SOCORRO TAOPO BANGA v.

SPOUSES JOSE AND EMELINE BELLO

471 SCRA 653 (2005), THIRD DIVISION (Carpio Morales, J.)
It is the intention of the parties and not the terminology used in the
contract that determines whether a deed of absolute sale in form is an
equitable mortgage.

FACTS: Nelson Banga, as mortgagor, with the consent of his wife

Socorro, executed a Deed of Real Estate Mortgage in favor of Jose V.
Bello over their real property as security for a loan extended by Jose to
Nelson. The said mortgage was amended twice increasing the amount
of the loan. It appears that a Deed on Absolute Sale was subsequently
executed involving the same property. Socorro filed a complaint for the
declaration of nullity of the sale for making it appear that she
consented to the absolute sale. Also, Socorro questions the
unconscionably low consideration for the sale of the property.
Bello contends that the sale was personally and voluntarily executed
by Spouses Banga before the notary public and that the consideration
of the sale is fair and reasonable because it is also based on the real
estate mortgage and its amendments. Nelson, on the other hand,
claims that the executed Deed was actually a third amendment to the
mortgage and that he had already paid in full their principal
indebtedness.
ISSUE: Whether or not the parties intended the deed of absolute sale
to be merely an equitable mortgage?

HELD: Article 1602 of the Civil Code enumerates instances when a

contract shall be presumed to be an equitable mortgage. Some of
these cases are: (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) In any other cases where it may be fairly
inferred that the real intention of the parties is that the transaction
shall ensure the payment of a debt or the performance of an
obligation. Also, Article 1604 of the Civil Code provides that the
provisions of Article 1602 shall also apply to a contract purporting to
be an absolute sale.
It has been observed by the Trial Court that the Deed of Absolute
Sale was prepared in 1987, the same year that the original deed of real
estate mortgage was executed. Such is because the residence
certificate numbers issued to the parties in 1987 appearing in the real
estate mortgage of 1987 are the same as those appearing in the Deed
of Absolute Sale purportedly executed in 1989.
In fact, in the acknowledgement portion of the 1989 Deed of
Absolute Sale whereon the phrase ―Series of 1987‖ appears, the
number ―9‖ was superimposed on the number ―7‖, which this Court
takes as a clear design to make it appear that it was notarized in 1989.
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.
Revealing the true intention of the parties is the undisputed
relationship of Nelson and the Bello spouses as debtor and creditors
respectively, which, together with the circumstances mentioned above,
draws the Supreme Court to affirm the trial court's ruling that the deed
of absolute sale was executed to serve as additional security for the
loan extended to Nelson.

NATIVIDAD BAUTISTA-BORJA v. ILUMINADA BAUTISTA, et al.

574 SCRA 375 (2008), SECOND DIVISION (Carpio Morales, J.)
An action for declaration of nullity of an alleged fraudulent deed of sale
is imprescriptible under the Civil Code.

FACTS: Petitioner Natividad Bautista- Borja (Natividad), one of the five

children of deceased Spouses Pablo and Segundina Tadiaman Bautista
(spouses Bautista), claimed that Iluminada Bautista, et al., through
fraud and deception, convinced her to take possession and cultivate
some agricultural lands that will eventually be partitioned. Unknown to
Natividad, however, the titles to the lands were cancelled by virtue of
Deeds of Sale executed on different dates by her parents in favor of
her siblings Simplicio and Francisco, a fact which she found out
subsequent to her possession and cultivation of the said lands.
Natividad thus filed a complaint before the Regional Trial Court (RTC)
for Annulment of the Deeds of Sale and/or Partition of Properties.
The RTC dismissed the complaint for lack of cause of action,
prescription and laches. Natividad thus elevated the case to the Court
of Appeals (CA), contending that the nature of her complaint was one
for annulment of void contracts which is imprescriptible. The CA,
however, affirmed the trial court‘s decision.

ISSUES: Whether or not the Natividad‘s cause of action has already

prescribed?

HELD: From the earlier quoted-allegations in Natividad‘s complaint, it

is clear that her action is one for declaration of the nullity of the Deeds
of Sale which she claims to be either falsified ─ because at the time of
the execution thereof, Pablo was already gravely ill and bedridden,
hence he could not have gone and appeared before the Notary Public,
much less understood the significance and legal deeds ─ and/or
because there was no consideration therefor. Clearly, following Article
1410 of the Civil Code, petitioner‘s action is imprescriptible. But even if
Natividad‘s complaint were to be taken as one for reconveyance, given
that it is based on an alleged void contract, it is just the same as
imprescriptible.

PEDRO MOLINA v. COURT OF APPEALS, et al.

398 SCRA 97 (2003), THIRD DIVISION (Carpio Morales, J.)
If prior to the execution of the impugned Deed, a party signed receipts
under which he acknowledged receiving sums of money as payment
for his property, which receipts were worded in the vernacular and
could not have been mistaken or misunderstood for anything else
other than as evidence of the sale of his property, the transaction
indicated was one of sale on installment.

FACTS: More than four years after petitioner Pedro Molina (Molina)
executed the Deed of Sale conveying his share of the property to his
sister Felisa, Molina executed another Deed of Absolute Sale in lieu of
the first deed covering the same share in favor of Felisa‘s son
respondent Margarito Flores and his wife Nerisa Herrera. Molina filed
an action for reformation of instrument and/or annulment of document
and title with reconveyance and damages before the Regional Trial
Court (RTC) of Cavite, alleging that the Deed of Absolute Sale does not
express the true will of the parties. The RTC ruled in favor of Molina
and ordered the annulment of the Deed of Absolute Sale. Margarito
and Nerisa appealed to the Court of Appeals which reversed the RTC‘s
decision and dismissed the complaint of Molina.

ISSUE: Whether the parties intended the Deed of Absolute Sale in

favor of Flores and Herrera to be an absolute sale or an equitable
mortgage?

HELD: For the presumption of an equitable mortgage to arise under

Art. 1602, two (2) requisites 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. In the
case at bar, the second requisite is conspicuously absent. That the
alleged loan was received by Molina in installments of P1,000.00 per
month for ten months or a total of P10,000.00 in fact indicates that the
transaction was not one of a loan but of sale on installment.
Molina argues that assuming arguendo that a contract of sale
was entered into, it was not consummated as the entire purchase price
was not paid. Assuming that to be so albeit, by the Deed in question
Molina acknowledged receipt of the P8,000.00 purchase price, it does
not by itself bar the transfer of the ownership or possession of the
property, much less dissolve the contract of sale. The contract remains
but the payment of the price is a resolutory condition, and the remedy
of the seller is to exact fulfillment or, in case of a substantial breach, to
rescind the contract under Article 1191 of the Civil Code.
That Molina, prior to the execution of the impugned Deed, signed
receipts under which he acknowledged receiving sums of money as
payment for his property, which receipts were worded in the
vernacular and could not have been mistaken or misunderstood for
anything else other than as evidence of the sale of his property, seals
the case against him. It confirms this Court‘s earlier observation that
the transaction indicated was one of sale on installment.

Medina v. CIR
1 SCRA 302

Facts: Antonio Medina is married to Antonia Rodriguez (since 1944),

both not having property or business of their own at that time of
marriage. Antonio in 1946 acquire forest concessions in Isabela (Sn.
Mariano and Palanan). Logs cut and removed by Antonio from his
concessions were initially sold to different persons in Manila through
his agent Mariano Osorio. The wife later engaged in business as lumber
dealer and sold all logs produced in the Sn. Mariano concession to
persons in Manila through the same agent. The Collector of Internal
Revenue imposed a tax assessment on Antonio Medina considering the
sales of the wife as that of Antonio’s original sales taxable under
Section 186 NIRC. Antonio appealed, contending that the spouses had
a premarital agreement of absolute separation of property, the records
of which was allegedly destroyed during World War II. The Collector
modified the assessment, reducing the amount to be paid. Antonio
requested for consideration, but which was denied. Antonio appealed
to the CTA, which upheld the assessment of the collector except for so-
called compromise penalties. Antonio filed present petition.

Issue: Whether the sale made by Antonio to his wife were valid so as
to exempt the sales made by Antonia from being considered as part of
Antonio’s original sales taxable under Section 186 of the NIRC.

Held: As there is no evidence of a pre-marital agreement of absolute

separation between the spouses, the sales made by Antonio (as forest
concessionaire) to his wife (as lumber dealer) are null and void as
these are contracts violative of Article 1490 of the Civil Code. Being
void transactions, the sales made by Antonio to his wife were correctly
disregarded by the Collector in his tax assessments that considered as
the taxable sales those made by the wife through the spouses’
common agent, Osorio

SANTOS vs. COURT OF APPEALS

G.R. No. 120820. August 1, 2000

Facts: Spouses Santos owned the house and lot in Better Living
Subdivision, Paranaque, Metro Manila. The land together with the
house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a
loan of P150K. The bank sent Rosalinda Santos a letter demanding
payment of P16K in unpaid interest and other charges. Since the
Santos couple had no funds, Rosalinda offered to sell the house and lot
to Carmen Caseda. After inspecting the real property, Carmen and her
husband agreed.

Carmen and Rosalinda signed a document, involving the sale of the

house – P350K as full amount, P54K as downpayment. Among other
condition set is that Caseda will pay the balance of the mortgage in the
bank, real estate taxes and the electric and water bills.

The Casedas complied with the bank mortgage and the bills. The
Santoses, seeing that the Casedas lacked the means to pay the
remaining installments and/or amortization of the loan, repossessed
the property. The Santoses then collected the rentals from the
tenants. Carmen approached petitioners and offered to pay the
balance of the purchase price for the house and lot. The parties,
however, could not agree, and the deal could not push through
because the Santoses wanted a higher price.

Carmen is now praying that the Santoses execute the final deed of
conveyance over the property.

Issue: WON there was a perfected contract of sale? NO

Held: A contract is what the law defines it to be, taking into

consideration its essential elements, and not what the contracting
parties call it. Article 1458 expressly obliges the vendor to transfer
ownership of the thing sold as an essential element of a contract of
sale. This is because the transfer of ownership in exchange for a price
paid or promised is the very essence of a contract of sale.

There was no transfer of ownership simultaneously with the delivery of

the property purportedly sold. The records clearly show that,
notwithstanding the fact that the Casedas first took then lost
possession of the disputed house and lot, the title to the property has
remained always in the name of Rosalinda Santos. Although the parties
had agreed that the Casedas would assume the mortgage, all
amortization payments made by Carmen Caseda to the bank were in
the name of Rosalinda Santos. The foregoing circumstances
categorically and clearly show that no valid transfer of ownership was
made by the Santoses to the Casedas. Absent this essential element,
their agreement cannot be deemed a contract of sale.

It was a contract to sell. Ownership is reserved by the vendor and is

not to pass until full payment of the purchase price. This we find fully
applicable and understandable in this case, given that the property
involved is a titled realty under mortgage to a bank and would require
notarial and other formalities of law before transfer thereof could be
validly effected.

The CA cannot order rescission. If the vendor should eject the

vendee for failure to meet the condition precedent, he is enforcing
the contract and not rescinding it. When the petitioners in the
instant case repossessed the disputed house and lot for failure of
private respondents to pay the purchase price in full, they were merely
enforcing the contract and not rescinding it.