GR 137247; (August, 2006) (Digest)
G.R. No. 137247 August 7, 2006
ANATALIA B. RAMOS, Petitioner, vs. SPOUSES DOMINGO A. DIZON and EDNA MEDINA DIZON, Respondents.
FACTS
Petitioner Anatalia Ramos filed a petition for registration of consolidation of ownership over a parcel of land. She alleged that respondent Domingo Dizon, through his attorney-in-fact Elpidio Dizon acting under a Special Power of Attorney (SPA), sold to her one-half of the subject property under a pacto de retro sale with a five-month redemption period. Upon Domingo’s failure to redeem, Ramos sought consolidation of ownership. Domingo opposed, claiming the SPA was executed solely to secure a P150,000.00 loan from Ramos for house construction, which Elpidio exceeded by obtaining P350,000.00. Domingo asserted he revoked the SPA and that the pacto de retro sale was simulated, serving merely as security for the loan, making it an equitable mortgage.
The trial court admitted evidence including the SPA, the Deed of Sale Under Pacto de Retro, a Real Estate Mortgage over the same property executed by Elpidio in favor of Ramos, and promissory notes for P350,000.00. During trial, Elpidio testified that the P350,000.00 stated in the pacto de retro deed was the same amount covered by the real estate mortgage and promissory notes, indicating no separate consideration was paid for the sale.
ISSUE
Whether the contract between the parties is a true pacto de retro sale or an equitable mortgage.
RULING
The Supreme Court ruled the contract is an equitable mortgage, not a true sale. The legal logic hinges on the application of Article 1602 of the Civil Code, which presumes a transaction is an equitable mortgage when certain circumstances exist, such as when the price is unusually inadequate or when the vendor remains in possession. Here, a key indicator was the existence of a prior real estate mortgage over the same property securing the exact same loan amount (P350,000.00) as the purported sale price. Elpidio’s testimony confirmed there was no separate consideration for the pacto de retro; the “price” was merely the proceeds of the earlier loan. This proves the deed was intended as additional security for the loan, not a true sale.
Furthermore, the Court found the petitioner failed to overcome this presumption. The evidence clearly established that the pacto de retro sale and the real estate mortgage covered one and the same obligation. Therefore, the contract could not be enforced as a sale to consolidate ownership. The proper remedy for Ramos was to foreclose the mortgage, not to seek consolidation under a simulated sale. The decisions of the lower courts denying the petition for consolidation were affirmed.