MADRIGAL vs.

CA

G.R. No. 142944. April 15, 2005

When a document appears on its face to be a sale, the owner of the property may prove
that the contract is really a loan with mortgage by raising an issue the fact that the
document does not express the true intent of the parties.

Spouses Jose and Fermina Mallari owned a 340 sqm. Residential house and lot. When Jose
needed money to fund the travel of his wife to the US, he wanted to mortgage the property
but their son Virgilio convinced him not to and made him assign a portion to Virgilio instead
with the same conditions. The consideration of the Deed was only for (P50,000) unknown to
Jose, Virgilio sold the property to Madrigal for the same amount and demanded Jose to
vacate the property.

FACTS:

Jose and Fermina Mallari owned a 340 sqm. Residential lot with a 2 storey house. Fermina
planned to travel to the US, so Jose thought of mortgaging the property with a bank in
order to pay for his wife’s travel but he was convinced by his son Virgilio to assign him a
portion of the property for the consideration of (P50,000) and that he would let his father
and sister occupy the property and that he would not dispose of the property without his
father’s consent and he may redeem the property any time.

The spouses then executed a document (Deed of Absolute Sale) which appeared to convey
to Virgilio the said house and lot to which the deed described the properties sold as a one
story residential house and 135 sqm lot. Virgilio then sold the same property for the same
amount to Edenbert Madrigal who was a long time neighbor of the Mallaris.

ISSUES: Whether or not the RTC and CA erred in taking into account parol
evidence presented by Jose to prove the existence of an equitable mortgage
instead of a sale between him and Virgilio?

RULING: NO

When a document appears on its face to be a sale, the owner of the property may prove
that the contract is really a loan with mortgage by raising an issue the fact that the
document does not express the true intent of the parties.

The parol evidence then becomes competent and admissible to prove that the instrument
was in truth and in fact given merely as a security for the repayment of a loan.

Madrigal and Virgilio to pay for damages and to return to Jose the residential house and lot.