OSCAR D. RAMO vs. HON.

COURT OF APPEALS, ADELAIDA RAMOS

G.R. No. 42108 December 29, 1989
FACTS:
Sometime in January 1959, private respondent Adelaide Ramos borrowed
from her brother, petitioner Oscar D. Ramos, the amounts of P 5,000.00
and P 9,000.00 in connection with her business transaction involving the
recovery of a parcel of land. As security for said loan, Adelaida executed in
favor of Oscar (2) deeds of conditional sale of her rights, shares,
interests and participation on several parcels of land.
Upon the failure of said private respondent as vendor a retro to exercise
her right of repurchase within the redemption period, Oscar filed a petition
for consolidation and approval of the conditional sale in a Special
Proceedings, which were approved by the court.
Adelaida remained in possession of these properties until sometime in 1964 when
petitioner took possession thereof.

On February 1968, Adelaida filed Civil Case with the then Court of First Instance for declaration
of nullity of orders, reformation of instrument, recovery of possession with preliminary injunction
and damages. The complaints therein alleged that the deeds of conditional sale, are mere
mortgages and were vitiated by misrepresentation, fraud and undue influence and that the
orders issued by the probate and cadastral courts, were null and void for lack of
jurisdiction. Petitioners, specifically deny the allegations of fraud and misrepresentation and
interposed as defense the fact that the questioned conditional sales were voluntarily
executed by private respondent Adelaida Ramos and truly expressed the intention of the
parties; that the action, if any, has long prescribed; that the questioned orders, approving
the consolidation of ownership of the lands in question in favor of petitioner were within
the jurisdiction of the lower court.

In its order dated February 17, 1971, the trial court also declared: "Both parties
agreed and manifested in open court the principal obligation in the
transaction reflected is one of loan secured by a Real Estate Mortgage.
Oscar appealed the decision, the CA affirmed the lower courts decision in toto.

ISSUE: Whether the conditional sale was one of equitable mortgage.

RULING:
Article 1602 of the Civil Code provides:
The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1)
When the price of a sale with right to repurchase is unusually
inadequate;
(2)
When the vendor remains in possession as lessee or otherwise;
(3)
When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
(4)
When the purchaser retains for himself a part of the purchase price;

(5)
When the vendor binds himself to pay the taxes on the thing sold;
(6)
In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment of
a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits or other benefit to be
received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.

Several undisputed circumstances persuade this Court (that) the questioned

deeds should be construed as equitable mortgages as contemplated in
Article 1602 of the Civil Code, namely: (1) plaintiff vendor remained in
possession until 1964 of the properties she allegedly sold in 1959 to
defendants; (2) the sums representing the purchase price were advanced
to plaintiff by way of loans; and (3) the properties purchased by Oscar
Ramos and his wife have never been declared for taxation purposes in
their names.
o Even if we indulge the petitioners that they are justified in not taking possession
considering that what were sold to them were only the rights, shares, interests and
participation of Adelaida Ramos. However, such fact will not justify a reversal of the
conclusion that the purported deeds of sale con pacto de retro are equitable
mortgages. Such a conclusion is buttressed by the other circumstances catalogued
especially the undisputed fact that the two deeds were executed by reason of the loan
extended by Oscar Ramos to Adelaida Ramos and that the purchase price stated
therein was the amount of the loan itself.

The above-stated circumstances are more than sufficient to show that the true intention
of the parties is that the transaction shall secure the payment of said debt and, therefore,
shall be presumed to be an equitable mortgage under Paragraph 6 of Article 1602
hereinbefore quoted. Settled is the rule that to create the presumption enunciated by
Article 1602, the existence of one circumstance is enough. The said article expressly
provides therefor "in any of the following cases," hence the existence of any of the
circumstances enumerated therein, not a concurrence nor an overwhelming number of
such circumstances, suffices to give rise to the presumption that the contract with the
right of repurchase is an equitable mortgage.

The rule is firmly settled that whenever it is clearly shown that a deed of sale
with pacto de retro, regular on its face, is given as security for a loan, it must be
regarded as an equitable mortgage.

As to the Lack of Jurisdiction

o The approval of the probate court of the conditional sale is not a conclusive
determination of the intrinsic or extrinsic validity of the contract but a mere
recognition of the right of private respondent Adelaida Ramos as an heir, to
dispose of her rights and interests over her inheritance even before partition. A
reading of the order of the probate court will show that it is merely an approval
of the deed of conditional sale executed by Adelaida Ramos. There is nothing in
said order providing for the consolidation of ownership over the lots allegedly
sold to petitioners nor was the issue of the validity of said contract discussed or

resolved therein. "To give approval" means in its essential and most
obvious meaning, to confirm, ratify, sanction or consent to some act or
thing done by another.
The approval by the probate court of the conditional sale was without
prejudice to the filing of the proper action for consolidation of
ownership and/or reformation of instrument in the proper court within
the statutory period of prescription.
Article 1607 of the Civil Code provided for consolidation as follows: In case of real property, the
consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the
provisions of article 1616 shall not be recorded in the Registry of Property without a judicial
order, after the vendor has been duly heard.

On the issue of prescription,

o The present case, having been filed on February 28, 1960, approximately
seven (7) years from the execution of the questioned deeds, was
seasonably instituted. The prescriptive period for actions based upon
a written contract and for reformation is ten (10) years under Article
1144 of the Civil Code. Such right to reformation is expressly recognized in
Article 1365 of the same code.
Aurora P. De Leon vs. Hon. Serafin Salavador
G.R. No. L-30871. December 28, 1970
FACTS:
o A judgment for P35,000.00-actual was obtained by Enrique de Leon against
respondent Bernabe in a Civil Case, a writ of execution was issued by said
court. The city sheriff, levied on execution on two parcels of land
registered in the names of Bernabe. At the execution sale, the city sheriff
sold the said properties to herein petitioner, Aurora (sister of the
judgment creditor) as the highest bidder for the total sum of P30,194.00, (the
property then being subject to an existing mortgage lien in the amount of
P120,000.00). The sheriff executed the corresponding certificate of
sale in her favor, which was duly with register of deeds.
o Two weeks before the expiration of the one-year period to redeem, the
judgment debtor Bernabe filed a separate civil action against his
judgment creditor Enrique de Leon, petitioner Aurora P. de Leon as
purchaser and the sheriff as defendants for the setting aside or
annulment of the execution sale "for being anomalous and irregular,"
and for the ordering of a new auction sale. This second case, instead of
being referred to Judge Cruz presiding who issued the writ of execution, was
assigned to Judge Serafin Salvador, who issued on February 19, 1968 a
writ of preliminary injunction enjoining therein defendants,
particularly the sheriff to desist "from taking further proceedings
against the properties of the plaintiff [Bernabe] that were sold at public
auction, and from issuing a sheriff's deed of sale at the expiration of
the period of redemption in favor of Aurora P. de Leon." Aurora
moved to dissolve the injunction and to dismiss this second case on
the grounds of laches and lack of jurisdiction of Judge Salvador's
court to interfere with the execution proceedings pending in the first
case before Judge Cruz' court which is of equal and co-ordinate jurisdiction,

o
o

but Judge Salvador denied the same for not being indubitable and
tried the case.
Judge Salvador issued an order to allow Bernabe to redeem the
properties sold at public auction more than two years ago. On the following
day, Bernabe deposited with the sheriff the sum of P33,817.28 as
the redemption price, who issued a certificate of redemption.
Bernabe then registered said certificate on the following day with the
register of deeds, who in turn cancelled the entry of the execution
sale in favor of Aurora.
Aurora's motion to set aside the order and certificate and
registration of mortgage for lack of jurisdiction was denied by Judge
Salvador.
Aurora also filed in the first case before Judge Cruz for consolidation
of title and to order the sheriff to issue in her favor a final deed of
sale over the subject parcels of land. Judge Cruz granted Aurora's
motion over Bernabe's opposition that he had redeemed the said
properties by virtue of Judge Salvador's order in the second case and
ordering Bernabe to surrender his owner's duplicates of title for transfer to
Aurora.

ISSUE: Whether the purchase price was grossly inadequate and sufficient
to avoid the sale.
RULING: "However, while in ordinary sales for reasons of equity a transaction may
be invalidated on the ground of inadequacy of price, or when such inadequacy
shocks one's conscience as to justify the courts to interfere, such does not follow
when the law gives to the owner the right to redeem, as when a sale is made at
public auction, upon the theory that the lesser the price the easier it is for the
owner to effect the redemption. And so it was aptly said: 'When there is the right to
redeem, inadequacy of price should not be material, because the judgment debtor
may reacquire the property or also sell his right to redeem and thus recover the loss
he claims to have suffered by reason of the price obtained at the auction sale.
ALFONSO FLORES vs. JOHNSON SO
G.R. No. L-28527 June 16, 1988
FACTS:
o Johnson So filed an action for specific performance against Alfonso
Flores to effect the redemption of a parcel of land which was alleged to
have been ostensibly sold to the latter by Valentin Gallano, with right of
repurchase within (4) years from the date of the sale. Valentin Gallano
sold in an absolute manner the same land to Johnson So. On the
allegation that the Pacto de Retro Sale did not embody the real intent
of the agreement, that the transaction is a mere mortgage to secure
a loan, Johnson So prayed that the court declare the said Pacto de
Retro Sale as a mere equitable mortgage and order Alfonso Flores
receive the sum of P2,550.00 deposited with the court and to consider the
land in question redeemed from the latter for all legal purposes.
o The lower court ruled that, on the issue of the nature of the contract in
question, it is a contract of sale of a parcel of land with the
reservation in favor of the vendor a retro of the right to repurchase

it within a period of four (4) years from execution thereof, that the
execution of the affidavit of consolidation of ownership and its
subsequent did not make his ownership over the land absolute and
indefeasible because of non-compliance with Articles 1606 and 1607 of the
New Civil Code, which require a judicial order for consolidation of the
title of vendee a retro; and that the right of redemption belonging to
Valentin Gallano was, ipso facto, acquired by Johnson So when he
brought the land in question.
ISSUE: Whether the execution of the affidavit of consolidation of
ownership by Alfonso Flores and its subsequent registration in the
Office of the Register of Deeds of Sorsogon made his ownership over
the land in question absolute and indefeasible.
RULING:
o The pacto de retro sale between Gallano and Flores was executed
when the Civil Code of Spain was still in effect. It is provided in
Article 1509 thereof that if the vendor does not comply with the
provisions of Article 1518, (i.e. to return the price, plus
expenses) the vendee shall acquire irrevocably the ownership of
the thing sold.
o Under the old Civil Code, the ownership was consolidated in the
vendee a retro by operation of law. Accordingly, upon the failure of
Valentin Gallano, as the vendor a retro, to redeem the property
subject of the pacto de retro sale within the period agreed upon, the
vendee a retro, Alfonso Flores, became the absolute owner of the
subject property.
o This right of ownership which had already vested in Alfonso Flores way
back in 1954 upon Gallano's failure to redeem within the stipulated
period cannot be defeated by the application of Articles 1606 and
1607 of the New Civil Code which requires registration of the
consolidation of ownership in the vendee a retro only by judicial order.
o Article 2252 on Transitional Provisions in the New Civil Code provides that:
Changes made and new provisions and rules laid down by this Code
which may prejudice or impair vested or acquired rights in
accordance with the old legislation shall have no retroactive
effect ...
The trial court, therefore, erred in allowing redemption of the subject
property by plaintiff-appellee, Johnson So. Valentin Gallano was no
longer the owner of the same at the time of sale to Johnson So, thus, no
right whatsoever was transmitted to the latter, except the right to
redeem the property. Ownership over the subject property had long
vested upon the defendant appellant Alfonso Flores.
CARLOS ALONZO and CASIMIRA ALONZO vs. INTERMEDIATE APPELLATE
COURT
G.R. No. 72873
May 28, 1987
FACTS:
o Five brothers and sisters inherited in equal pro indiviso a parcel of land.
On March 1963, one of them, Celestino Padua, transferred his

o
o
o

undivided share of the herein petitioners for the sum of P550.00

by way of absolute sale. One year later 1964, Eustaquia Padua, his
sister, sold her own share to the same vendees, in an instrument
denominated "Con Pacto de Retro Sale ".
The petitioners occupied an area corresponding to two-fifths of
the said lot, representing the portions sold to them. The vendees
subsequently enclosed the same with a fence.
Tecla Padua, another co-heir, filed her own complaint invoking the
same right of redemption claimed by her brother.
The trial court also dismissed this complaint, now on the ground
that the right had lapsed, not having been exercised within thirty days
from notice of the sales in 1963 and 1964. Although there was no
written notice, it was held that actual knowledge of the sales by
the co-heirs satisfied the requirement of the law.
Art. 1088.
Should any of the heirs sell his hereditary rights to a
stranger before the partition, any or all of the co-heirs may be subrogated
to the rights of the purchaser by reimbursing him for the price of the sale,
provided they do so within the period of one month from the time they
were notified in writing of the sale by the vendor.

ISSUE: Was there a valid notice? Granting that the law requires the notice
to be written, would such notice be necessary in this case? Assuming
there was a valid notice although it was not in writing. would there be any
question that the 30-day period for redemption had expired long before
the complaint was filed in 1977?
RULING:
o In the face of the established facts, we cannot accept the private
respondents' pretense that they were unaware of the sales made by
their brother and sister in 1963 and 1964. By requiring written proof of
such notice, we would be closing our eyes to the obvious truth in favor of
their palpably false claim of ignorance, thus exalting the letter of the law over
its purpose. The purpose is clear enough: to make sure that the
redemptioners are duly notified. We are satisfied that in this case
the other brothers and sisters were actually informed, although not
in writing, of the sales made in 1963 and 1964, and that such notice
was sufficient.
o While we do not here declare that this period started from the dates of such
sales in 1963 and 1964, we do say that sometime between those years
and 1976, when the first complaint for redemption was filed, the
other co-heirs were actually informed of the sale and that thereafter
the 30-day period started running and ultimately expired. This could
have happened any time during the interval of thirteen years, when none of
the co-heirs made a move to redeem the properties sold. By 1977, in other
words, when Tecla Padua filed her complaint, the right of redemption had
already been extinguished because the period for its exercise had already
expired. While the general rule is, that to charge a party with laches in the
assertion of an alleged right it is essential that he should have
knowledge of the facts upon which he bases his claim, yet if the
circumstances were such as should have induced inquiry, and the

means of ascertaining the truth were readily available upon inquiry,

but the party neglects to make it, he will be chargeable with laches,
the same as if he had known the facts.
MANUEL LAO vs. COURT OF APPEALS and BETTER HOMES REALTY
G.R. No. 115307 July 8, 1997

FACTS:
o On June 24, 1992, (herein Private Respondent Better Homes Realty and
Housing Corporation) filed with the MTC, a complaint for unlawful
detainer, on the ground that (said private respondent) is the owner of
the premises that (herein Petitioner Manuel Lao) occupied the property
without rent, but on (private respondent's) pure liberality with the
understanding that he would vacate the property upon demand, but
despite demand to vacate made by letter received the (herein
petitioner) refused to vacate the premises.
o Herein petitioner claimed that he is the true owner of the house and
lot that the respondent purchased the same from N. Domingo Realty
but the agreement was actually a loan secured by mortgage; and that
plaintiff's cause of action is for accion publiciana, outside the
jurisdiction of an inferior court.
o Metropolitan Trial Court rendered judgment ordering the petitioner
to vacate the premises; to pay (Better Homes) reasonable rent for the use
and occupation of the premises.
o On appeal to the Regional Trial Court rendered a decision reversing
that of the Metropolitan Trial Court, and ordering the dismissal of the
(Better Homes) complaint for lack of merit. The Regional Trial Court held
that the subject property was acquired by (Better Homes) from N.
Domingo Realty, by a deed of sale, and (Better Homes) is now the
registered owner under the Registry of Deeds, but in truth the (Lao) is
the beneficial owner of the property because the real transaction
over the subject property was not a sale but a loan secured by a
mortgage thereon.
ISSUE: Absolute Sale or Equitable Mortgage?
RULING:
o A conveyance in the form of a contract of sale with pacto de retro will be
treated as a mere mortgage, if really executed as security for a
debt, and that this fact can be shown by oral evidence apart from the
instrument of conveyance. To the effect that any conveyance intended
as security for a debt will be held in effect to be a mortgage,
whether so actually expressed in the instrument or not, operates
regardless of the form of the agreement chosen by the contracting parties
as the repository of their will.
o The agreement between Better Homes and N. Domingo Realty, as
represented by Lao, manifestly one of equitable mortgage. First,

possession of the property remained with Manuel Lao who was the
beneficial owner of the property, before, during and after the
alleged sale. It is settled that a "pacto de retro sale should be treated as
a mortgage where the (property) sold never left the possession of the
vendors." Second, the option given to Manuel Lao to purchase the
property had been extended twice through documents executed by
Better Homes. The wording of the first extension is a refreshing revelation
that indeed the parties really intended to be bound by a loan with
mortgage, not by a pacto de retro. These extensions clearly represent
the extension of time to pay the loan given to Manuel Lao upon
his failure to pay said loan on its maturity.

RODOLFO LANUZA vs. MARTIN DE LEON

G.R. No. L-22331
June 6, 1967
FACTS:
o Rodolfo Lanuza and his wife Belen were the owners of a two-story house
which the spouses leased from the Consolidated Asiatic Co. Lanuza
executed a document entitled "Deed of Sale with Right to
Repurchase" whereby he conveyed to Maria Bautista Vda. de Reyes and
Aurelia R. Navarro the house, together with the leasehold rights to the lot, a
television set and a refrigerator in consideration of the sum of P3,000.
o When the original period of redemption expired, the parties extended it by an annotation to
this effect. Lanuza's wife, who did not sign the deed, this time signed her name below the
annotation.
o

It appears that after the execution of this instrument, Lanuza and his wife mortgaged
the same house in favor of Martin de Leon to secure the payment of a loan within one
year. This mortgage was executed and recorded in the Office of the Register of Deeds.

As the Lanuzas failed to pay their obligation, De Leon filed in the sheriff's office a
petition for the extra-judicial foreclosure of the mortgage. On the other hand, Reyes and
Navarro followed suit by filing in the Court of First Instance of Manila a petition for the
consolidation of ownership of the house on the ground that the period of redemption
expired without the vendees exercising their right of repurchase. The petition for
consolidation of ownership was filed.

The house was sold to De Leon as the only bidder at the sheriffs sale. De Leon
immediately took possession of the house secured a discharge of the mortgage on the
house in favor of a rural bank. He intervened in court and asked for the dismissal of the
petition filed by Reyes and Navarro on the ground that the unrecorded pacto de
retro sale could not affect his rights as a third party.

ISSUE: Is it a Sale or an Equitable Mortgage?

RULING:
These are circumstances which indeed indicate an equitable mortgage.4 But their relevance
emerges only when they are seen in the perspective of other circumstances which indubitably show
that what was intended was a mortgage and not a sale.These circumstances are:
1. The gross inadequacy of the price.The fact has not been mentioned that for the price of
P3,000, the supposed vendors "sold" their house which had an assessed value of P4,000, but also
their leasehold right television set and refrigerator, indeed, the petition for consolidation of ownership
is limited to the house and the leasehold right, while the stipulation of facts of the parties merely
referred to the object of the sale as "the property in question." The failure to highlight this point,
that is, the gross inadequacy of the price paid, accounts for the error in determining the true
agreement of the parties to the deed.
2. The non-transmission of ownership to the vendees. The Lanuzas did not really transfer
their ownership of the properties to Reyes and Navarro. What was agreed was that ownership
of the things supposedly sold would vest in the vendees only if the vendors failed to pay
P3,000. In fact the emphasis is on the vendors payment of the amount rather than on the redemption
of the things supposedly sold. This stipulation is contrary to the nature of a true pacto de retro
sale under which a vendee acquires ownership of the thing sold immediately upon execution
of the sale, subject only to the vendor's right of redemption.
3. The delay in the filing of the petition for consolidation. The fact that the period of
redemption expired on July 12, 1961 and yet this action was not brought until October 19,
1962 and only after De Leon had asked on October 5, 1962 for the extra-judicial for closure of
his mortgage.