MARLENE CRISOSTOMO & JOSE G. CRISOSTOMO vs. FLORITO M. GARCIA, JR.

G.R. No. 164787, January 31, 2006

TITLE: HUWAG BASTAMAGTIWALA SA KAMAG-ANAK
Facts: In his Complaint, respondent alleged that on 24 September 1986, Victoria Garcia Vda. de
Crisostomo, mother of petitioner Jose G. Crisostomo, sold to him, by way of a Deed of Absolute
Sale, a parcel of land, including the improvements and rights thereon. In the Deed of Sale,
petitioner Jose Crisostomo and his sister Cristina Crisostomo signed as witnesses in the
execution of the instrument. Since they were distant relatives, respondent allowed Victoria and
her children, petitioner Jose and Cristina, to stay in the subject property as lessees under a
Contract of Lease. By virtue of the said deed of sale, respondent effected the transfer of the tax
declaration covering the property, under his name from the City Assessor’s Office of Caloocan
City. However, before the transfer of title to respondent could be completed, petitioners-spouses
Jose and Marlene Crisostomo were able to secure a loan from the National Home Mortgage
Finance Corporation using the subject property as security through bad faith and machinations.
Worse, petitioners were able to transfer the subject property under their names without the
knowledge and consent of the respondent. Petitioners filed an “Urgent Motion to Dismiss
Action,” alleging that since respondent’s cause of action is based on an alleged deed of sale
executed on 24 September 1986, the cause of action of the respondent to enforce and to
implement the instrument arose on 24 September 1986 and pursuant to Article 1144 of the Civil
Code, the action must be brought within 10 years from the time the right of action accrues. Thus,
from 24 September 1986, respondent had only up to 24 September 1996 within which to file the
action. Since the complaint was filed only on 20 June 2002, or after the lapse of more than 16
years, the cause of action is clearly barred by prescription. Respondent countered that Article
1144 of the Civil Code does not apply to the case because the complaint is for cancellation of
title registered in the names of the petitioners and for reconveyance. Respondent further points
out that he did not file an action for specific performance based on the deed of sale. The
complaint, he said, is for reconveyance based on an implied or constructive trust which expires
in 10 years counted from the date the adverse title to the property is asserted by the possessor.
Issue: Whether the cause of action is already barred by prescription.
Ruling: NO Petitioners’ allegation that an action for the reconveyance of real property on the
ground of fraud must be filed within four years from the discovery of the fraud is without basis.
The four-year prescriptive period relied upon by the petitioners apply only if the complaint seeks
to annul a voidable contract under Article 1390 of the Civil Code. In the case at bar, respondent’s
action which is for Reconveyance and Cancellation of Title is based on an implied trust under
Art. 1456 of the Civil Code since he averred in his complaint that through fraud petitioners were
able to obtain a Certificate of Title over the property. He does not seek the annulment of a
voidable contract whereby Articles 1390 and 1391 of the Civil Code would find application such
that the cause of action would prescribe in four years. When a party uses fraud or concealment to
obtain a certificate of title of property, a constructive trust is created in favor of the defrauded
party. Constructive trusts are “created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention against one
who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to hold.” When property is registered in another’s
name, an implied or constructive trust is created by law in favor of the true owner. The action for
reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the
title. An action for reconveyance based on implied or constructive trust prescribes in ten years
from the alleged fraudulent registration or date of issuance of the certificate of title over the
property.
GR No. 208021, February 3, 2016
Oscar Villarta (Petitioner) v Gaudioso Talavera Jr (Respondent)
Second Division
Ponente: Carpio, J.

Nature of Action: Action for reformation of contract.

TITLE: DACION EN PAGO

FACTS:
Appellant Oscar Villarta filed the complaint for reformation of contracts. He alleged that
he owned four parcels of land, all situated in Santiago City. That he obtained several loans from
appellee who was a distant relative. That appellee employed insidious words and machinations in
convincing him to execute a deed of absolute sale over TCT No. T-130095; however, the real
agreement was that the lot would only serve as security for the several loans he obtained. On
May 18, 2001, he also executed another deed of absolute sale and alleged that the real agreement
was that the lot would only serve as collateral. The Deeds of Absolute Sale dated March 1995
and May 18, 2001 were in reality an equitable mortgage. That the P500,000.00 consideration for
the Deed of Absolute Sale dated May 18, 2001 was grossly inadequate because the actual market
value of the subject land was P5,900,000.00. That despite the execution of the two deeds of
absolute sale, he still had possession of the subject lots and even leased them.
Appellee Gaudioso Talavera, Jr. on the other hand averred that even before 1996,
appellant had been obtaining loans from him. During their early transactions, appellant paid his
obligations. That appellant obtained a loan to him duly covered by two (2) Metrobank checks
and secured by three parcels of land. However, when the checks were presented for payment,
they were dishonored by the bank for the reason of account closed. Despite repeated demands,
appellant failed to settle his obligations. Appellant told him that he could no longer raise the sum
to pay off his loans, and, instead offered his properties, i.e., TCTs T-130095 and T-214950, to
satisfy his obligation. The properties covered by TCTs T-130095 and T-214950 were delivered
to him via appellant’s two deeds of absolute sale. That there could be no equitable mortgage over
TCT T-214950 for the same was never made a collateral for the loan; there could also be no
equitable mortgage over TCT T-130095 for though it was true that the same initially served as
security, the arrangement was novated when appellant offered the lot as payment; appellant’s
complaint failed to state a cause of action; the transfer of the properties to him was by virtue of
dacion en pago
The RTC rendered a Decision and ruled in favor of respondent. On their faces, the Court
finds no other intention, nor ambiguity in them, hence, no cogent reason to reform them nor to
consider them as equitable mortgages, obviously, for want of evidence. The CA dismissed
petitioner’s appeal and affirmed the RTC’s Decision and Resolution. The CA rejected
petitioner’s argument that the real transaction is an equitable mortgage and consequently denied
the request to re-compute the obligation.

ISSUE:
Whether there was an equitable mortgage.

RULING:
None. The transaction between petitioner and respondent is not an equitable mortgage,
but a dacion en pago.
 We agree with the lower courts’ assessment of the facts. The conduct of the parties prior
to, during, and after the execution of the deeds of sale adequately shows that petitioner sold to
respondent the lots in question to satisfy his debts. Respondent was able to sufficiently explain
why the presumption of an equitable mortgage does not apply in the present case. The
inadequacy of the purchase price in the two deeds of sale dated 18 May 2001 was supported by
an Affidavit of True Consideration of the Absolute Sale of the Property. Respondent did not
tolerate petitioner’s possession of the lots. Respondent caused the registration and subsequent
transfer of TCT No. T-214950 to TCT No. T-333921 under his name, and paid taxes thereon.
There were no extensions of time for the payment of petitioner’s loans; rather, petitioner offered
different modes of payment for his loans. It was only after three instances of bounced checks that
petitioner offered TCT Nos. T-130095 and T-214950 as payment for his loans and executed
deeds of sale in respondent’s favor. The transaction between petitioner and respondent is thus not
an equitable mortgage, but is instead a dacion en pago.
Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance of an existing obligation. It is a special
mode of payment where the debtor offers another thing to the creditor who accepts it as
equivalent to the payment of an outstanding debt. For dacion en pago to exist, the following
elements must concur: (a) existence of a money obligation; (b) the alienation to the creditor of a
property by the debtor with the consent of the former; and (c) satisfaction of the money
obligation of the debtor.