G.R. No. 73733 December 16, 1986 EPIFANIA MAGALLON, petitioner, vs. HON. ROSALINA L.

MONTEJO, in her Official Capacity as Presiding Judge of Regional Trial Court of Davao del Sur, Branch XXI, CONCEPCION LACERNA, ELECERIA LACERNA and PURITA LACERNA,respondents. Latasa, Cagas and Aranune Law & Surveying Office for petitioner. Alberto Lumakang for private respondents.

NARVASA, J.: The petition before this Court sinks the annulment of a writ of execution issued by the respondent Judge in Civil Case No. 727 of her court (RTC Davao del Sur). Said case was instituted by the plaintiffs (private respondents herein) against Martin Lacerna to compel partition of parcel of land located in Barrio Kasuga Municipality of Magsaysay, Davao del Sur, to which said defendant had perfected a claim by homestead. The plaintiffs, claiming to be the common children of Martin Lacerna and his wife, Eustaquia Pichan, who died in 1953, asserted a right to one-half of the land as their mother's share in her conjugal partnership with Martin. While said defendant denied having contracted marriage with Eustaquia Pichan although he admitted living with her without benefit of marriage until she allegedly abandoned him as well as paternity of two of the plaintiffs who, he claimed, were fathered by other men, the Trial Court gave his denials no credence. Said Court, on the basis of the evidence presented to it, found that Martin had in fact been married to Eustaquia, and that the plaintiffs were his children with her. The Trial Court further found that Martin had begun working the homestead, and his right to a patent to the land accrued, during his coverture with Eustaquia. On the basis of these findings, the plaintiffs were declared entitled to the half of the land claimed by them. 1 Martin Lacerna appealed to the Intermediate Appellate Court AC-G.R. No. 59900-R). That Court affirmed, in a Decision promulgated on August 31, 1984 which has since become final. 2 It appears that at the time the case was brought, and while it was being heard in the Trial Court, no certificate of title to the land had yet been issued to Martin Lacerna, although he had already complied with all the conditions necessary to a grant thereof. Original Certificate of Title No. P-11 568 (issued on the basis of Homestead Patent No. 148869) was issued only on November 22, 1978, while Lacerna's appeal was pending in the Intermediate Appellate Court. While it is not disputed that said certificate of title refers to the same land homesteaded by Lacerna during his coverture with Eustaquia Pichan, for reasons to which the record before the Court offers no clear clue, it states on its face that it is issued in the name of " ... MARTIN LACERNA, Filipino, of legal age, married to Epifania Magallon ... ," the latter being the present petitioner. 3 It appears further that on November 26, 1985, after the confirmative Decision of the Intermediate Appellate Court had become final and executory, the respondent Judge, on motion of the plaintiffs issued an alias writ of execution commanding the Provincial Sheriff::
... to order the defendant Martin Lacerna to divide and partition the property located at Casuga, Magsaysay, Davao del Sur, consisting of 10 hectares designated as Lot No. 5098 Cad. No. 275 covered by H.A. No. 20-13378 (E-20-12748), of which is the share of Eustaquia Pichan in the conjugal property, and plaintiffs being Pichan's children are also entitled thereto; and deliver portion of 5 hectares of the aforedescribed lot to the plaintiffs as their share to satisfy the said judgment and your fees thereon. 4

Apparently, said writ was served on both Martin Lacerna and petitioner herein, for on December 17, 1985, the latter filed with the Trial Court a "Motion for Intervention and to Stay Execution" alleging that the land subject of the writ was conjugal property of herself and Martin Lacerna under a certificate of title (OCT No. P-11568) ... issued way back 1978 (sic) without legal impediments, and ... now incontestable," as well as ... valid, binding and legal unless declared otherwise in an independent proceedings, ... and praying that ... the property of herein intervenor be excluded from the enforcement of the writ of execution." 5 Said motion was denied, as also was a motion for reconsideration of the order of denial. Hence, the present petition. The facts found by the lower courts which, in view of the finality of the latter's decisions, are binding upon this Court and can no longer be controverted, as wen as the pertinent allegations of the petition, leave no doubt that the land in question, which rightfully pertained to the conjugal partnership of Martin Lacerna and Eustaquia Pichan, the plaintiff's mother, and should have been titled in the names of said spouses, was, through fraud or mistaken, registered in the names of Martin Lacerna and petitioner herein, Epifania Magallon In such a situation, the property should be regarded as impressed with an implied, or a constructive, trust for the party rightfully entitled thereto. The Civil Code provides that:
If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. 6

The provision restates one of the principles upon which the general law of trust is founded, expressed in equity jurisprudence thus: A constructive trust is a creature of equity, defined supra (sec. 15) as a remedial device by which the holder of legal title is held to be a trustee for the benefit of another who in good conscience is entitled to the beneficial interest. So. the doctrine of constructive trust is an instrument of equity for the maintenance of justice, good faith, and good conscience, resting on a sound public policy requiring that the law should not become the instrument of designing persons to be used for the purpose of fraud. In this respect constructive trusts have been said to arise through the application of the doctrine of equitable estoppel or under the broad doctrine that equity regards and treats as done what in good conscience ought to be done. Where, through a mistake of fact, title to, and apparent ownership of, property rightfully belonging to one person is obtained by another, a constructive trust ordinarily arises in favor of the rightful owner of such property
It is a general principle that one who acquires land or other property by fraud, misrepresentation, imposition, or concealment, or under any such other circumstances as to render it inequitable for him to retain the property, is in equity to be regarded as a trustee ex maleficio thereof for a person who suffers by reason of the fraud or other wrong, and is equitably entitled to the property, even though such beneficiary may never have any legal estate therein. It is to be observed, however, that in the absence of equitable considerations or a fiduciary relationship, fraud alone, either actual or constructive, will not give rise to a trust, since, as has been pointed out, if it were otherwise all persons claiming property under defective titles would be trustee for the 'true' owners. 7 Under proper circumstances, mistake, although unconnected with fraud, will warrant relief under the Code providing that one who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act is, unless he has come better title thereto, an involuntary trustee of the thing gained for the benefit of the person who would otherwise have had it. 8 As stated by Justice Cardozo, a constructive trust is the formula through which the conscience of equity finds expression and when property has been acquired in such circumstances that the holder

of the legal title may not in good conscience retain the beneficial interest; equity converts him into a trustee. 9

In an early case in this jurisdiction, land of the plaintiff had, by mistake, been included in the title of an adjoining owner who was afterwards sued by his creditors, the latter obtaining writs of execution and procuring their annotation on said title. In an action by the plaintiff to enjoin the sale of his property, annul the levies thereon and secure a new title without those encumbrances, this Court affirmed judgment of the lower court in the plaintiff's favor, despite the fact that he had done nothing to protect his interests in the land during a period of almost six years following the issuance of the decree of registration in favor of the adjoining owner. The Court, noting that the titular (ostensible) owner had never laid claim to the property mistakenly registered in his name and that he had in fact acquiesced to judgment in a separate action declaring the plaintiff the real owner of the property, refused to apply the one-year limitation period for disputing the title and held that in the circumstances, the former merely held title to the property in trust for the plaintiff. 10 In Bueno vs. Reyes, 11 where property belonging to an ancestor of whom plaintiffs' parents were the intestate heirs was, though mistake or in bad faith, registered in cadastral proceedings in the name of other parties who had no right thereto, this Court reaffirmed the principles already cited, holding that:
If any trust can be deduced at all from the foregoing facts it was an implied one, arising by operation of law not from any presumed intention of the parties but to satisfy the demands of justice and equity and as a protection against unfair dealing or downright fraud. Indeed, in this kind of implied trust, commonly denominated constructive, as distinguished from resulting, trust, there exists a certain antagonism between the cestui que trust and the trustee. Thus, for instance, under Article 1456 of the Civil Code, 'if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.' In a number of cases this Court has held that registration of property by one person in his name, whether by mistake or fraud, the real owner being another per- son, impresses upon the title so acquired the character of a constructive trust for the real owner, which would justify an action for reconveyance. 12

Clearly, therefore, the petitioner herein, as the trustee of a constructive trust, has an obligation to convey to the private respondents that part of the land in question to which she now claims an ostensible title, said portion rightfully pertaining to the respondents' deceased mother as her share in the conjugal partnership with Martin Lacerna. The question is whether that obligation may be enforced by execution in the action at bar, which was brought and prosecuted to judgment against Martin Lacerna only, without impleading the petitioner. 13 Stated otherwise, is petitioner bound by final judgment rendered in an action to which she was not made a party? There are no clear precedents on the matter in our law. Reference to American law for any persuasive ruling shows that even there the question seems to be an open one. "The authorities are in conflict as to whether a wife, not a party to an action is bound by a judgment therein for or against her husband with respect to community or homestead property or property held as an estate in entirety. Community property. It has been held that a judgment against the husband in an action involving community property, is conclusive on the wife even if she is not a party, but it has also been held that a judgment against either husband or wife with respect to community property in an action to which the other spouse is not a party does not prevent the other spouse from subsequently having his or her day in court, although, of course, a judgment against both husband and wife is binding on both.

Estate by entirety. It has been both affirmed and denied that a wife is in such privity with her husband in respect of property held by them as an estate in entirety that a judgment for or against him respecting such property in a suit to which she is not a party is binding on her. Homestead. A judgment affecting a homestead is, according to some authorities, not binding on a spouse who is not a party to the action in which it is rendered, unless the homestead is community property or the homestead claim or interest would not defeat the action; but, according to other authorities, where the husband sets up and litigates a claim for the homestead, an adjudication for or against him is binding on the wife. 14
As to her community interest in real property, a wife is in privity with her husband and is represented by him in an action as fully as though she had expressly been made a party thereto. Cutting vs. Bryan, 274 P. 326, 206 Cal. 254, certiorari denied 50 S. Ct. 16, 280 U.S. 556,74 L.Ed 611. 15

In the particular circumstances obtaining here, the Court can as it does in good conscience and without doing violence to doctrine, adopt the affirmative view and hold the petitioner bound by the judgment against Martin Lacerna, despite her not having in fact been impleaded in the action against the latter. This ruling presumes that petitioner is, as she claims, the legal wife of Lacerna though, as observed by the Intermediate Appellate Court, no marriage contract was presented by Lacerna to prove his marriage to the petitioner either before or after the death of Eustaquia Pichan. Indeed, it is clear that the petitioner cannot assert any claim to the land other than by virtue of her supposed marriage to Lacerna. As a mere mistress, she cannot pretend to any right thereto. But whether the petitioner is a lawful wife or a mere "live-in" partner, the Court simply cannot believe that she never became aware of the litigation concerning the land until presented with the writ of execution. What is far more probable and credible is that she has known of the lawsuit since 1956 when Martin Lacerna "married" her. 16Her silence and inaction since then and until barely a year ago bespeak more than anything else, a confession that she had and has no right to the land and no defense to offer to the action, either on her part or on the part of Martin Lacerna. Had she even the semblance of a right, there is no doubt she would have lost no time asserting it. From the averments of the petition, it is evident that the petitioner relies mainly, if not solely, on the fact that the certificate of title to the land carries her name as the "wife" of the owner named therein, Martin Lacerna. As already observed, such entry on the certificate of title has been established by evidence no longer disputable as resulting from a mistake if, indeed, it was not procured through fraud. Moreover, on the authority of Litam vs. Rivera 17 and Stuart vs. Yatco, 18 the phrase "married to Epifania Magallon written after the name of Martin Lacerna in said certificate of title is merely descriptive of the civil status of Martin Lacerna, the registered owner, and does not necessarily prove that the land is "conjugal" property of Lacerna and petitioner hereyn. Neither can petitioner invoke the presumption established in Article 160 of the Civil Code that property acquired during the marriage belongs to the conjugal partnership, there being no proof of her alleged marriage to Martin Lacerna except that which arises by implication from the aforestated entry in the certificate of title and for the far more compelling reason that the homestead claim on the land was shown to have been perfected during Martin Lacerna's marriage to Eustaquia Pichan, mother of the private respondents. The ruling in Maramba vs. Lozano 19that the presumption does not operate where there is no showing as to when property alleged to be conjugal was acquired applies with even greater force here. The writ of execution, however, must be set aside, though not for the reasons urged in the petition. The judgment of the respondent Trial Court which was affirmed by the Intermediate Appellate Court merely declared the private respondents entitled to one-half of the land in question, without specifically ordering partition and delivery to them of said half portion. A writ of execution cannot vary the terms of the judgment it is issued to satisfy, or afford relief different from, or not clearly included in, what is awarded by said judgment. Even if the judgment in question is construable as authorizing or directing a partition of the land, the

mechanics of an actual partition should follow the procedure laid down in Rule 69 of the Rules of Court which does not contemplate or provide for the intervention of the sheriff in the manner prescribed in the writ complained of. Both the Trial Court, in rendering the judgment in question, and the Intermediate Appellate Court, in affirming the same, appear to have overlooked the fact that the surviving spouse is the legal and compulsory heir of the deceased husband or wife; otherwise, consistent with the finding that the half portion of the land sued for pertained to the late Eustaquia Pichan as her share in the conjugal partnership with Martin Lacerna, they should have ruled that Martin Lacerna concurred with the three private respondents in the succession to said portion, each of them taking an equal share. 20 Unfortunately, said error is beyond review because Martin Lacerna allowed the judgment to become final and executory without raising that point of law, even on appeal. WHEREFORE, the writ of execution complained of is set aside and annulled. Instead of enforcing said writ, the respondent Trial Court is ordered to effect the partition of the land in question in accordance with the terms of its now final and executory decision and the provisions of Rule 69 of the Rules of Court. No pronouncement as to costs in this instance. SO ORDERED.

G.R. No. 75410 August 17, 1987 CESAR SARMIENTO, petitioner, vs. THE INTERMEDIATE APPELLATE COURT, HON. RICARDO D. DIAZ as the Presiding Judge of Branch XXVII of the Regional Trial Court of Manila, PHILIPPINE NATIONAL BANK and NORMA DIAZ SARMIENTO,respondents. No. 75409 August 17, 1987 CESAR SARMIENTO, petitioner, vs. THE INTERMEDIATE APPELLATE COURT, HON. REGINA G. ORDOEZ-BENITEZ, as the Presiding Judge of Branch XXVII of the Regional Trial Court of Manila, PHILIPPINE NATIONAL BANK, NORMA SARMIENTO, LORNA SARMIENTO and LERMA SARMIENTO, respondents.

PARAS., J.: This is a petition to review and reverse the decision * dated June 13, 1986 of respondent Intermediate Appellate Court (now Court of Appeals) in AC-G.R. SP Nos. 09159 and 09160 denying the petition for certiorari and prohibition for lack of merit and correspondingly dismissing these cases. The facts of the aforecited cases will be presented separately since they involve different proceedings heard before different branches of the Regional Trial Court of Manila. G.R. No. 75409 The Court of Appeals narrates the facts thus: It appears that on May 10, 1977, the private respondent Norma Sarmiento sued her husband, the petitioner Cesar Sarmiento, for support. The case was filed with the Juvenile and Domestic Relations Court and later assigned to Regional Trial Court, Branch XLVII, presided over by Judge Regina Ordoez-Benitez, after the reorganization of the Judiciary in 1983. On March 1, 1984, Judge Ordoez-Benitez rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering the defendant, Cesar Sarmiento, to pay his plaintiff-wife, Norma Sarmiento, the sum of Five Hundred Pesos (P500.00)monthly as support commencing on May 10, 1977 up to March, 1984, which shall be paid thirty (30) days after the Decision shall have become final and executory and the monthly support, starting April 1984, shall be deposited with the Cashier of the Regional Trial Courts, City Hall, Manila within the first five (6) days of April 1984 and every month thereafter from which plaintiff-wife or her duly authorized representative may withdraw the same. Support; shall be Immediately payable, notwithstanding any appeal which may be interposed by defendant. Let a copy of this Decision be furnished the Cashier of the Regional Trial Courts of City Hall, Manila, for his information and guidance.

On April 9,1984 the private respondent moved for execution of the judgment pending appeal The petitioner actually filed a notice of appeal four days later on April 13. On May 3, 1984, Judge Ordoez-Benitez issued the following order: Acting on the "Motion for Execution of Decision Pending Appeal dated April 9, 1984, and the Notice of Appeal filed by the defendant on April 13, 1984, the Philippine National Bank is hereby directed that no amount due the defendant be released without authority from this Court and until final disposition of said case. Let a copy of this Order be directed to the Philippine National Bank for its guidance and information. On May 29, 1985 the private respondent filed a motion to require the Philippine National Bank to deliver to the private respondent the accrued support out of the retirement benefits due to the Petitioner as a former employee of the PNB. The petitioner prays That a restraining order and/or writ of pre injunction forthwith issue, ENJOINING AND PROHIBITING the respondent JUDGE REGINA G. ORDOEZ-BENITEZ and all the respondents in Civil-Case No. E-02184, their agents and employees, and all persons acting for them or on their behalf, from enforcing, executing or otherwise giving force and effect to the Decision (Annex "A " hereof, and the Order Annex "B hereof). " On June 13, 1966, the Court of Appeals found petitioner's appeal unmeritorious and thus dismissed the same. Petitioner moved for reconsideration but the motion was denied. Hence this petition. G.R. No. 75410 The Court of Appeals sums up the facts as follows: It appears that, on August 1, 1984, the private respondent brought another action against the petitioner for a declaration that the retirement benefits due the petitioner from the PNB were conjugal and that 50% thereof belonged to the private respondent as her share. The case was assigned to Branch XXVII of the RTC of Manila, presided over by Judge Ricardo Diaz. The petitioner filed an answer in which he contended that the complaint did not state a cause of action' that there was another action peding between him and the plaintiff and that the plaintiff did not exhaust administrative remedies before bringing the suit. However, the trial court refused to dismiss the complaint because the grounds cited were not indubitable. The case was therefore set for pre-trial conference. For failure of the petitioner to appear at the pretrial conference on December 19, 1985, the trial court declared him as in default. Thereafter, on February 20, 1986, judgment was rendered as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering defendant Philippine National Bank to desist and refrain from releasing to defendant Cesar Sarmiento all monetary benefits and emoluments which may be due him by reason of his retirement

from service, but instead, to deliver one-half (1/2) thereof to the herein plaintiff; and if in the event that all such monetary benefits and emoluments, for one reason or another, had already been paid to defendant Cesar Sarmiento, said defendant is hereby ordered to pay plaintiff one-half (1/2) of whatever monetary benefits, emoluments and pivileges he received from defendant Philippine National Bank by reason of his retirement. Likewise, defendant Cesar Sarmiento is hereby ordered the costs of suit.' On April 21, 1986, the private respondent moved for the immediate execution of the judgment in her favor, on the ground that any appeal that the petitioner might take would merely be dilatory in the light of the admission in his answer. The petitioner filed an opposition to the motion wherein he manifested that he was not going to appeal the decision of the trial court but that he would instead filed a petition for certiorari and prohibition against the trial coourt. Petitioner appealed the February 20, 1986 decision of respondent Judge Diaz to the Court of Appeals on a petition for certiorari and prohibition. The assailed decision denied the above petition. Hence, this joint petition. Petitioner's averments can be narrowed down to the following: 1. The order of May 3, 1984 of respondent Judge Ordonez-Benitez, prohibiting the Philippine National Bank to release any amount of the retirement gratuity due the petitioner without the trial court's approval is contrary to law, because retirement benefits are exempt from execution. 2. Since the trial court had refused to give the course to his appeal, he was justified in resorting to the extraordinary legal remedies of certiorari and prohibition. 3. The default judgment dated February 20, 1986 of respondent Judge Diaz also ordering the PNB to desist from releasing to petitioner any portion of his retirement benefits and to deliver one-half thereof to herein private respondent is contrary to law. From the foregoing, it can be gauged that what petitioner principally questions or protests against is respondent appellate court's failure (actually refusal to resolve the issue on whether or not the retirement benefits due the petitioner from the PNB are subject to attachment, execution or other legal process). Private respondent, however, claims that the issues raised by petitioner before respondent Court of Appeals were issues relating to the merits of the cases then pending with respondents Judge Ordonez-Benitez and Judge Diaz and hence the said issues were proper subject of an appeal, which remedy was already availed of by petitioner in both cases. She likewise submits that since no question of jurisdiciton or abuse of discretion had been raised and substantiated in the petitions before the respondent Court of Appeals, said appellate court was legally justified in dismissing the petition. Just as We have dealt with the facts of these two cases, We now intend to resolve their issues and questions also separately. G.R. No. 75409

We do not find merit in petitioner's contention that simply because the trial court had refused to give due course to his appeal, he was already justified in resorting to the extraordinary legal remedies of certiorari and prohibition. What the respondent Court of Appeals found in this regard need not be further elaborated upon. Said appellate court ruled: Under BP 129, sec. 39, no record on appeal is required to take an appeal. Nor is an appeal bond required. (Interim Rules, sec. 18) A notice of appeal is sufficient. Unlike before, where approval of the record on appeal and the appeal bond was required before the appeal was perfected, under the present rule, the appeal is perfected upon the expiration of the last day to appeal by a party by the mere filing of a notitce of appeal (Interim Rules, sec. 23). The approval of the court is not required. This means that within 30 days after the perfection of the appeal, the original record should be transmitted to the Intermediate Appellate Court. If the clerk neglects the performance of this duty, the appellant should ask the court to order the clerk. It does not seem that the petitioner has done this, and it may even be that he is liable for failure to prosecute his appeal. (Rule 46, sec. 3; Rule 50, sec. 1 [c]. On the allegation of petitioner that it is not the appellant but the appellee's duty to make the clerk of court of the trial court transmit the record on appeal to the appellate court, respondent Court of Appeals aptly points to the rullings under Rule 46, sec. 3 of the Revised Rules of Court. It has been held that, while it is the duty of the clerk of the Court of First Instance to immediately transmit to the clerk of the Supreme Court a certified copy of the bill of exceptions, (now, record on appeal) it is also the duty of the appellant to cause the same to be presented to the clerk of the Supreme Court within thirty days after its approval. He cannot simply fold his arms and say that it is the duty of the Clerk of Court First Instance under the provisions of section 11, Rule 41 of the Rules of Court to transmit the record of appeal to the appellate court. It is appellant's duty to make the clerk act and, if necessary, procure a court order to compel him to act. He cannot idly sit by and wait till this is done. He cannot afterwards wash his hands and say that delay in the transmittal of the record on appeal was not his fault. For, indeed, this duty imposed upon him was precisely to spur on the slothful. (2 Moran, Comments on the Rules of Court 480 [1979])." Evidently, petitioner had no valid excuse to resort to the extraordinary writ of certiorari and prohibition when appeal had been available to him and which he, in fact, already initiated but did not pursue. Petitioner, in questioning the Order of May 3, 1984 of respondent Judge Ordoez-Benitez, claims that such order contravenes the law exempting retirement gratuity from legal process and liens. We find merit in petitioner's stand in the light of the explicit provisions of Sec. 26 of CA 186, as amended, which read as follows: Sec. 26. Exemption from legal process and liens. No policy of life insurance issued under this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted under this Act, shall be liable to attachment, garnishment, or other process, or to be seized, taken, appropriated,or applied by any legal or equitable process or operation of law to pay any debt or liability of such member, of his beneficiary, or any other person who may have a right thereunder, either before or after payment; nor shall the proceeds thereof; when not made payable to a named beneficiary, constitute a part of the estate of the member for payment of his debt; Provided, however, That this section shall not apply when obligation, associated or bank or other financial instituted, which is hereby authorized.

The aforecited freeze order of respondent Judge Benitez (directing PNB not to release any portion of the retirement benefits due the petitioner) falls squarely within the restrictive provisions of the aforequoted section. Notably, said section speaks of "any other benefit granted under this Act," or "other process" and "applied by any legal or equitable process or operation of law." This assailed order clearly violates the aforestated provision and is, therefore, illegal and improper. G.R. No 75410 Re the petition for certiorari and prohibition, the appellate court in dismissing the same, said: But in this case, the petitioner could have appealed from the decision of Judge Diaz. Instead, he announced he was not going to appeal. He was going to file a petition for certiorari and prohibition as he in fact did in this case. This certainly cannot be done, even under the most liberal view of practice and procedure. Especially can this not be done when the questions raised do not relate either to errors of jurisdiction or to grave abuse of discretion but, if at all, to errors of judgment. The default judgment dated February 20, 1986 of respondent Judge Diaz which ordered then defendant PNB to desist and refrain from releasing to petitioner all monetary benefits and emoluments due him as retirement benefits and to deliver one-half thereof to private respondent also comes within the prohibition imposed by Sec. 26, as amended, of the GSIS Charter. This, in effect, is also a freeze order. The directive to deliver one-half (1/2) of the retirement benefits to private respondent makes the default judgment doubly illegal because retirement benefits have been adjudged as gratuities or reward for lengthy and faithful service of the recipient and should be treated as separate property of the retiree-spouse. Thus, if the monetary benefits are given gratis by the government because of previous work (like the retirement pay of a provincial auditor in Mendoza vs. Dizon, L-387, October 25, 1956) or that of a Justice of the Peace (Elcar vs. Eclar, CA-40 O.G. 12th Supp. No. 18, p. 86), this is a gratuity and should be considered separate property (Art. 148, Civil Code). In view of the foregoing, the petitions are hereby GRANTED. Let the records be remanded to the trial courts of origin for further proceedings.

G.R. No. 93433 August 5, 1991 THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. NGUYEN DINH THAN, accused-appellant. The Solicitor General for plaintiff-appellee. Emmanuel B. Palabrica counsel de oficio for accused-appellant .

GUTIERREZ, JR., J.:p This is an appeal from the decision of the Regional Trial Court, Branch 48, Puerto Princess City, Palawan, the dispositive portion of which reads: WHEREFORE, the court finds the accused Nguyen Dinh Nhan guilty beyond reasonable doubt of the crime of rape defined and penalized under Act. 335 of the Revised Penal Code and hereby sentences him to suffer the penalty of reclusion perpetua with the accessory penalty and to pay the cost of the suit. The accused is further ordered to indemnify the complainant Tran Thi Thuc Doan the sum of P 12,000.00 without subsidiary imprisonment in case of insolvency. (Records, p. 80) The criminal complaint filed against the accused states: That on or about the lst day of September 1989, and/or prior thereto, at VRCPPFAC Puerto Princess City, Philippines, and within the jurisdiction of this Honorable Court, the said accused, with lewd design, with the use of force and intimidation and while armed with a knife did then and there wilfully, unlawfully and feloniously have carnal knowledge with Tran Thi Thuc Doan, 17 years old and mentally retarded, without the consent and against the will of the latter. (Records, p. 1) The prosecution evidence upon which the trial court based its finding of guilt beyond reasonable doubt is a follows: xxx xxx xxx On September 1, 1989 on or about 8:00 o'clock in the evening, Tran Thi Thuc Doan, a mentally retarded Vietnamese refugee came home at House No. 6 Zone 8 from the temple. The accused, a friend of a certain Mr. Khan, also living in the quarters was there. He appeared to be drunk and requested Mr. Khan to massage his body. Instead of doing it himself, Khan requested complainant to do the massaging. When she was massaging the accused the latter fell asleep. On that evening the accused laid on top of her, pulled down her panty and inserted his private parts inside her vagina causing pain on the complainant. At that time Mr. Khan and Miss Ha were then sleeping. When complainant shouted, Mr. Khan asked the accused what he was doing to her. The accused stepped on her chest to stop her from answering further. After the sexual assault the accused slept. The following day, September 2, 1989 complainant went to Dr. Socorro Gonzaga. Accordingly, the latter conducted a medical examination on the subject, findings of which are duly embodied in a medical certification (Exh. "A") reading as follows:

Pertinent P.E. Findings: -vaginal oz (+) blood, admits 2 fingers -vaginal canal (+) blood - fresh laceration noted at 3:00 position about 3 cm. long -vaginal smear requested: Result attached: (+) some spermatozoa seen On the witness stand, Dr. Socorro Gonzaga, Medical Coordinator at the Philippine First Asylum Camp of Vietnamese Refugees, affirmed that she medically examined the complainant. Complainant has (sic) sort of familiar to Dr. Gonzaga because she had previous medical treatment from her. The doctor described the patient complainant as short in stature and handicapped. The medical examination conducted on September 2, 1989 revealed that the presence of fresh laceration and spermatozoa inside the vagina would conclude that patient underwent sexual intercourse within 24 or 48 hours prior to examination. Another witness for the prosecution, Caroline McClure a social worker at the Community and Family Service International (CFSI) with office located at Philippine First Asylum Camp testified that Tran Thi Thuc Doan was a regular client of hers since her arrival at the Camp from Vietnam for suspicion of being mentally handicapped. As directed to her by the doctor, Doan was further referred to Sonia P. Margallo a resident psychologist for psychological test who submitted a report (Exh. "C") with the following findings: Doans current general mental functioning appears to be on the lower mild retardation range, with the probable mental age of a 7-year old. She is capable of learning up to approximately 4th to 5th grade school level. Completely trainable, Doan can benefit from vocational skills training involving use of the hands, but not finer motor skills like embroidery. On September 2, 1989, Sis. Lucy, the Camp's midwife reported that Doan had been sexually abused. Hence, complainant was submitted for medical examination to Dr. Gonzaga. Ms. McClure assisted Doan in filing of this complainant against the accused. (Rollo, pp. 1517; Records, p. 78) Tran Thi Thuc Doan, the complainant testified that on September 1, 1989 on or about 8:00 o'clock in the evening, she went to her quarters, House No. 6 Zone 8 from the temple. The accused, Mr. Nhan was inside her quarters, with Mr. Khan and Miss Ha. When the accused asked Mr. Khan to massage his body, the latter requested her to do the massage. She massaged the body of the accused till he fell asleep. When she was about to sleep, the accused laid on top of her, removed her panty and inserted his private part inside her vagina. She felt pain and she shouted. Mr. Khan asked Nhan what he was doing and why she shouted, Nhan stepped oh her chest, after which the accused slept. The following morning she saw Dr. Socorro Gonzaga for examination. (Rollo, p. 17) The version of the defense, on the other hand, is as follows:

xxx xxx xxx ... [a]ccused Nguyen Dinh Nhan denied having sexually molested Doan on September 1, 1989, as he was selling bread at the time of the alleged commission of the offense but he admitted that he stayed and slept in House No. 6 Zone 8 on or about 1 1:00 o'clock in the evening and that time the people in the house were Tuc Vu Khan and Ha. He slept at the lower level of the house with Khan and Ha. He said he did not see Doan on September 1, 1989. When asked about the accusation against him, he denied having committed the act on September 1, 1989 but admitted that he had sexual intercourse with Doan on July 24, 1 989 at about 9:30 or 1 0:00 o'clock in the evening in that house after giving him the massage. He was drunk at that time she massaged his back ending up (sic) sexual intercourse with her. He did not force the complainant to consummate the act. However, he admitted that the complainant is physically and mentally handicapped. When confronted with a letter (Exh. "E") addressed to complainant, he admitted having sent the same to her. (Rollo, p. 17) The appellant raises the following assignment of errors, to wit: I THE TRIAL COURT ERRED IN NOT HOLDING THAT THE PSYCHOLOGICAL REPORT (EXH. "C") DATED JULY 31, 1989 IS A HEARSAY EVIDENCE AND HAS THEREFORE NO PROBATIVE VALUE II THE TRIAL COURT ERRED IN NOT HOLDING THAT THE PSYCHOLOGICAL REPORT (EXH. "C") IS INADEQUATE AND SPECULATIVE AS IT DOES NOT CONFORM WITH THE UNIVERSALLY ACCEPTED PSYCHIATRIC YARDSTICK. III THE TRIAL COURT ERRED IN NOT HOLDING THAT THE COMPLAINANT IS NOT DEPRIVED OF REASON AND THEREFORE THE CASE IS BEYOND THE AMBIT OF ART. 335 PARAGRAPH 2 OF THE REVISED PENAL CODE. IV THE TRIAL COURT ERRED IN NOT HOLDING THAT THE PROSECUTIONS EVIDENCE IS NOT SUFFICIENT TO WARRANT THE CONVICTION OF THE ACCUSED BEYOND REASONABLE DOUBT. (Appellant's Brief, p. 3) According to Article 335 of the Revised Penal Code, rape is committed by having carnal knowledge of a woman under any of the following circumstances: (1) by using force or intimidation; (2) when the woman is deprived of reason or otherwise unconscious; (3) when the woman is under twelve years of age, even though neither of the circumstances mentioned above are present. In the case at bar, the trial court convicted Nguyen Dinh Nhan, the accused-appellant, for rape under the second circumstance. The trial court found that the complainant, Tran Thi Thuc Doan was a woman deprived of reason as she is a mental retardate. The appellant adopts a two-pronged defense. His first defense is premised on the exclusion of the psychological report. He argues that without the said report, there is then no evidence establishing the

complainant's mental retardation. But on the off chance that the psychological report confirming the complainant's mental retardation will be admitted, his second defense is based on the argument that the deprivation of reason mentioned in Article 335 paragraph 2 of the Revised Penal Code means complete deprivation of reason. The complainant, then, does not fall under said category as she is not one completely deprived of reason. The appellant's first defense is contained in the first two assigned errors. The appellant questions the admissibility and the adequacy of the psychological report (Exh. "C") upon which the trial court anchored its findings that the complainant is a mental retardate. As to its admissibility, he contends that the psychological report is hearsay, thus, has no probative value. As to its adequacy, he states that the report is the product of tests which are not in accordance with universally accepted procedures in ascertaining the mental condition of the person. There is no need to delve on the adequacy of the psychological report as it is true that without presenting Sonia Margallo the psychologist who prepared the questioned report as a witness, the said report is hearsay evidence (Rule 130, Sec. 36, Revised Rules on Evidence; US v. Lorenzana, 12 Phil., 64, 70 [1908]). The accusedappellant is entitled to cross-examine the psychologist who made the report. Without such examination the accused would be deprived of his right to confront and examine the witnesses against him. On this basis, the appellant, in his fourth assigned error, contends that without the psychological report, there is no sufficient evidence to support his conviction beyond reasonable doubt. He adds that no other evidence were adduced that touch on the mental capacity of the complainant. The appellant's contention this time, is without merit. Upon a close perusal of the records, we find that contrary to appellant's contention, there is enough evidence to support the appellant's conviction. The complainant's mental condition was amply established despite the nonadmission of the psychological report, by the testimonies of the prosecution witnesses, Socorro Gonzaga and Caroline McClure and by the testimony of the appellant himself. Socorro Gonzaga, a doctor of medicine, testified that she had examined Doan several times before the rape incident, (TSN, November 8, 1989, p. 8) hence, she had ample opportunity to observe her behavior. In fact, after her very first examination of the complainant she recommended that the complainant be psychologically examined as she suspected her to be a handicap case. (TSN, November 8, 1989, p. 8) In her testimony she positively declared that Doan is mentally retarded. (TSN, November 8,1989, p. 11). Caroline McClure a social worker of the Community and Family Services International (C.F.S.I.) at the Vietnamese Refugees Center, (the camp where complainant and appellant were staying) likewise, testified that Doan is mentally handicapped (TSN, November 9,1989, p. 2) Although McClure admitted that she is not a psychologist, (TSN, November 9,1989, p. 6) she is still in a position to know the mental condition of the complainant as she has know the complainant ever since May 18, 1989, the date of the arrival of the complainant at the center. The complainant was a regular client of the C.F.S.I. precisely because of her mental condition. (TSN, November 9, 1989, p. 2) It was also due to Doan's mental condition that McClure had to assist her in filing the complaint. (TSN, November 9,1989, p. 5) However, it was the appellant's own testimony which created the greatest damage to his defense. The appellant admitted in open court that he knew that the complainant is mentally and physically handicapped. (TSN, December 12, 1989, p. 6) Rule 129, Sec. 4 of the Revised Rules of Evidence states that: Sec. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof The admission may be

contradicted only by showing that it was made through palpable mistake or that no such admission was made There was no showing that the admission was made through palpable mistake. The appellant cannot deny that he made such an admission. Therefore, he cannot say that there was no evidence which dwelled on the mental capacity of the complainant when he himself admitted to that lack of mental capacity. In fact, the knowledge of the appellant about the mental condition of the complainant might have emboldened him to commit the despicable act. Having established that the complainant is a mental retardate, the second defense of the appellant now comes into play. In the third assigned error, the appellant claims that a woman "deprived of reason" as used in Article 335, paragraph 2 of Revised Penal Code should be construed as one completely deprived of intelligence It was the claim of the prosecution that the complainant is only an imbecile or a woman suffering from mental weakness, hence, she could not be categorized as a woman "deprived of reason." This claim must fail. The Supreme Court cases of People v. De Jesus, 129 SCRA 4, 8-9 [19841 and People v. Atento G.R. No. 84728, April 26, 1991 have adopted the ruling in People v. Daing, CA-G.R. No. 6366R, March 6,1953, 49 O.G. 2331, 2338 (June 1953) which states: The deprivation of reason contemplated by law does not need to be complete. Mental abnormality or deficiency is enough. So it was held by the Supreme Court of Spain that a man having carnal knowledge of a woman whose mental faculties are not normally developed or who is suffering from hemiplegia and mentally backward or who is an Idiot commits the crime of rape. (Sentences of November 19, 1930, May 11, 1932 and June 24,1935) Whatever term may describe the complainant, be it an imbecile or a woman suffering from mental weakness, there is no question about her mental retardation. The complainant's abnormality stuck out like a sore thumb at the center. Her behavior as a mental retardate was so obvious that even the appellant who is not a man of science concluded that she was mentally handicapped. Her being a regular client of the C.F.S.I. shows that she had to be assisted and guided unlike a normal 17 year old girl. Moreover, no motive can be ascribed to the complainant other than a desire for justice and redress for a terrible wrong. (See People v. Puedan G.R. No. 92586, April 26, 1991; People v. Doctolero G.R. No. L-34386, February 7, 1991) She was a Vietnamese refugee, mentally retarded, inexperienced in the ways of the world. It is highly improbable that she would fabricate matters and impute the crime unless it was true. (See People v. Gerones, G.R. No. 91116, January 24,1991) WHEREFORE, the decision appealed from is AFFIRMED with the modification that the indemnity to the offended party is increased to P30,000.00. SO ORDERED.

FRANCISCO MUOZ, JR., Petitioner,

G.R. No. 156125 Present: CARPIO MORALES, J., Chairperson, BRION, BERSAMIN, VILLARAMA, JR., and SERENO, JJ.

versus -

Promulgated: ERLINDA RAMIREZ and ELISEO CARLOS, Respondents. August 25, 2010 x-----------------------------------------------------------------------------------------x DECISION BRION, J.: We resolve the present petition for review on certiorari[1] filed by petitioner Francisco Muoz, Jr. (petitioner) to challenge the decision[2] and the resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 57126.[4] The CA decision set aside the decision[5] of the Regional Trial Court (RTC), Branch 166, Pasig City, in Civil Case No. 63665. The CA resolution denied the petitioners subsequent motion for reconsideration. FACTUAL BACKGROUND The facts of the case, gathered from the records, are briefly summarized below. Subject of the present case is a seventy-seven (77)-square meter residential house and lot located at 170 A. Bonifacio Street, Mandaluyong City ( subject property), covered by Transfer Certificate of Title (TCT) No. 7650 of the Registry of Deeds of Mandaluyong City in the name of the petitioner.[6]

The residential lot in the subject property was previously covered by TCT No. 1427, in the name of Erlinda Ramirez, married to Eliseo Carlos (respondents).[7] On April 6, 1989, Eliseo, a Bureau of Internal Revenue employee, mortgaged TCT No. 1427, with Erlindas consent, to the Government Service Insurance System (GSIS) to secure a P136,500.00 housing loan, payable within twenty (20) years, through monthly salary deductions of P1,687.66.[8] The respondents then constructed a thirty-six (36)-square meter, two-story residential house on the lot. On July 14, 1993, the title to the subject property was transferred to the petitioner by virtue of a Deed of Absolute Sale, dated April 30, 1992, executed by Erlinda, for herself and as attorney-in-fact of Eliseo, for a stated consideration of P602,000.00.[9] On September 24, 1993, the respondents filed a complaint with the RTC for the nullification of the deed of absolute sale, claiming that there was no sale but only a mortgage transaction, and the documents transferring the title to the petitioners name were falsified. The respondents alleged that in April 1992, the petitioner granted them a P600,000.00 loan, to be secured by a first mortgage on TCT No. 1427; the petitioner gave Erlinda aP200,000.00[10] advance to cancel the GSIS mortgage, and made her sign a document purporting to be the mortgage contract; the petitioner promised to give the P402,000.00 balance when Erlinda surrenders TCT No. 1427 with the GSIS mortgage cancelled, and submits an affidavit signed by Eliseo stating that he waives all his rights to the subject property; with theP200,000.00 advance, Erlinda paid GSIS P176,445.27[11] to cancel the GSIS mortgage on TCT

No. 1427;[12] in May 1992, Erlinda surrendered to the petitioner the clean TCT No. 1427, but returned Eliseos affidavit, unsigned; since Eliseos affidavit was unsigned, the petitioner refused to give the P402,000.00 balance and to cancel the mortgage, and demanded that Erlinda return the P200,000.00 advance; since Erlinda could not return the P200,000.00 advance because it had been used to pay the GSIS loan, the petitioner kept the title; and in 1993, they discovered that TCT No. 7650 had been issued in the petitioners name, cancelling TCT No.1427 in their name. The petitioner countered that there was a valid contract of sale. He alleged that the respondents sold the subject property to him after he refused their offer to mortgage the subject property because they lacked paying capacity and were unwilling to pay the incidental charges; the sale was with the implied promise to repurchase within one year,[13] during which period (from May 1, 1992 to April 30, 1993), the respondents would lease the subject property for a monthly rental of P500.00;[14] when the respondents failed to repurchase the subject property within the one-year period despite notice, he caused the transfer of title in his name on July 14, 1993;[15] when the respondents failed to pay the monthly rentals despite demand, he filed an ejectment case[16] against them with the Metropolitan Trial Court (MeTC), Branch 60, Mandaluyong City, on September 8, 1993, or sixteen days before the filing of the RTC case for annulment of the deed of absolute sale. During the pendency of the RTC case, or on March 29, 1995, the MeTC decided the ejectment case. It ordered Erlinda and her family to vacate the subject property, to surrender its possession to the petitioner, and to pay the overdue rentals.[17] In the RTC, the respondents presented the results of the scientific examination[18] conducted by the National Bureau of Investigation of Eliseos purported signatures in the Special Power of Attorney[19] dated April 29, 1992 and

the Affidavit of waiver of rights dated April 29, 1992,[20] showing that they were forgeries. The petitioner, on the other hand, introduced evidence on the paraphernal nature of the subject property since it was registered in Erlindas name; the residential lot was part of a large parcel of land owned by Pedro Ramirez and Fructuosa Urcla, Erlindas parents; it was the subject of Civil Case No. 50141, a complaint for annulment of sale, before the RTC, Branch 158, Pasig City, filed by the surviving heirs of Pedro against another heir, Amado Ramirez, Erlindas brother; and, as a result of a compromise agreement, Amado agreed to transfer to the other compulsory heirs of Pedro, including Erlinda, their rightful shares of the land.[21]

THE RTC RULING In a Decision dated January 23, 1997, the RTC dismissed the complaint. It found that the subject property was Erlindas exclusive paraphernal property that was inherited from her father. It also upheld the sale to the petitioner, even without Eliseos consent as the deed of absolute sale bore the genuine signatures of Erlinda and the petitioner as vendor and vendee, respectively. It concluded that the NBI finding that Eliseos signatures in the special power of attorney and in the affidavit were forgeries was immaterial because Eliseos consent to the sale was not necessary.[22] The respondents elevated the case to the CA via an ordinary appeal under Rule 41 of the Revised Rules of Court. THE CA RULING

The CA decided the appeal on June 25, 2002. Applying the second paragraph of Article 158[23] of the Civil Code and Calimlim-Canullas v. Hon. Fortun,[24] the CA held that the subject property, originally Erlindas exclusive paraphernal property, became conjugal property when it was used as collateral for a housing loan that was paid through conjugal funds Eliseos monthly salary deductions; the subject property, therefore, cannot be validly sold or mortgaged without Eliseos consent, pursuant to Article 124[25] of the Family Code. Thus, the CA declared void the deed of absolute sale, and set aside the RTC decision. When the CA denied[26] the subsequent motion for reconsideration,[27] the petitioner filed the present petition for review on certiorari under Rule 45 of the Revised Rules of Court. THE PETITION The petitioner argues that the CA misapplied the second paragraph of Article 158 of the Civil Code and Calimlim-Canullas[28] because the respondents admitted in the complaint that it was the petitioner who gave the money used to cancel the GSIS mortgage on TCT No. 1427; Article 120[29] of the Family Code is the applicable rule, and since the value of the house is less than the value of the lot, then Erlinda retained ownership of the subject property. He also argues that the contract between the parties was a sale, not a mortgage, because (a) Erlinda did not deny her signature in the document;[30] (b) Erlinda agreed to sign a contract of lease over the subject property;[31] and, (c) Erlinda executed a letter, dated April 30, 1992, confirming the conversion of the loan application to a deed of sale.[32]

THE CASE FOR THE RESPONDENTS

The respondents submit that it is unnecessary to compare the respective values of the house and of the lot to determine ownership of the subject property; it was acquired during their marriage and, therefore, considered conjugal property. They also submit that the transaction between the parties was not a sale, but an equitable mortgage because (a) they remained in possession of the subject property even after the execution of the deed of absolute sale, (b) they paid the 1993 real property taxes due on the subject property, and (c) they receivedP200,000.00 only of the total stated price of P602,000.00. THE ISSUE The issues in the present case boil down to (1) whether the subject property is paraphernal or conjugal; and, (2) whether the contract between the parties was a sale or an equitable mortgage. OUR RULING We deny the present Petition but for reasons other than those advanced by the CA. This Court is not a trier of facts. However, if the inference, drawn by the CA, from the facts is manifestly mistaken, as in the present case, we can review the evidence to allow us to arrive at the correct factual conclusions based on the record.[33]

First Issue: Paraphernal or Conjugal?

As a general rule, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.[34] In the present case, clear evidence that Erlinda inherited the residential lot from her father has sufficiently rebutted this presumption of conjugal ownership.[35] Pursuant to Articles 92[36] and 109[37] of the Family Code, properties acquired by gratuitous title by either spouse, during the marriage, shall be excluded from the community property and be the exclusive property of each spouse.[38] The residential lot, therefore, is Erlindas exclusive paraphernal property. The CA, however, held that the residential lot became conjugal when the house was built thereon through conjugal funds, applying the second paragraph of Article 158 of the Civil Code and Calimlim-Canullas.[39] Under the second paragraph of Article 158 of the Civil Code, a land that originally belonged to one spouse becomes conjugal upon the construction of improvements thereon at the expense of the partnership. We applied this provision in CalimlimCanullas,[40] where we held that when the conjugal house is constructed on land belonging exclusively to the husband, the land ipso facto becomes conjugal, but the husband is entitled to reimbursement of the value of the land at the liquidation of the conjugal partnership. The CA misapplied Article 158 of the Civil Code and Calimlim-Canullas We cannot subscribe to the CAs misplaced reliance on Article 158 of the Civil Code and Calimlim-Canullas. As the respondents were married during the effectivity of the Civil Code, its provisions on conjugal partnership of gains (Articles 142 to 189) should have governed their property relations. However, with the enactment of the Family

Code on August 3, 1989, the Civil Code provisions on conjugal partnership of gains, including Article 158, have been superseded by those found in the Family Code (Articles 105 to 133). Article 105 of the Family Code states:
x x x x The provisions of this Chapter [on the Conjugal Partnership of Gains] shall also apply to conjugal partnerships of gains already established between spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil Code or other laws, as provided in Article 256.

Thus, in determining the nature of the subject property, we refer to the provisions of the Family Code, and not the Civil Code, except with respect to rights then already vested. Article 120 of the Family Code, which supersedes Article 158 of the Civil Code, provides the solution in determining the ownership of the improvements that are made on the separate property of the spouses, at the expense of the partnership or through the acts or efforts of either or both spouses. Under this provision, when the cost of the improvement and any resulting increase in value are more than the value of the property at the time of the improvement, the entire property of one of the spouses shall belong to the conjugal partnership, subject to reimbursement of the value of the property of the owner-spouse at the time of the improvement; otherwise, said property shall be retained in ownership by the owner-spouse, likewise subject to reimbursement of the cost of the improvement.[41] In the present case, we find that Eliseo paid a portion only of the GSIS loan through monthly salary deductions. From April 6, 1989[42] to April 30, 1992,[43] Eliseo paid aboutP60,755.76,[44] not the entire amount of the GSIS housing loan plus interest, since the petitioner advanced the P176,445.27[45] paid by Erlinda to cancel the mortgage in 1992. Considering the P136,500.00 amount of

the GSIS housing loan, it is fairly reasonable to assume that the value of the residential lot is considerably more than the P60,755.76 amount paid by Eliseo through monthly salary deductions. Thus, the subject property remained the exclusive paraphernal property of Erlinda at the time she contracted with the petitioner; the written consent of Eliseo to the transaction was not necessary. The NBI finding that Eliseos signatures in the special power of attorney and affidavit were forgeries was immaterial. Nonetheless, the RTC and the CA apparently failed to consider the real nature of the contract between the parties. Second Issue: Sale or Equitable Mortgage? Jurisprudence has defined an equitable mortgage "as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent."[46] Article 1602 of the Civil Code enumerates the instances when a contract, regardless of its nomenclature, may be presumed to be an equitable mortgage: (a) when the price of a sale with right to repurchase is unusually inadequate; (b) when the vendor remains in possession as lessee or otherwise; (c) 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; (d) when the purchaser retains for himself a part of the purchase price; (e) when the vendor binds himself to pay the taxes on the thing sold; and, (f) 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. These instances apply to a contract purporting to be an absolute sale.[47] For the presumption of an equitable mortgage to arise under Article 1602 of the Civil Code, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention was to secure an existing debt by way of a mortgage. Any of the circumstances laid out in Article 1602 of the Civil Code, not the concurrence nor an overwhelming number of the enumerated circumstances, is sufficient to support the conclusion that a contract of sale is in fact an equitable mortgage.[48]

Contract is an equitable mortgage In the present case, there are four (4) telling circumstances pointing to the existence of an equitable mortgage. First, the respondents remained in possession as lessees of the subject property; the parties, in fact, executed a one-year contract of lease, effective May 1, 1992 to April 30, 1993.[49] Second, the petitioner retained part of the purchase price, the petitioner gave a P200,000.00 advance to settle the GSIS housing loan, but refused to give the P402,000.00 balance when Erlinda failed to submit Eliseos signed affidavit of waiver of rights. Third, respondents paid the real property taxes on July 8, 1993, despite the alleged sale on April 30, 1992;[50] payment of real property taxes is a usual burden

attaching to ownership and when, as here, such payment is coupled with continuous possession of the property, it constitutes evidence of great weight that the person under whose name the realty taxes were declared has a valid and rightful claim over the land.[51] Fourth, Erlinda secured the payment of the principal debt owed to the petitioner with the subject property. The records show that the petitioner, in fact, sent Erlinda a Statement of Account showing that as of February 20, 1993, she owed P384,660.00, and the daily interest, starting February 21, 1993, was P641.10.[52] Thus, the parties clearly intended an equitable mortgage and not a contract of sale. That the petitioner advanced the sum of P200,000.00 to Erlinda is undisputed. This advance, in fact, prompted the latter to transfer the subject property to the petitioner. Thus, before the respondents can recover the subject property, they must first return the amount of P200,000.00 to the petitioner, plus legal interest of 12% per annum, computed from April 30, 1992. We cannot sustain the ballooned obligation of P384,660.00, claimed in the Statement of Account sent by the petitioner,[53] sans any evidence of how this amount was arrived at. Additionally, a daily interest of P641.10 or P19,233.00 per month for a P200,000.00 loan is patently unconscionable. While parties are free to stipulate on the interest to be imposed on monetary obligations, we can step in to temper the interest rates if they are unconscionable.[54] In Lustan v. CA,[55] where we established the reciprocal obligations of the parties under an equitable mortgage, we ordered the reconveyance of the property to the rightful owner therein upon the payment of the loan within ninety (90) days from the finality of the decision.[56]

WHEREFORE, in light of all the foregoing, we hereby DENY the present petition. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 57126 areAFFIRMED with the following MODIFICATIONS: 1. The Deed of Absolute Sale dated April 30, 1992 is hereby declared an equitable mortgage; and 2. The petitioner is obligated to RECONVEY to the respondents the property covered by Transfer Certificate of Title No. 7650 of the Register of Deeds of Mandaluyong City, UPON THE PAYMENT OF P200,000.00, with 12% legal interest from April 30, 1992, by respondents within NINETY DAYS FROM THE FINALITY OF THIS DECISION. Costs against the petitioner.

SO ORDERED.