GR L 61337; (June, 1984) (Digest)
G.R. No. L-61337 June 29, 1984
AURORA P. CAPULONG, et al., petitioners, vs. THE COURT OF APPEALS, DELFIN G. TOLENTINO, et al., respondents.
FACTS
Jovita Ponce Vda. de Capulong obtained a series of loans totaling P16,250.00 from Dr. Delfin Tolentino, secured by a mortgage on her property. Upon failing to pay, she executed a Deed of Absolute Sale over the property to Tolentino for P21,300.00, an amount exceeding her debt. A separate document granted her an option to repurchase the property by a specified date, which she failed to exercise. Tolentino subsequently sold the property to the spouses Ricardo Tolentino and Pilar de Joya.
Capulong filed a complaint seeking annulment of the loan contracts for usury, declaration of the deed of sale as an equitable mortgage, and reconveyance. The trial court dismissed the complaint, finding insufficient evidence of usury and upholding the deed as a true sale. The Court of Appeals affirmed this decision. Capulong’s heirs (petitioners) elevated the case, arguing the transaction was a loan secured by an equitable mortgage, not a sale.
ISSUE
Whether the Deed of Absolute Sale should be declared an equitable mortgage.
RULING
Yes. The Supreme Court reversed the appellate court and declared the deed an equitable mortgage. The legal logic is anchored on Article 1602 of the Civil Code, which establishes presumptions for equitable mortgages. The Court found the attendant circumstances indicative of a loan security arrangement, not a true sale. Critically, the purchase price (P21,300.00) closely approximated the total of the principal loans received (P13,000.00) plus computed interest, suggesting the “sale” was merely a device to secure the debt repayment. The execution of a separate option to repurchase, which functioned similarly to a right of redemption, further supported this conclusion. The Court held that the evidence sufficiently triggered the presumption under Article 1602(6), allowing the inference that the real intention was to secure a debt. Consequently, the subsequent sale by Tolentino was declared void, and the petitioners were ordered to pay their mortgage indebtedness with legal interest.