GR 134166; (August, 2000) (Digest)
G.R. No. 134166 ; August 25, 2000
SPOUSES MARIO REYES and CONCEPCION DOMINGUEZ-REYES, and SPOUSES DOMINADOR VICTA and ARACELI DOMINGUEZ-VICTA, petitioners, vs. COURT OF APPEALS and SPOUSES JAIME RAMOS and NILDA ILANO-RAMOS, respondents.
FACTS
The petitioners, Concepcion Dominguez-Reyes and Araceli Dominguez-Victa, were co-owners of undivided shares in a parcel of land inherited from their father. Between 1980 and 1985, they executed eighteen separate “Deeds of Absolute Sale and Transfer” in favor of respondent Nilda Ilano-Ramos, purportedly conveying a total of 3,000 square meters from their shares. The deeds stipulated partial payment upon signing and the balance upon the segregation and titling of the sold portions. In 1991, after the property was partitioned and titles issued to the petitioners, the Ramos spouses demanded compliance with the deeds to segregate and convey the land. Petitioners refused, contending the deeds did not reflect the true agreement.
Petitioners alleged the transactions were actually loan agreements secured by mortgages. They claimed they obtained piecemeal loans from Nilda Ramos, and whenever the aggregate reached ₱10,000 to ₱20,000, she would prepare a deed of sale. They were assured these were mere formalities for her finance corporation and would not be notarized or enforced. However, three deeds were notarized. Petitioners offered to repay the loans, but the offer was refused.
ISSUE
Whether the eighteen instruments, denominated as “Deeds of Absolute Sale and Transfer,” constitute true contracts of sale or are equitable mortgages.
RULING
The Supreme Court ruled the transactions were equitable mortgages, reversing the Court of Appeals. The legal logic rests on the application of statutory presumptions under Articles 1602 and 1603 of the Civil Code and an examination of the parties’ contemporaneous and subsequent acts, which revealed a loan security intent, not a sale.
The Court found several circumstances indicative of an equitable mortgage. First, the purchase price in the deeds was grossly inadequate compared to the property’s value. Second, the petitioners-vendors remained in possession of the property. Third, the respondents-lenders retained the documents of title. Fourth, the petitioners offered to repay the sums received, which respondents refused. These factors collectively rebutted the absolute nature of the sale. The Court emphasized that the true intent of the parties prevails over the document’s form. The assurance that the deeds were mere loan formalities, coupled with the petitioners’ continuous possession and the inadequate price, confirmed a loan-with-security arrangement. Consequently, the deeds were construed as mortgages. The Court ordered petitioners to pay their loans with interest within thirty days, with the property to be sold at public auction if they defaulted.