G.R. No. 251792 . February 27, 2023
LOURDES N. CANDO, PETITIONER, VS. FLOCERFIDA DE GUZMAN SOLIS, JOAN SOLIS AND MICHELLE SOLIS, RESPONDENTS.

FACTS

Spouses Jose Guyala Solis and Flocerfida de Guzman Solis were the registered owners of two parcels of land in Quezon City. On February 27, 2012, they borrowed P15,000,000.00 from Lourdes N. Cando and executed a document denominated as a “Real Estate Mortgage Without Judicial Proceedings” covering the properties as security. The mortgage deed contained a stipulation that upon failure to pay the indebtedness, the mortgagee (Cando) had the right to transfer ownership of the properties in her favor without judicial intervention. Subsequently, Cando presented a Deed of Absolute Sale dated October 29, 2012, purportedly executed by the spouses in her favor, and used it to transfer the titles to her name. Spouses Solis filed a complaint for annulment of the deed of sale with reformation of instrument and damages, alleging that they only intended a mortgage, that the sale was void, and that the mortgage stipulation constituted a pactum commissorium. During the pendency of the case, Jose died and was substituted by his heirs (respondents). The Regional Trial Court (RTC) granted the complaint, annulled the deed of sale, declared the transaction a mortgage, and ordered the reinstatement of the original titles. The Court of Appeals affirmed the RTC decision. Cando appealed to the Supreme Court via certiorari.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s decision which annulled the Deed of Absolute Sale and declared the transaction between the parties as one of mortgage.

RULING

The Supreme Court denied the petition and affirmed the assailed Court of Appeals decision. The Court held that the findings of fact of the trial court, affirmed by the Court of Appeals, are generally conclusive and binding. It found no compelling reason to deviate from these findings, which established that the true intention of the parties was to constitute a mortgage, not a sale. The Court noted the gross inadequacy of the purported sale price (P15,000,000.00) compared to the properties’ actual value (P60,000,000.00), and the circumstances surrounding the execution of the documents, which indicated the transaction was a loan with security. The Deed of Absolute Sale was therefore declared void ab initio. The stipulation in the mortgage deed allowing the mortgagee to transfer ownership upon default was declared a pactum commissorium, which is void. However, the nullity of this stipulation did not invalidate the entire mortgage contract. The Court sustained the ruling that the transaction was a mortgage securing the P15,000,000.00 loan, which was now due and demandable, with Cando having the right to judicially foreclose the properties in case of non-payment. The awards of nominal damages and attorney’s fees were also upheld.