G.R. No. 104784 . March 3, 1994.
FELIMON UY, petitioner, vs. THE COURT OF APPEALS and MARIA DEL ROSARIO-TANJUAKIO, respondents.

FACTS

Petitioner Felimon Uy assails the decision of the Court of Appeals which declared a Deed of Absolute Sale dated June 11, 1979, over a house and lot executed by private respondent Maria del Rosario-Tanjuakio in his favor for P70,000.00, to be an equitable mortgage. The trial court initially dismissed the private respondent’s complaint for reconveyance, finding no justification to consider the deed an equitable mortgage. On appeal, the Court of Appeals remanded the case for trial on the merits. After trial, the trial court again dismissed the complaint. On a second appeal, the Court of Appeals reversed the trial court and declared the deed an equitable mortgage, entitling the private respondent to redeem the property upon payment of P70,000.00 with legal interest from June 11, 1979. The petitioner insists the document was a true sale, pointing out that the private respondent, a college graduate, signed it voluntarily after its contents were explained to her by her own witness, Jesus Morales. The private respondent contends the real intention was a mortgage, as evidenced by a contemporaneous “Option To Repurchase” granting her 60 days to repurchase the property.

ISSUE

Whether the Deed of Absolute Sale dated June 11, 1979, should be declared an equitable mortgage.

RULING

The Supreme Court DENIED the petition and AFFIRMED the decision of the Court of Appeals. The Deed of Absolute Sale was declared an equitable mortgage.
The Court found that the circumstances surrounding the transaction, as revealed by the evidence, justified the application of Article 1602 of the Civil Code. The concurrence of the following circumstances supported the conclusion of an equitable mortgage:
1. The private respondent remained in possession of the property. She continued to occupy the house and lot even after the execution of the deed.
2. The private respondent continued to pay the real estate taxes. She paid the taxes due on the property from 1979 to 1981, while the petitioner-spouses only started paying in 1982.
3. The price of P70,000.00 was grossly inadequate. The appellate court noted the property’s value was significantly higher than the stated consideration.
4. The private respondent was a borrower out of necessity. The transaction was a loan secured by the property.
5. The petitioner controlled the preparation of the documents. The deed and the option to repurchase were prepared by the petitioner’s lawyer.
6. The testimony of witness Jesus Morales indicated the document was signed as a formality. Morales testified that he pointed out to the private respondent that she was signing a deed of sale, but she and the petitioner treated it as a mere formality for a mortgage transaction. The petitioner’s own cross-examination testimony, where he stated “Mr. Morales kept pointing to the plaintiff that the document she was signing was a deed of absolute sale,” inadvertently confirmed he was present during these discussions, contrary to his initial evasion.
The Court applied the rule that in case of doubt in onerous contracts, the doubt should be settled in favor of the greatest reciprocity of interests. A loan secured by a mortgage involves a smaller transmission of rights and greater reciprocity than an absolute sale. Therefore, the transaction was correctly declared an equitable mortgage, entitling the private respondent to redeem the property.