GR L 27289; (April, 1985) (Digest)
G.R. No. L-27289 April 15, 1985
JUAN AGUINALDO, Substituted by MARINA and PRIMITIVO AGUINALDO, plaintiffs-appellants, vs. JOSE ESTEBAN and FRANCISCA SARMIENTO, defendants-appellees.
FACTS
Plaintiff Juan Aguinaldo, as heir of his father Jose Aguinaldo, filed a complaint seeking to annul a contract entitled “Sanglaan ng Isang Lupa na Patuluyan Ipaaari.” He alleged that his illiterate father was induced through fraud and undue influence to affix his thumbmark on the document in June 1958. The defendants, spouses Jose Esteban and Francisca Sarmiento, had been giving Jose Aguinaldo fifty centavos daily since March 26, 1955. The plaintiff contended the contract was an invalid mortgage containing a pacto comisario, while the defendants asserted it was a valid absolute sale that transferred ownership to them upon Jose Aguinaldo’s death in 1960. The parties agreed to submit the case for decision solely on the legal issue of whether the contract constituted a mortgage or a sale.
ISSUE
Whether the contract “Sanglaan ng Isang Lupa-Canaveral na Patuluyan Ipaaari” is a valid contract of sale or a void contract of mortgage.
RULING
The Supreme Court reversed the trial court and declared the contract null and void. The legal logic centered on ascertaining the true intention of the parties by examining the contract’s terms and surrounding circumstances. The Court found the transaction was not a bona fide sale. The document’s title and key stipulation used the word “isinasangla,” which in Tagalog context signifies a mortgage or a pacto de retro sale, not an absolute conveyance. The consideration was illusory; the P540.00 stated was not a lump sum but represented the daily fifty-centavo allowances given to the elderly and illiterate Jose Aguinaldo, meaning the defendants were essentially using the property’s fruits to fund its own purchase.
The circumstances revealed an unconscionable transaction. The contract was executed three years after the daily allowances began, without the knowledge of the plaintiff-heir, and the vulnerable father, who could not read, likely did not comprehend the document’s full import. The Court concluded the agreement was a mortgage disguised as a sale, and its enforcement would constitute unjust enrichment. Consequently, ownership was declared vested in the heirs of Juan Aguinaldo, and the defendants were ordered to reconvey possession and cancel the tax declaration in their favor.