G.R. No.

239088, April 03, 2019

SPOUSES JOHN T. SY AND LENY N. SY, AND VALENTINO T. SY,

PETITIONERS, v. MA. LOURDES DE VERA-NAVARRO AND
BENJAEMY HO TAN LANDHOLDINGS, INC., HEREIN REPRESENTED
BY GRACE T. MOLINA, IN HER CAPACITY AS CORPORATE
SECRETARY, RESPONDENTS.
Caguioa, J.:

FACTS: T h i s c a s e s t e m m e d f r o m a C o m p l a i n t f o r D e c l a r a t i o n o f N u l l i t y
o f D e e d o f A b s o l u t e S a l e , C a n c e l l a t i o n o f T r a n sf e r C e r t i f i c a t e o f
T i t l e s , R e c o ve r y o f O wn e r s h i p f i l e d b y p e t i t i o n e r s a g a i n s t r e s p o n d e n t s
M a . L o u r d e s D e V e r a - N a va r r o ( r e s p o n d e n t D e V e r a - N a va r r o ) a n d
Benjaemy Ho Tan Landholdings, Inc. (respondent, BHTLI)

Petitioners Sps. Sy alleged that they were the co-owners of a parcel

o f l a n d a n d t h e f o u r - s t o r e y b u i l d i n g , c o ve r e d b y a T C T ( s u b j e c t
p r o p e r t y) w i t h a m a r k e t va l u e o f m o r e t h a n P 4 0 M . P e t i t i o n e r J o h n , f o r
h i m s e l f a n d i n r e p r e s e n t a t i o n o f h i s c o - o wn e r s , b o r r o we d m o r e t h a n
P 3 . 7 M f r o m r e s p o n d e n t D e V e r a - N a va r r o , s e c u r e d b y a R e a l E s t a t e
M o r t g a g e C o n t r a c t ( M o r t g a g e C o n t r a c t ) o ve r t h e s u b j e c t p r o p e r t y .
P e t i t i o n e r s S p s . S y a l l e g e d t h a t a f t e r t h e e xe c u t i o n o f t h e M o r t g a g e
C o n t r a c t , a s p e r u s u a l p r a c t i c e , r e s p o n d e n t D e V e r a - N a va r r o a s k e d
p e t i t i o n e r J o h n t o e xe c u t e a n u n d a t e d D e e d o f A b s o l u t e S a l e w i t h a
stated consideration in the amount of P5M as additional security for
t h e l o a n . F u r t h e r , p e t i t i o n e r J o h n a n d r e s p o n d e n t D e V e r a - N a va r r o
ve r b a l l y a g r e e d t h a t t h e m o d e o f p a ym e n t f o r t h e l o a n wo u l d b e
r e s p o n d e n t D e V e r a - N a va r r o ' s c o l l e c t i o n o f r e n t a l p a ym e n t s f r o m t h e
tenants of the subject property in the total amount of P70K per month
f o r f i ve ye a r s . O n 2 0 1 1 , h e wa s i n f o r m e d b y r e s p o n d e n t B H T L I
t h r o u g h a l e t t e r t h a t t h e o wn e r s h i p o f t h e s u b j e c t p r o p e r t y h a d b e e n
t r a n s f e r r e d t o r e s p o n d e n t D e V e r a - N a va r r o ; t h a t a n e w T C T c o ve r i n g
t h e s u b j e c t p r o p e r t y wa s i s s u e d i n f a vo r o f r e s p o n d e n t D e V e r a -
N a va r r o ; a n d t h a t r e s p o n d e n t B H T L I wa s d e m a n d i n g t h a t t h e
p e t i t i o n e r s S p s . S y va c a t e t h e s u b j e c t p r o p e r t y. U p o n l e a r n i n g t h i s ,
p e t i t i o n e r V a l e n t i n o , o n e o f t h e c o - o wn e r s , c a u s e d t h e a n n o t a t i o n o f
a n a d ve r s e c l a i m o n t h e T C T .

A D e e d o f A b s o l u t e S a l e wa s e x e c u t e d b y r e s p o n d e n t D e V e r a -
N a va r r o i n f a vo r o f r e s p o n d e n t B H T L I a n d r e s p o n d e n t D e V e r a -
N a va r r o , wh i l e a d m i t t i n g t h e e xi s t e n c e o f t h e M o r t g a g e C o n t r a c t t o
s e c u r e t h e l o a n a g r e e m e n t wi t h p e t i t i o n e r s , a l l e g e d t h a t t h e a m o u n t
r e m a i n e d u n p a i d a n d t h a t J o h n e ve n o b t a i n e d a d d i t i o n a l l o a n s
r e a c h i n g m o r e o r l e s s P 1 0 . 5 M . F u r t h e r , r e s p o n d e n t D e V e r a - N a va r r o
c l a i m e d t h a t p e t i t i o n e r J o h n s o l d t o h e r t h e s u b j e c t p r o p e r t y b y vi r t u e
o f t h e u n d a t e d De e d o f A b s o l u t e S a l e . T h a t t h e u n d a t e d D e e d o f
Absolute Sale is, for all intents and purposes, a legitimate contract of
s a l e , wh i l e p e t i t i o n e r s S p s . S y c l a i m e d t h a t t h e y a r e t h e r i g h t f u l
o wn e r s o f t h e s u b j e c t p r o p e r t y s i n c e t h e u n d a t e d D e e d o f A b s o l u t e
S a l e e xe c u t e d b e t we e n p e t i t i o n e r J o h n a n d r e s p o n d e n t D e V e r a -
N a va r r o i s a l l e g e d l y n u l l a n d vo i d t h a t t h e r e wa s n o r e a l c o n t r a c t o f
s a l e b e t we e n t h e p a r t i e s a n d t h a t t h e s a i d D e e d wa s m e r e l y i n t e n d e d
to provide added security to the Mortage Contract.

D e s p i t e t h e e xe c u t i o n o f t h e D e e d o f A b s o l u t e S a l e b y r e s p o n d e n t D e
V e r a - N a va r r o i n f a vo r o f r e s p o n d e n t B H T L I , t h e l a t t e r h a s n o r i g h t t o
o wn t h e p r o p e r t y a s i t wa s a l l e g e d l y n o t a b u ye r i n g o o d f a i t h .
R e s p o n d e n t B H T L I a l l e g e d t h a t i t i s a b u ye r i n g o o d f a i t h s i n c e t h e
s a l e b e t we e n i t a n d r e s p o n d e n t D e V e r a - N a va r r o o ve r t h e s u b j e c t
p r o p e r t y wa s s u p p o s e d l y c o n s u m m a t e d 1 0 d a ys p r i o r t o t h e a n n o t a t i o n
o f t h e a d ve r s e c l a i m . S i n c e i t w a s s u p p o s e d l y n o t a wa r e o f a n y
i n f i r m i t y i n vo l v i n g t h e s u b j e c t p r o p e r t y, r e s p o n d e n t B H T L I a l l e g e d t h a t
i t s h o u l d b e t r e a t e d a s a b u ye r i n g o o d f a i t h .

R T C r u l e d t h a t t h e p u r p o r t e d D e e d o f A b s o l u t e S a l e b e t we e n
p e t i t i o n e r J o h n a n d r e s p o n d e n t D e V e r a - N a va r r o a n e q u i t a b l e
m o r t g a g e a n d t h u s n u l l a n d vo i d . A l s o i t d e c l a r e d t h e D e e d o f
A b s o l u t e S a l e e x e c u t e d b y d e f e n d a n t N a va r r o i n f a vo r o f d e f e n d a n t
B H T L I a s n u l l a n d vo i d . I n t h e m a i n , t h e u n d a t e d D e e d o f A b s o l u t e
S a l e wa s m e r e l y a n a d d i t i o n a l s e c u r i t y f o r t h e l o a n a n d t h a t i n s t e a d o f
a va l i d c o n t r a c t o f s a l e , wh a t t r a n s p i r e d b e t we e n t h e p a r t i e s w a s a n
e q u i t a b l e m o r t g a g e d u e t o t h e e xi s t e n c e o f c e r t a i n
badges of an equitable mortgage

O n a p p e a l , t h e CA r e ve r s e d t h e r u l i n g s o f t h e R T C . T h e r e wa s i n d e e d
a c o n t r a c t o f s a l e b e c a u s e t h e r e co r d s a r e s u p p o s e d l y b e r e f t o f a n y
e v i d e n c e i n d i c a t i v e t h a t t h e r e wa s a n e q u i t a b l e m o r t g a g e . F u r t h e r , t h e
C A p o s i t e d t h a t t h e t r a n s a c t i o n i s d a c i o n e n p a g o . L a s t l y, i t h e l d t h a t
r e s p o n d e n t B H T L I wa s a b u ye r i n g o o d f a i t h a s t h e r e wa s n o s h o w i n g
t h a t r e s p o n d e n t B H T L I wa s a wa r e o f a n y i r r e g u l a r i t y a s t o t h e t i t l e
c o ve r i n g t h e s u b j e c t p r o p e r t y.

P e t i t i o n e r s f i l e d t h e i r M o t i o n f o r R e c o n s i d e r a t i o n b u t we r e d e n i e d ,
hence the present appeal.

ISSUE: W h e t h e r o r n o t t h e t r a n s a c t i o n b e t we e n p e t i t i o n e r J o h n a n d
r e s p o n d e n t D e V e r a - N a va r r o wa s a va l i d c o n t r a c t o f s a l e a n d n o t a n
equitable mortgage.
RULING: U p o n e xa m i n a t i o n o f t h e r e c o r d s o f t h e i n s t a n t c a s e , t h e C o u r t
f i n d s t h a t t h e r e w a s n o r e a s o n f o r t h e C A t o r e ve r s e t h e R T C ' s c o r r e c t
finding that an equitable mortgage exists in the instant case. The
p u r p o r t e d c o n t r a c t o f s a l e b e t we e n p e t i t i o n e r J o h n a n d r e s p o n d e n t D e
V e r a - N a va r r o i s a n e q u i t a b l e m o r t g a g e a n d n o t a l e g i t i m a t e c o n t r a c t
of sale.

A n e q u i t a b l e m o r t g a g e i s d e f i n e d a s o n e wh i c h a l t h o u g h l a c k i n g i n
s o m e f o r m a l i t y, o r f o r m o r wo r d s , o r o t h e r r e q u i s i t e s d e m a n d e d b y a
s t a t u t e , n e ve r t h e l e s s r e ve a l s t h e i n t e n t i o n o f t h e p a r t i e s t o c h a r g e
real property as security for a debt, and contains nothing impossible
or contrary to law.

Its essential requisites are: (1) that the parties entered into a
contract denominated as a contract of sale; and (2) that their
intention was to secure an existing debt by way of a mortgage.

Article 1602 of the Civil Code states that a contract shall be presumed
t o b e a n e q u i t a b l e m o r t g a g e i n a n y o f t h e f o l l o wi n g c a s e s :
(1) W hen the price of a sale with right to repurchase is unusually
inadequate;
(2) W h e n t h e ve n d o r r e m a i n s i n p o s s e s s i o n a s l e s s e e o r
o t h e r wi s e ;
(3) W h e n u p o n o r a f t e r t h e e xp i r a t i o n o f t h e r i g h t t o r e p u r c h a s e
a n o t h e r i n s t r u m e n t e xt e n d i n g t h e p e r i o d o f r e d e m p t i o n o r
g r a n t i n g a n e w p e r i o d i s e xe c u t e d ;
(4) W hen the purchaser retains for himself a part of the purchase
price;
(5) W h e n t h e ve n d o r b i n d s h i m s e l f t o p a y t h e t a xe s o n t h e t h i n g
sold;
(6) I n a n y o t h e r c a s e wh e r e i t m a y b e f a i r l y i n f e r r e d t h a t t h e r e a l
intention of the parties is that the transaction shall secure the
p a ym e n t o f a d e b t o r t h e p e r f o r m a n c e o f a n y o t h e r o b l i g a t i o n .

Jurisprudence consistently shows that the presence of even one of the

c i r c u m s t a n c e s e n u m e r a t e d i n A r t i c l e 1 6 0 2 s u f f i c e s t o c o n ve r t a
p u r p o r t e d c o n t r a c t o f s a l e i n t o a n e q u i t a b l e m o r t g a g e . T h e e xi s t e n c e
of any of the circumstances defined in Article 1602 of the New Civil
C o d e , n o t t h e c o n c u r r e n c e n o r a n o ve r wh e l m i n g n u m b e r o f s u ch
circumstances, is sufficient for a contract of sale to be presumed an
equitable mortgage