of sale but an equitable mortgage
considering that the purchase price was grossly inadequate and the Spouses Bandong remained as possessors of the subject property
after Eulalia’s alleged purchase thereof. The appellate court likewise charged Jocelyn
with knowledge that the Spouses Raymundo were not the
absolute owners of the subject property negating the presumption that she was
an innocent purchaser for value.
The Court of Appeals found
the Motion for Reconsideration filed by petitioners unmeritorious and denied
the same in its Resolution[11] dated
Hence, this instant Petition
for Review on Certiorari filed by
the petitioners assailing the Decision dated
I.
WHETHER OR NOT THE DEED OF
II.
WHETHER OR NOT JOCELYN IS A BUYER IN GOOD
FAITH.
In arguing that the sale
between Dominador and Eulalia
is valid, petitioners posit that gross inadequacy of the price is not
sufficient to invalidate the sale, and granting arguendo that insufficient consideration may void a sale, it has not been
proven that the consideration of sale between Dominador
and Eulalia was grossly inadequate.
Elaborating, petitioners
maintain that the amount of P110,000.00 (which they claimed they
have given to Dominador), or even the sum of P70,000.00
(which respondents admitted receiving), was a substantial consideration, sufficient
to support a sale contract. Mere
inadequacy of the price is not sufficient to invalidate a sale; the price must
be grossly inadequate or utterly shocking to the conscience in order to avoid a
contract of sale.
Petitioners further aver
that the alleged market value of the subject property as submitted by the
appraiser, one of respondents’ witnesses, would not serve as an objective basis
in determining the actual value of the subject property, much less the supposed
amount of its purchase price, in the absence of any logical and valid basis for
its determination.
Finally, petitioners contend that so long as
the contract was voluntarily entered into by the parties and in the absence of
a clear showing that their consent thereto was vitiated by fraud, mistake,
violence or undue influence, such as in the case at bar, the said contract
should be upheld.
We
do not agree.
An equitable mortgage is one
that - although lacking in some formality, forms and words, or other requisites
demanded by a statute - nevertheless reveals the intention of the parties to
charge a real property as security for a debt and contains nothing impossible
or contrary to law.[12]
The instances when a
contract - regardless of its nomenclature - may be presumed to be an equitable
mortgage are enumerated in the Civil Code as follows:
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 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.
Art. 1604. The
provisions of Article 1602 shall also apply to a contract purporting to be an
absolute sale.
For Articles 1602 and 1604
to apply, two requisites must concur: one, the parties entered into a contract
denominated as a contract of sale; and two, their intention was to secure an
existing debt by way of an equitable mortgage.[13]
There is no question that Dominador
and Eulalia entered into a contract of sale as
evidenced by the document denominated as Deed of Sale[14]
signed by them. As to whether the
parties intended to transfer ownership of the subject property or merely to
constitute a security for an existing debt is an issue that needs to be
addressed by this Court.
In resolving this kind of controversy, the doctrine in
Reyes v. Court of Appeals[15]
directs us to give utmost consideration to the intention of the parties in
light of the relative situation of each and the circumstances surrounding the
execution of the contract, thus:
In determining whether a deed absolute in form is a mortgage, the court is not limited to the written memorials of the transaction. 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 all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude acts, conduct, declarations of the parties, the negotiations between them leading to the deed, and generally, all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. x x x[16] (Emphasis supplied.)
By applying the aforestated principle to the case at bar, we are constrained to rule that in executing the said Deed of Sale, Dominador and Eulalia never intended the transfer of ownership of the subject property but to burden the same with an encumbrance to secure the indebtedness incurred by Dominador on the occasion of his employment with Eulalia.
By Eulalia’s own admission,[17]
it was her customary business practice to require her biyaheros
to deliver to her the titles to their real properties and to execute in her
favor the corresponding deeds of sale over the said properties as security for
the money she provided for their cattle procurement task, and since Dominador worked for Eulalia’s
business for years, he was allowed to advance the money without any security. Significantly, it was only after he incurred
a shortage that the sale contract was executed.
We are not inclined to believe the contention of the
petitioners that Dominador ceded his property to Eulalia as payment for his obligation for it is contrary to
human experience that a person would easily part with his property after
sustaining a debt. Rather, he would
first look for means to settle his obligation, and the selling of a property on
which the house that shelters him and his family stands, would be his last
resort. The only reasonable conclusion
that may be derived from Dominador’s act of executing
a Deed of Sale in favor of Eulalia is that the latter
required him to do so in order to ensure that he will subsequently pay his
obligation to her.
This conclusion is in accord with the doctrine we
enunciated in Aguirre v. Court of Appeals,[18]
that:
The explicit provision of Article 1602 that any of
those circumstances would suffice to construe a contract of sale to be one of
equitable mortgage is in consonance with the rule that the law favors the least
transmission of property rights.
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.
While we agree in the petitioners’ insistence that
inadequacy of the price is not sufficient to nullify the contract of sale,
their persistence is, however, misplaced.
It is worthy to note that the factual circumstances attendant in the
case at bar call not for the application of the legal and jurisprudential
principles on annulment of contract per se, but more aptly, of the
provisions of Articles 1602 and 1604 of the Civil Code on the construction of
the contract of sale as an equitable mortgage.
Consequently, the agreement between Dominador and Eulalia was not
avoided in its entirety so as to prevent it from producing any legal effect at
all. Instead, we construe that said
transaction is an equitable mortgage, thereby merely altering the relationship
of the parties from seller and buyer, to mortgagor and mortgagee, while the subject
property is not transferred but subjected to a lien in favor of the latter.
Moreover, granting that the purchase price is
adequate, the fact that respondents remain in possession of the subject
property after its supposed sale is sufficient to support our finding that the
contract is one of equitable mortgage and not of sale. To reiterate, 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.[19]
An innocent
purchaser for value is one who buys the property of another, without notice
that some other person has a right or interest in the property, for which a
full and fair price is paid by the buyer at the time of the purchase or before
receipt of any notice of claims or interest of some other person in the
property.[22]
Petitioners are harping on the
contention that Jocelyn was an innocent purchaser for value. Invoking the indefeasibility of a
Again, we are not persuaded. The burden of proving the purchaser’s good
faith lies in the one who asserts the same.
In discharging the burden, it is not enough to invoke the ordinary
presumption of good faith.[23] In Arrofo
v. Quiño,[24]
we have elucidated that:
[A] person dealing with registered land, [is not
required] to inquire further that what the
Thus,
while it is true x x x that
a person dealing with registered lands need not go beyond the certificate of
title, it is likewise a well-settled rule that a purchaser or mortgagee cannot
close his eyes to facts which should put a reasonable man on his guard, and
then claim that he acted in good faith under the belief that there was no
defect in the title of the vendor or mortgagor. His mere refusal to face up to the fact that
such defect exists, or his willful closing of his eyes to the possibility of
the existence of a defect in the vendor’s or mortgagor’s title, will not make
him an innocent purchaser for value, if it afterwards develops that the title
was in fact defective, and it appears
that he had such notice of the defect as would have led to its discovery had he
acted with the measure of precaution which may be required of a prudent man in
a like situation.
In the present case, we are not convinced by the petitioners’ incessant assertion that Jocelyn is an innocent purchaser for value. To begin with, she is a grandniece of Eulalia and resides in the same locality where the latter lives and conducts her principal business. It is therefore impossible for her not to acquire knowledge of her grand aunt’s business practice of requiring her biyaheros to surrender the titles to their properties and to sign the corresponding deeds of sale over said properties in her favor, as security. This alone should have put Jocelyn on guard for any possible abuses that Eulalia may commit with the titles and the deeds of sale in her possession.
The glaring lack of good faith of Jocelyn is more
apparent in her own admission that she was aware that Dominador
and a certain
In the last analysis, good faith, or the lack of it, is a question of intention. But in ascertaining the intention that impels one on a given occasion, the courts are necessarily controlled by the evidence as to the conduct and other outward acts by which the motive may be safely determined.[26]
Petitioners question further the belated filing by the Spouses Bandong of an action for the annulment of sale, since the Spouses Bandong filed the same only after they received the notice to vacate, and not immediately after the execution of the assailed Deed of Sale. We have repeatedly held that the one who is in actual possession of a piece of land claiming to be the owner thereof may await to vindicate his right. His undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.[27]
Finally, we agree with the Court of Appeals that the ejectment case which had been litigated to finality by the Spouses Buenaobra and the respondents need not alter our conclusion in the present case. Well entrenched is the doctrine that in ejectment cases, the sole question for resolution is the physical or material possession of the property in question, so that neither the claim of juridical possession nor an averment of ownership can outrightly prevent the court from taking cognizance of the case.[28] In ejectment cases, all the court may do is to resolve who is entitled to its possession although, in doing so, it may make a determination of who is the owner of the property in order to resolve the issue of possession. But such determination of ownership is not clothed with finality. Neither will it affect ownership of the property or constitute a binding and conclusive adjudication on the merits with respect to the issue of ownership.[29]
WHEREFORE, IN VIEW OF THE FOREGOING,
the instant Petition is DENIED.
The Decision dated
SO ORDERED.
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MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
Associate Justice
Chairperson
Associate
Justice
Associate Justice
ATTESTATION
I attest that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
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
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S.
PUNO
Chief Justice
[1] Penned by Associate Justice Arturo D. Brion with Associate Justices Godardo A. Jacinto and Regalado L. Maambong, concurring; rollo, pp. 30-54.
[2]
[3]
[4]
[5]
[6] Records, Vol. I, pp. 514-516.
[7]
[8] Appeal was docketed as CA-G.R. SP No. 29639
[9]
[10]
[11]
[12] Ceballos v. Intestate Estate of the Late Emigdio Mercado, G.R. No. 155856, 28 May 2004, 430 SCRA 323, 335.
[13] Heirs
of the Late Spouses Aurelio and Esperanza Balite v.
Lim, G.R. No. 152168,
[14] Records, Vol. I, pp. 9-10.
[15] Reyes v. Court of Appeals, 393 Phil. 479, 489 (2000).
[16]
[17] Rollo, p. 14
[18] 380 Phil. 736, 742 (2000).
[19]
[20] Azcona v. Reyes and Larracas, 59 Phil. 446, 450 (1934).
[21] The other exceptions are provided by Article 1505 of the Civil Code.
Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.
Nothing in this title, however, shall affect:
(1) The provisions of any factors’ acts, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under the statutory power of sale or under the order of a court of competent jurisdiction;
(3) Purchases made in merchant’s store, or in fair, or markets, in accordance with the Code of Commerce and special laws.
[22] Eastworld Motor Industries Corporation v. Skunac Corporation, G.R. No. 163994, 16 December 2005, 478 SCRA 420, 427-428.
[23] Potenciano v. Reynoso, 449 Phil. 396, 410 (2003).
[24] G.R. No. 145794, 26 January 2005, 449 SCRA 284, 296-297.
[25] Potenciano v. Reynoso, supra note 23.
[26] Eastworld
Motor Industries Corp. v. Skunac Corporation, supra note 22.
[27] Arlegui v. Court of Appeals, 428 Phil. 381, 398 (2002).
[28] Spouses
[29]