Facts :
Adelaida
Ramos borrowed from her brother, Oscar Ramos, the amounts P5,000 and 9,000 in
connection with her business transaction with Flor Ramiro, Fred Nabba and Atty.
Ruperto sarandi involving the recovery of parcel of land. The amount was used
to finance the trip to Hawaii of Ramiro, Nabba and Sarandi. As security of the
loan, Adelaida Ramos (private respondent) execuded in favor of Oscar and Luz
two deeds of conditional sale of her rights, shares and interests and
participation respectively over lot no. 4033 registered in the name of their
parents and lot no. 4221 covered by a certificate of title registered in the
names of Socorro Ramos,Josefina Ramos and Adelaida Ramos, aid properties being
of the cadastral survey.
Upon
the failure of Adelaida Ramos as vendor a retro to exercise her right of
repurchase within the redemption, petitioners filed a petition for approval of
the pacto de retro sale of lot no. 4221 in the CFI acting as a cadastral court.
CFI conveyed the deed of the conditional sale to spouses Oscar and Luz by way
of pacto de retro sale whatever right and interests Adelaida may have in lot
no. 4033, approving the notarial register of notary public Sibal. The court
also ordered the consolidation of ownership and dominion to spouses Oscar and
Luz over the rights, shares and interests of Adelaida in lot no. 4221 which she
sold to the spouses under a pacto de retro sale.
Adelaida
filed a civil case with the CFI for the declaration of nullity of orders,
reformation of instrument, recovery of possession with preliminary injunction
and damages. Adelaida alleged in her complaint that the deeds of conditional
sale are mere mortgages and were
vitiated by misrepresentation, fraud and undue influence and the orders issued
by the cadastral court were null and void for lack of jurisdiction. Petitioners,
in their answer, specifically denied the allegations of fraud and
misrepresentation and interposed as defense the fact that the conditional sales
were voluntarily executed by Adelaida and truly expressed the intention of the parties, that the action
as long prescribed, the orders questioned approving the consolidation of
ownershop of the lands where within the jurisdiction of the lower court in its
capacity as a probate court and as a cadastral court; that the land subject of
the conditional sales were in custodial egis in connection with the settlement
of the properties of the late Denoga, the predecessor in interest of both
petitioners and the private respondent.
The
RTC denied the defendant’s motion to
dismiss ,declared the loan transaction secured by the Real Estate Mortgage as equitable
mortages. On appeal the CA affirmed the ruling of the RTC.
Issue : WON the transaction was deemed to be an
equitable mortgage.
Held :
Yes. 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.
The SC denied the petition and affirmed the CA
ruling. The court ruled that in practically all of the so called contracts of
sale with right of repurchase, the real intention of the parties is that the
pretended purchase price is money loaned, and in order to secure the payment of
the loan, a contract purporting to be sale with pacto de retro is drawn up. The
provisions contained in articles 1859 and 1858 of the civil code which
respectively prohibit the creditor from appropriating the things given in
pledge or mortgage and ordering that said things be sold or alienated when the
principal obligation becomes due, are circumvented.
Furthermore,
it is well known that the practice in these contracts of sale with pacto de
retro is to draw up another contract purporting to be a lease of the property
to the supposed vendor, who pays in the money, or in rent, and in fact rent is
the interest on the money loaned The interest is usurious, thus the usury law
is circumvented. The contract under consideration is preserved in the civil
code, but with adequate safeguards and restrictions.
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