G.R. No. 125755 ; February 24, 2003
PEDRO MOLINA, petitioner-appellant, vs. HON. COURT OF APPEALS and SPOUSES MARGARITO M. FLORES and NERISA HERRERA, respondents-appellees.

FACTS

Petitioner Pedro Molina was a co-owner of a parcel of land in Naic, Cavite. On April 23, 1984, he executed a Deed of Absolute Sale conveying his share to his sister, Felisa Molina, but this sale was not registered. The co-owners later partitioned the property. On June 13, 1988, upon Felisa’s request, Molina executed another Deed of Absolute Sale covering the same share, this time in favor of Felisa’s son, respondent Margarito Flores, and his wife Nerisa Herrera, for ₱8,000.00. A new title was issued to the respondent spouses.
Subsequently, 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). He alleged that the 1988 Deed did not express the true intention of the parties, claiming he was made to believe he was signing only a receipt for a debt owed to Felisa. The RTC ruled in Molina’s favor, annulling the deed and cancelling the title. The Court of Appeals reversed the RTC decision and dismissed Molina’s complaint.

ISSUE

Whether the Deed of Absolute Sale dated June 13, 1988, is an equitable mortgage, not a true sale, thereby warranting its annulment.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The contract is a valid sale, not an equitable mortgage. For a contract to be construed as an equitable mortgage under Article 1602 of the Civil Code, the evidence must clearly show the parties’ intention to secure a debt. Molina failed to prove any such intent. His claim of being defrauded due to lack of education and misunderstanding of English is unsubstantiated. Testimonies from witnesses, including one of Molina’s own, confirmed that the notary public read and explained the deed’s contents in the vernacular before its signing. Molina’s admission that he continued to receive rentals from a lessee on the property does not, by itself, establish an equitable mortgage, as such possession is not exclusive proof under the circumstances.
The Court emphasized that the presumption of an equitable mortgage arises only when the facts satisfy one of the instances enumerated in Article 1602. Here, Molina did not present clear and convincing evidence of any qualifying circumstance, such as grossly inadequate price or an agreement to secure a debt. The mere allegation of simulation, without corroborative evidence, cannot prevail over the notarized deed’s regularity and the witnesses’ consistent testimonies regarding its proper execution. Therefore, the contract remains a consummated sale.