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G.R. No.

L-19196

November 29, 1968 DE VILLARICA, petitioners, and JOVITO S.

ANGEL VILLARICA and NIEVES PALMA GIL vs. THE COURT OF APPEALS, JULIANA MONTEVERDE, GAUDENCIO FRANCISCO, respondents. Ruiz Law Office and Leopoldo Anatolia Reyes for respondent Jose M. Kimpo for respondents Juliana Monteverde, et al.. CAPISTRANO, J.: M.

CONSUNJI

Abellera Jovito

for S.

petitioners. Francisco.

On May 19, 1951, the spouses Angel Villarica and Nieves Palma Gil de Villarica sold to the spouses Gaudencio Consunji and Juliana Monteverde a lot containing an area of 1,174 sq. meters, situated in the poblacion of the City of Davao, for the price of P35,000. The instrument of absolute sale dated May 19, 1951 (Exh. "B"), in the form of a deed poll, drafted by Counselor Juan B. Espolong who had been appointed by the Villaricas as their agent to sell the lot, was acknowledged on May 25, 1951, before the same Juan B. Espolong who was also a Notary Public. The public instrument of absolute sale and the vendors' TCT No. 2786 were delivered to the vendees. On the same day, May 25, 1951, the spouses Consunji executed another public instrument, Exh. "D", whereby they granted the spouses Villarica an option to buy the same property within the period of one year for the price of P37,750. In July, same year, the spouses Consunji registered the absolute deed of sale, Exh. "B", in consequence of which TCT No. 2786 in the names of the spouses Villarica was cancelled and a new TCT No. 3147 was issued in the names of the spouses Consunji. In February, 1953, the spouses Consunji sold the lot to Jovito S. Francisco for the price of P47,000 by means of a public instrument of sale Exh. "4". This public instrument of sale was registered in view of which TCT No. 3147 in the names of the spouse Consunji was cancelled and a new TCT in the name of Jovito S. Francisco was issued. On April 14, 1953, the spouses Villarica brought an action in the Court of First Instance of Davao against the spouses Consunji and Jovito S. Francisco for the reformation of the instrument of absolute sale, Exh. "B", into an equitable mortgage as a security for a usurious loan of P28,000 alleging that such was the real intention of the parties. Defendants answered that the deed of absolute sale expressed the real intention of the parties and they also alleged a counterclaim for sums of money borrowed by the plaintiffs from the Consunjis which were then due and demandable. After trial, the Court of First Instance of Davao rendered its decision holding that the instrument of absolute sale, Exh. "B", was really intended as an equitable mortgage. Judgment was accordingly rendered reforming the deed of absolute sale into an equitable mortgage. Judgment was likewise rendered in favor of defendant Consunjis on their counterclaim for sums of money. Judgment was also rendered in favor of defendant Francisco as purchaser in good faith. Both parties appealed to the Court of Appeals. On September 15, 1961, the Court of Appeals rendered its decision finding that the public instrument of absolute sale, Exh. "B", expressed the true intention of the parties and that the defendants-appellants' (Consunjis) counterclaim for sums of money was substantiated by the evidence. Accordingly the Court of Appeals rendered judgment as follows: WHEREFORE, the judgment appealed from is reversed and the complaint is dismissed as to the defendant spouses, and the plaintiffs are ordered to pay to them their remaining indebtedness of fifteen thousand (P15,000.00) pesos with interest at 5% from July 7, 1951. That part of the judgment dismissing the complaint as to Jovito S. Francisco is hereby affirmed, with the modification that the attorney's fees in the sum of P2,350.00 awarded to him is eliminated. The present case is not one of those enumerated in Article 2208 of the New Civil Code where attorney's fees may be recovered. Costs against the plaintiffsappellants.

On December 6, 1961, the spouses Villarica, plaintiffs-appellants in the Court of Appeals, petitioned the Supreme Court for certiorari or review of the decision rendered by the Court of Appeals. The petition was given due course and the decision of the Court of Appeals is now before us for review on questions of law. Petitioners contend that the Court of Appeals erred in finding that the public instrument of absolute sale, Exh. "B", expressed the true intention of the parties, arguing that under Article 1604 in relation to Articles 1602 and 1603 of the Civil Code, the instrument of absolute sale, Exh. "B", should be presumed as an equitable mortgage on the grounds that (1) the price of P35,000 was unusually inadequate; (2) the vendors remained in possession of the property sold; (3) the period of one year for repurchase granted in the instrument Exh. "D" was extended for one month; and (4) the vendors pay the taxes on the land sold. The contention is unmeritorious in view of the following considerations: (1) The price of P35,000 was not even inadequate. The land sold was assessed for tax purposes at P8,870 effective 1950. It was purchased by the spouses Villarica from the Philippine Alien Property Custodian in October, 1950, for the price of P20,000. The Villaricas borrowed P7,400 from a Chinese named Domingo Lua Chin Lam and, with this borrowed money, made part payment of the price to the Philippine Alien Property Custodian. Then they mortgaged the land to the Philippine Alien Property Custodian as security for the P10,000 unpaid balance of the purchase price. One year later, on May 19, 1951, they sold the land by means of the instrument of absolute sale Exh. "B" to the Consunjis for the price of P35,000, thus making a profit of P15,000 in one year without having invested their own money in buying the land. On February 21, 1953, the Consunjis sold the land to Jovito S. Francisco for the price of P47,000, thus making profit of P12,000. The price of P70,000 found by the trial court to be the market price of the land at the time of the trial in 1956 was not the market price in 1951 when the Villaricas sold the lot to the Consunjis. Hence, it is evident that the price of P35,000 stated in the instrument of absolute sale Exh. "B" was the market price of the lot in 1951. (2) The vendors did not remain in possession of the land sold as lessees or otherwise. On their request in order to help them in the expenses of their children in Manila, the vendors were merely allowed by the vendees to collect the monthly rents of P300 for five months up to October, 1951, on the understanding that the amounts so collected would be charged against them. But thereafter the vendees were the ones who collected the monthly rents from the tenants. It follows that the vendors did not remain in possession of the land as lessees or otherwise. (3) In Exh. "D" the Consunjis as new owners of the lot granted the Villaricas an option to buy the property within the period of one year from May 25, 1951 for the price of P37,750. Said option to buy is different and distinct from the right of repurchase which must be reserved by the vendor, by stipulation to that effect, in the contract of sale. This is clear from Article 1601 of the Civil Code, which provides: Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulation which may have been agreed upon. The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. Hence, Exhibits "B" and "D" cannot be considered as evidencing a contract of sale with pacto de retro. Since Exh. "D" did not evidence a right to repurchase but an option to buy, the extension of the period of one year for the exercise of the option by one month does not fall under No. 3, of Article 1602 of the Civil Code, which provides that: 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) The taxes paid by the vendors were back taxes up to the time of the sale on May 19, 1951. The vendors had the obligation to pay the back taxes because they sold the land free of all liens and encumbrances. The taxes due after the sale were paid by the vendees. The petitioners admit that they cannot now question the finding of the Court of Appeals that they fully received the price of P35,000 mentioned in the instrument of absolute sale Exh. "B". In addition, we noted that the petitioners acknowledged in writing (Exh. "4"-Consunji-Monteverde), dated May 28, 1951, having received full payment of said price of P35,000. In view hereof and of the foregoing considerations, petitioners' contention that Exhibits "B" and "D" were used as a device to cover a usurious loan, has absolutely no merit. The findings of the Court of Appeals on the amounts due from the spouses Villarica to the spouses Consunji as loans, evidenced by promissory notes, after deducting partial payments made thereon being factual, cannot be reviewed. PREMISES CONSIDERED, the judgment of the Court of Appeals is hereby affirmed, with costs against petitioners also in this instance

G.R. No. L-9304

April 28, 1956

DOROTEO DE LA CRUZ, JULIA ROBLES AND NARCISO ALIGADA, plaintiffs-appellees, vs. RAFAEL L. RESURECCION and ALMEDA, FRANCISCO AND CO., defendants-appellants. Ernest P. Jose L. Almario for appellees. BAUTISTA ANGELO, J.: Plaintiffs instituted this action in the Court of First Instance of Masbate to recover a parcel of land sold under pacto de retro to defendants and to have the latter execute the necessary deed after receiving from the clerk of court the money consigned by plaintiffs to cover the payment of redemption. The main defense of defendants is that plaintiffs failed to comply with the requirements of the law to effect redemption within the requirements of the law to effect redemption within the period stipulated with the result that defendants irrevocably acquired the ownership of the land. They set up a counterclaim for damages resulting the filing of the action. After the parties had submitted a stipulation of facts without reserving the right to present additional evidence the court rendered judgment recognizing the right of plaintiffs to repurchase the land ordering defendants to execute a deed of resale in their favor and to receive from the clerk of court the amount of P1,350 deposited by plaintiffs for the purpose, less the damages due the plaintiffs at the rate of P67.50 per quarter from November 15, 1951 until delivery of the property, deducting therefrom the sum of P19.25 as expenses incurred by defendants in connection with the execution of the original deed of sale, without pronouncement as to costs. Appeal having been taken to the Court of Appeals, the case certified to us on the ground that the questions involved are purely legal. Valencia for appellants.

It appears that Doroteo de la Cruz and his wife Julia Robles sold on January 28, 1949 to defendants under pacto de retro a parcel of coconut land. The document was registered in the Office of the Register of Deeds. It was expressly agreed upon that the land may be redeemed within a period of three years from the date of the sale. On September 2, 1951, Doroteo de la Cruz went to the house of defendant Rafael L. Resurreccion to tell him that he wanted to redeem the land and, upon being asked if he had the money with him, De la Cruz answered in the negative. Thereupon, Resurreccion tried to dissuade him to redeem the land offering him a premium of P400, to which De la Cruz replied that he would consult his wife. Thereafter, De la Cruz left promising to return later with his wife, but he never returned, and on October 17, 1951 he deposited with the clerk of court the sum of P1,350 with the request that he notify defendants of then deposit. Then, on November 5, 1951, he and his wife instituted the present action. It further appears that sometimes after the execution of the deed of sale the spouses De la Cruz sold their rights over the land to one Narciso Aligada but of this transfer no evidence was given to defendants. The main issue to be determined hinges on whether plaintiffs can still redeem the land even if they made the offer to redeem within the period stipulated, considering that they had made the consignation not strictly in accordance with the requirements of the law. Defendants contend that plaintiffs have forfeited their right to redeem because, while they made a deposit of the redemption money with the clerk of court, they however failed to give notice of their intention which the laws requires. Plaintiffs on the other hand, contend that they had substantially complied with the requirements of the law regarding consignation, and, even if they, failed the tender of payment they made had the effect of preserving their right to the redemption. We find merit in plaintiffs' contention. It should be noted that Doroteo de la Cruz offered to redeem the land from defendants on September 2, 1951, much prior to the expiration of the period of redemption , and when defendants tried to dissuade him to redeem the land upon payment of a premium of P400, which De la Cruz interpreted as a refusal to allow the redemption, plaintiffs lost no time in depositing the repurchase money and instituted the present action to enforce their right. These steps are more than necessary in contemplation of law to preserve their right of redemption. Whether therefore all the requirements of then law to make a valid consignation were complied with or not, it would appear to be of no consequence, the important thing being that the tender of payment be made within the period stipulated. The above conclusion finds support in our jurisprudence, Thus, in the case of Rosales vs. Reyes and Ordaveza, 265 Phil., 495, this Court said: "The further remarks of the Court to the effect that if the vendee refused to accept the amount of the price when offered it must be placed on deposit in order to prevent title vesting absolutely in the vendee were purely obiter. Such a rule has never been adopted in this jurisdiction. On the contrary, the settled rule, as evidenced by the four decisions discussed above, is that a bona fide offer of the redemption price, where that is certain and fixed, is sufficient to preserve the vendor's right of action in case where the offer is refused . " (Emphasis supplied.) Again, in the case of Canuto vs. Mariano, 37 Phil., 840, this doctrine was reiterated thus: "The contention that the plaintiff lost her right to redeem because she failed to make judicial deposit of the purchase price when the defendant declined to receive it, is not entitled to serious consideration in view of the repeated decision of this Court to the contrary collated and discussed in the case of Rosales vs. Reyes and Ordaveza (25 Phil., 495). In that case in the cases cited, therein we declared that the settled rule in this jurisdiction is that a bona fide offer or tender of the price agreed upon for the repurchase is sufficient to preserve the rights of the party making it, without the necessity of making judicial deposit, if the offer or tender is refused ." (Emphasis supplied.) This is more so if an action is actually brought in court to enforce redemption for such action "tolls the term for the right of 1 redemption" (Ong Chua vs. Carr, 53 Phil., 975). The contention, therefore, that plaintiffs have forfeited their right to redeem because they have failed to comply with the requirements of the law regarding consignation is of no moment, it appearing that plaintiffs not only made a tender of payment within the period stipulated but went to the extent of filing an action to protect their right. Such steps come within the purview of the decisions above adverted to. The contention of defendants that the plaintiffs have lost their right to redeem because pending the period of redemption they sold the land to one Narciso Aligada is also untenable for it appears that the sale was made

subject to the pacto de retro sale made by the plaintiffs to defendants. In fact, it was therein stipulated that part of the purchase price would be applied to the redemption payment. Such a clause is in effect a recognition to the part of the vendee of the right of the plaintiffs to redeem the land within the period stipulated. In any event, this is a defense that can be set up by Aligada and not by defendants. Wherefore, the decision appealed from is affirmed, with costs against the appellants. Paras, Bengzon, C.J., Montemayor, Reyes, A., Jugo, Concepcion, Reyes, J. B. L., and Endencia, JJ., concur.

G.R. Nos. 75109-10 June 28, 1989 BIENVENIDA MACHOCA ARCADIO VDA. DE CRUZO, ELENA MACHOCA ARCADIO VDA. DE PINTON, INOCENTA MACHOCA ARCADIO VDA. DE PLIEGO, ISIDORA MACHOCA ARCADIO DE PLIEGO (Deceased) represented by daughter Natividad Pliego de Ceballos and ARISTON "RICARDO" MACHOCA ARCADIO (Deceased) represented by daughter Virginia Arcadio de Evangelista: Represented by INOCENTA MACHOCA ARCADIO VDA. DE PLIEGO, petitioners, vs. HON. GLICERIO V. CARRIAGA, JR., FRANKLIN ANG and MELECIO SUAREZ (Deceased) represented by the surviving spouse, Pilar de los Reyes, respondents. Placidtrank B. Osorio for petitioners. Donatilo C. Macamay for respondents.

REGALADO, J.: This is an appeal from the order of respondent Judge Glicerio V. Carriaga, Jr., dated February 26, 1986, dismissing petitioners' complaint in Special Civil Action No. OZ-0751 of the Regional Trial Court, Branch XV, Ozamiz City, on the ground of res judicata. Lot No. 1131 of the Misamis Cadastre, subject matter of this case, was originally registered in the name of Gabina 2 Machoca, as her paraphernal property, under Original Certificate of Title No. 682. Petitioners herein are the children of the late spouses Leonardo Arcadio and said Gabina Machoca. On February 4, 1954, Gabina Machoca mortgaged Lot No. 1131 for P 425.00 to private respondent Franklin Ang and delivered to him her aforesaid certificate of title in connection therewith. On October 4, 1954, Gabina again borrowed an additional sum of P 175.00 from Ang as a result of which her total obligation to the latter was in the sum of P 600.00. Petitioners claim that on the same date, Ang caused the preparation of a deed of sale over the subject lot to which document Gabina Machoca, being illiterate, affixed her thumb-mark in the belief that this second instrument was similar to the deed of mortgage executed by her on February 4, 1954. When Gabina went home, her children, herein petitioners, informed her that the second document was not a deed of mortgage but a contract of sale.
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On the following day, October 5, 1954, Gabina went back to Ang and demanded the reformation of the aforesaid 3 instrument. Franklin Ang, instead of reforming the instrument, prepared a deed of agreements which, by reason of its importance, is herein quoted in full: City of Ozamiz O c t o b e r 5 , 1 9 5 4 DEED OF AGREEMENT KNOW ALL MEN BY THESE PRESENTS: That I, FRANKLIN ANG, of legal age, married and with residence and postal address at Gango, City of Ozamiz, Philippines, VENDEE in the Deed of Sale executed by the Vendor, GAVINA MACHOCA, as recorded by Notary Public Manuel C. Manago in Doc. No. 284, Page No. 58, Book No. 1, Series of 1954, hereby grants and obligates himself (sic) to resell the property therein sold within a period of three (3) years from and after the date of the said instrument, for the same price of SIX HUNDRED PESOS ( P 600.00 ), Philippine Currency, to the said VENDOR: PROVIDED, however, That if the Vendor shall fail to exercise her right to redeem as herein granted within the stipulated period, then this conveyance shall be deemed to be absolute and irrevocable. IN WITNESS WHEREOF, the party herein hereto have (sic) set his hands (sic) at Ozamiz City, Philippines, on this 5th day of October, 1954.

Pursuant to the provisions of said deed of agreement, Gabina's right to repurchase the property was to expire on October 4, 1957, that is, three years from October 4, 1954 when the deed of sale was executed. As early as June 10, 1955, however, Ang caused the registration of the deed of sale, resulting in the subsequent cancellation of Original Certificate of Title No. 682 and the consequent issuance of Transfer Certificate of Title No. 4 T-161 for the same property in the name of Franklin Ang. On June 24, 1963, no redemption having been made, Ang sold said Lot No. 1131 to herein private respondent 5 Melecio Suarez who then obtained Transfer Certificate of Title No. T-945 therefore in his name. Gabina Machoca died on April 21, 1966 leaving herein petitioners as her only heirs. It appears that petitioners remained in possession of the disputed land until March 14, 1977 when herein private respondents Melecio Suarez and Pilar de los Reyes filed an action against Pedro, Inocenta and Lazaro, all surnamed 6 Pliego before the City Court of the City of Ozamiz, docketed as Civil Case No. C-1 thereof, for unlawful detainer 7 with damages. On July 21, 1978, the city court rendered a decision declaring the plaintiffs therein to be the real 8 owners of Lot No. 1131 and ordering the defendants to vacate the premises and pay the costs. The appeal from said decision by the defendants therein to the Court of Appeals in CA-G.R. No. 66511-R was dismissed, which dismissal became final and executory, hence judgment was entered by the Court of Appeals on July 10, 9 10 1981. Consequently, a writ of execution and an order of demolition were issued by the city court on September 17, 1981 and October 12, 1983, respectively, in Civil Case No. C-1 Disgressing backward in time from the foregoing incidents, the records reveal that during the pendency of the aforesaid unlawful detainer case (Civil Case No. C-1), herein petitioners filed on September 6, 1977 a petition for prohibition, Civil Case No. OZ-665 of the erstwhile Court of First Instance of Mizamis Occidental, Branch II, Ozamiz City, against City Court Judge Ceferino Ong and herein private respondents to restrain Judge Ong from further proceeding with the trial in Civil Case No. C-1 for alleged lack of jurisdiction. The petition was dismissed on March 11 15, 1978 and no appeal was taken by said petitioners. It further appears that likewise during the pendency of Civil Case No. C-1, petitioners filed a complaint, dated June 7, 1977, with the same Court of First Instance, Branch II, at Ozamiz City, involving Lot No. 1131 and docketed as Civil Case No. OZ-648, against Franklin Ang, Bonifacio Longayan, Melecio Suarez and Pilar de los Reyes, for "removal of clouds of title and declaring title of defendants as null and void or cancelled, or reconveyance and 12 13 damages." On December 18, 1984, the complaint was dismissed for failure to prosecute. Petitioners moved for the reconsideration of the order but the motion was denied. A second motion for reconsideration was likewise 14 denied. No appeal having been made, the order of dismissal became final. Finally, on December 14, 1985, the same petitioners filed Special Civil Case No. OZ-0751 with the Regional Trial Court, Branch XV, Ozamiz City, for conventional redemption and damages against herein private respondents over 15 the same subject lot. Upon motion of the defendants therein, the complaint was dismissed by the court on 16 February 26, 1986 on the ground of res judicata. Hence, this petition assailing said dismissal order. The main substantive issue posed for resolution is whether or not the petitioners can still exercise the right to redeem Lot No. 1131. A corollary issue is whether or not the private deed of agreement has converted the deed of sale into an equitable mortgage.

Petitioners submit that the deed of sale, in relation to the deed of agreement executed on October 4, 1954, should be considered as an equitable mortgage because (a) the petitioners have been in continuous possession of the subject lot up to the present time; and (b) the price of P 600.00 is unusually inadequate considering that the land is along the road going to the airport of Ozamiz City, is only about three kilometers from the center of the city, and has an area of 3,408 square meters. It is likewise contended that petitioners have the right to redeem the property, there have been no foreclosure proceedings as yet, aside from the fact that private respondent Ang acted in evident bad faith and with fraud when he obtained title to the lot in his name prior to the expiration of the stipulated redemption period. On the other hand, private respondents maintain that the action for conventional redemption (Civil Case No. OZ0751) is already barred by the order of dismissal rendered in the action for removal of clouds on the title (Civil Case No. OZ-648), since both cases involved the same subject matter and raised the same issues between the same parties; and, further, that petitioners may no longer redeem the property for failure to exercise the right within the stipulated period. We shall first resolve the procedural objections, which auspiciously present the necessity to clarify the doctrine 17 ofres judicata and its implications. The principle of res judicata in actions in personam is found in Section 49 (b) and (c), Rule 39 of the Rules of Court which provides: Sec. 49. Effect of judgments. The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows: xxx (b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; (c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. The doctrine of res judicata thus lays down two main rules which may be stated as follows: (1) The judgment or decree of a court of competent jurisdiction on the merits concludes the parties and their privies to the litigation and constitutes a bar to a new action or suit involving the same cause of action either before the same or any other tribunal; and (2) Any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which a judgment or decree is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claim or demand, purpose, or subject matter of the two suits is the same. These two main rules mark the distinction between the principles governing the two typical cases in which a judgment may operate as evidence. In speaking of these cases, the first general rule above stated, and which corresponds to the aforequoted paragraph (b) of Section 49, is referred to as "bar by former judgment" while the second general rule, 18 which is embodied in paragraph (c) of the same section, is known as "conclusiveness of judgment. Stated otherwise, when we speak of resjudicata in its concept as a "bar by former judgment," the judgment rendered in the first case is an absolute bar to the subsequent action since said judgment is conclusive not only as to the matters offered and received to sustain that judgment but also as to any other matter which might have

been offered for that purpose and which could have been adjudged therein. This is the concept in which the term res judicata is more commonly and generally used and in which it is understood as the bar by prior judgment 19 constituting a ground for a motion to dismiss in civil cases. On the other hand, the less familiar concept or less terminological usage of res judicata as a rule on conclusiveness of judgment refers to the situation where the judgment in the prior action operates as an estoppel only as to the matters actually determined therein or which were necessarily included therein. Consequently, since other admissible and relevant matters which the parties in the second action could properly offer are not concluded by the said judgment, the same is not a bar to or a ground for dismissal of the second action. At bottom, the other elements being virtually the same, the fundamental difference between the rule of res judicataas a bar by former judgment and as merely a rule on the conclusiveness of judgment is that, in the first, there is an identity in the cause of action in both cases involved whereas, in the second, the cause of action in the first case is different from that in the second case. The diversity in results, in the instances where there is identity of cause of action in the two cases and those wherein there is no such identity, is not a caprice of mere mechanistic considerations or taxonomic niceties. In the latter situation, where the second case is based on a cause of action different from the first, the constituent elements of the second cause of action, the specie of proof necessary to establish the same, and the relief which may be granted in such second action are consequently at variance with those obtaining or sought in the first action. As a logical and rational consequence, therefore, only the findings in the first judgment are conclusive and deemed established if raised in and for purposes of the second action which, therefore, may proceed independently of the anterior case. However, where the same cause of action is involved in both cases, the foregoing considerations cannot apply since discrete facts and results would not generally arise from the same procedural and evidentiary foundations which inhere in the same cause of action. Even if diverse reliefs should be awarded due to contingencies in the results of proof, the judgment in the first action bars the second since the defendant admittedly committed one and the same wrong for which he should not be twice tried under the timehonored rule of non bis in idem. Now, it has been a consistent rule, to cite just a few representative cases, that the following requisites must concur in order that a prior judgment may bar a subsequent action, viz: (1) the former judgment or order must be final; (2) it must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence or stipulations submitted by the parties at the trial of the case; (3) it must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and second actions, identity of parties, of subject matter and of cause of action. There is no question that the order of dismissal rendered in the prior action, Civil Case No. OZ-648, had become final for failure of herein petitioners to appeal the same after their motions for reconsideration were denied. Furthermore, while the dismissal was for failure to prosecute, it had the effect of an adjudication on the merits, 21 22 and operates as res judicata, since the court did not direct that the dismissal was without prejudice. The fact remains that Civil Case No. OZ-648 for removal of clouds on title has, as parties, the same set of plaintiffs and defendants as Special Civil Case No. OZ-0751 for conventional redemption and damages, and both cases involve Lot No. 1131 only. Petitioners submit, however, that res judicata will nevertheless not apply since there is no identity of causes of action. It is their theory that since the issue of redemption was not raised in Civil Case No. OZ-648, it is paragraph (c) of Section 49, Rule 39 that applies, that is, the rule on conclusiveness of judgment, hence the dismissal of said former action does not constitute res judicata to bar Special Civil Case No. OZ-0751. We find no merit in such submission.
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Petitioners appear to labor under an erroneous conceptualization of what constitutes a cause of action. They postulate that the causes of action in the cases involved are not identical, thus: "In Civil Case C-1, the cause of action is physical possession. In Civil Case OZ-648, the cause of action is removal of clouds of title. In Civil Case OZ23 0751, the cause of action is conventional redemption ...." It is elementary that, in adjective law, a cause of action is the delict or the wrongful act or omission committed by 24 the defendant in violation of the primary rights of the plaintiff. In all these cases, petitioners have imputed to private respondents and their predecessor in interest the same alleged wrongful act, that is, acts of evident bad faith and fraud which supposedly divested petitioner's mother of her rights and title to the property in dispute. There is, consequently, an identical cause of action claimed by petitioners in these cases. A well-entrenched rule declares that a party cannot, by varying the form of action or adopting a different method of presenting his case, escape the operation of the principle that one and the same cause of action shall not be 25 twice litigated. In fact, authorities tend to widen rather than to restrict the doctrine of res judicata on the ground that public interest, as well as private interest, demand the ending of suits by requiring the parties to sue once and 26 for all in the same case all the special proceedings and remedies to which they are entitled. In determining whether causes of action are identical so as to warrant application of the rule of res judicata, the test most commonly stated is to ascertain whether the same evidence which is necessary to sustain the second 27 action would have been sufficient to authorize a recovery in the first, even if the forms or nature of the two 28 actions be different. If the same facts or evidence would sustain both, the two actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action; otherwise it is not. It has been said that this method is the best and most accurate test as to whether a former judgment is a bar in subsequent 29 proceedings between the same parties, and it has even been designated as infallible. In their motion to dismiss filed in Special Civil Case No. OZ-0751, private respondents made a comparative analysis of the reliefs prayed for therein and those in Civil Case No. OZ-648 which became the criterion in the court's order of dismissal. A perusal thereof reveals that both actions seek to have the deed of agreement of October 5, 1954 considered as a mere equitable mortgage and to have the titles issued in the name of private respondents declared null and void on the ground of fraud. Although ostensibly of different forms, the inescapable conclusion is that the parties are in effect litigating for the same thing and seeking the same relief, that is, to recover possession and ownership of Lot No. 1131. It is of no moment that the later remedy is for conventional redemption while the former case was for removal of clouds on the title, since both actions are anchored on exactly the same cause of action, are based on identical facts, and even claim the same relief. The present petition is, therefore, although presented in a different form, barred by the former decision in the case for removal of clouds on the title. We do not intend, however, to have the adjudication of this case go off purely on procedural points. Even assuming that res judicata would not bar Special Civil Case No. OZ-0751, the instant petition will nevertheless not prosper. It must be remembered that after the execution of the deed of sale on October 4, 1954, a second document was made wherein Franklin Ang undertook to resell the property, if Gabina Machoca elects to redeem the same, within three years from the date of the deed of sale. With respect, therefore, to the last transaction entered into by the parties, there were two documents involved, one of which is the deed of sale and the other, the right to repurchase. However, We find and so hold that there is no pacto de retro sale in this case, within the contemplation of the Civil Code which provides: Art. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may been agreed upon.

In Villarica, et al. vs. The Court of appeals, et al.,

30

We had the occasion to interpret this provision of law, to wit:

The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. We have similarly held in a prior case that an agreement to repurchase becomes a promise to sell when made after an absolute sale because where the sale is made without such an agreement, the purchaser acquires the thing sold 31 absolutely. Clearly, therefore, an option to buy or a promise to sell is different and distinct from the right of repurchase which must be reserved by the vendor, by stipulation to that effect, in the contract of sale. Hence, there having been an absolute sale of the land, respondent Ang was acting well within the ambit of his now inviolable right to register the land in his own name, notwithstanding the unexpired stipulated period of redemption in the deed of agreement. Granting, for the sake of argument, that the transaction actually involves a pacto de retro sale. petitioners failure to exercise their right of redemption within the stipulated period dictates that the instant petition must necessarily fail. The averment that petitioners were forestalled by respondent Ang from redeeming the property appears to be a frivolous afterthought since the former were not without recourse. There were several legal remedies available to them which, if duly resorted to, could have worked favorably for their cause. As it is, their silent acquiescence for an inexplicable length of time worked greatly to their disadvantage. Not only did petitioners fail to repurchase the property within the stipulated period but they continued to sleep on their rights even beyond the allowable statutory period for the enforcement of such right of redemption. They are now barred by laches. Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or 32 declined to assert it. Petitioners' feigned ignorance regarding the registration of the property in the name of respondent spouses, even disregarding the constructive notice thereof to them under the law, is belied by the fact that petitioner Inocenta Pliego and Pedro Pliego signed a written commitment that "if Pilar Suarez will use their land for the construction of 33 their house, we are ready and agreed (sic) to transfer our house to another place." This instrument was never refuted, aside from the categorical admission of the petitioners during the trial of the ejectment case that private 34 respondents were already enjoying the fruits of the land since 1963. If petitioners were not disturbed in their possession until the ejectment case was filed, it could only have been out of sheer generosity and tolerance of private respondent spouses. Treading on the same supposition that there existed such a right to repurchase, petitioners insist that the pacto de retro sale is, for all intents and purposes, an equitable mortage on the pretext that they have been in continuous possession of the land from the time of the execution of the document. This again is a result of the distorted notion that petitioners' possession is in the concept of that of an owner. Petitioners cannot be credited with good faith in insinuating that their mother, Gabina Machoca, was deceived into believing that the deed of agreement was a mortgage contract similar to the first document she executed. As earlier explained, after the second deed was executed and Gabina Machoca showed the same to herein petitioners, it was the latter who advised her that the contract be reformed, as a consequence of which the separate deed of agreement of October 5, 1954 was executed. It would be safe to conclude then that petitioners had approved of and consented to the provisions of both contracts. It will readily be noted that the deed of agreement specifically provided: "That if the Vendor shall

fail to exercise her right to redeem as herein granted within the stipulated period, then this conveyance shall be deemed to be absolute and irrevocable." The contract, not being contrary to law, morals and public policy, is binding and enforceable against Gabina Machoca and her successors in interest. Petitioners cannot now be heard to claim otherwise after having been remiss in their obligations. They are further estopped from asserting that the parties intended differently, contrary to what the written contracts provide, in violation of the parol evidence rule. Furthermore, the inadequacy of the price does not on that account alone support the conclusion that the land was not sold to private respondent Ang, since the parties entered into a conventional, and not a forced, sale of the 35 property and both parties were in a position to form an independent judgment of the transaction. From the legal viewpoint, even if the property was sold for a comparatively low price, but the seller did nothing about it for a 36 number of years, the contract of sale is not invalid. Besides, in a contract of sale with right of repurchase, the price is usually less than in absolute sales since in the former the vendor expects to reacquire or redeem the 37 38 property sold, hence the inadequacy of the price is not an overriding determinant to set aside the sale. The same rationale obtains where, as in this case, there was a separate agreement to resell the property to the original vendor. Anent the imputation of evident bad faith and fraud to respondent Ang for obtaining title to the land in his own name prior to the expiration of the agreed period, the records do not yield the requisite proof that he was so motivated or had deliberately resorted to fraudulent deception. In the absence of concrete evidence of bad faith or fraud, neither of which can be presumed, We cannot hold otherwise. Besides, it is of essence of a contract of sale with pacto de retro that the vendee shall immediately acquire title to and possession of the land sold, subject only to the vendor's right of redemption. With much more reason does this hold true where a deed of absolute sale was merely complemented by a subsequently executed and separate agreement of resale. WHEREFORE, the order appealed from is hereby AFFIRMED. The temporary restraining order issued pursuant to the resolution of August 3, 1987 is hereby LIFTED and SET ASIDE. SO ORDERED. Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

G.R. No. L-55350 March 28, 1983 OLIMPIA FERNANDEZ Vda. de ZULUETA (Substituted by JOSEFINA, LIBERTY and GREGORIO all surnamed ZULUETA) petitioners, vs. ISAURO B. OCTAVIANO and AURELIO B. OCTAVIANO, respondents. Ty, Gesmundo, Fernandez and Gesmundo for petitioners. Nicolas P. Sonalan for respondents.

MELENCIO-HERRERA, J.:

Appeal by certiorari seeking a review of the Decision of respondent Court of Appeals promulgated on 22 April 1980, which reversed the judgment of the Trial Court rendered on 30 June 1975 in favor of petitioners' mother as plaintiff in Civil Case No. 8809 lodged before the Court of First Instance of Iloilo, Branch III. On 25 November 1952, Olimpia Fernandez Vda. de Zulueta (Olimpia, for brevity), the registered owner of 5.5 hectares of riceland, covered by Transfer Certificate of Title No. T-7428, sold the lot to private respondent Aurelio B. Octaviano (Aurelio, for short), for P8,600.00 subject to the following terms and conditions, to wit: That for and in consideration of the sum of EIGHT THOUSAND SIX HUNDRED AND 00/100 (P8,600.00) PESOS, Philippine currency, the VENDOR, her heirs, assigns, executors and administrators sells, transfers, and conveys as it is hereby SOLD, TRANSFERRED AND CONVEYED by way of ABSOLUTE AND DEFINITE SALE the aforementioned described property in favor of the VENDEE, his heirs, assigns, executors and administrators, the manner of payment of the aforementioned amount is to be made as follows: That upon the execution of this instrument, VENDEE will pay unto the VENDOR the amount of TWO THOUSAND AND 00/100 (P2,000.00) PESOS, Philippine Currency, and the VENDOR, has, by virtue of this instrument acknowledged receipt of said payment; That the remaining balance of SIX THOUSAND SIX HUNDRED AND 001/100 (P6,600.00) PESOS, Philippine Currency, should be paid by the VENDOR to the following person, to wit: That on May 31st, 1955, the VENDEE shall pay unto one MAXIMINO GUMAYAN of Leganes, Iloilo, the sum of FIVE THOUSAND AND 00/100 (P5,000.00) PESOS, Philippine Currency, representing the redemption price of the land aforementioned by virtue of a DEED OF SALE WITH PACTO DE RETRO the VENDOR has executed in favor of said Maximino Gumayan on May 21, 1949, ratified before Notary Public Tirso Espeleta and entered in his Notarial Register as Doe. No. 270; Page No. 56; Book No. IV; Series of 1949, the option of the VENDOR to redeem the aforementioned parcel of land pursuant to said Pacto de Retro Sale will be May 21, 1955; That the VENDEE will pay unto one MAXIMINO GUMAYAN of Leganes, Iloilo, the sum of ONE THOUSAND SIX HUNDRED AND 00/100 (Pl,600.00) PESOS, Philippine Currency, representing the redemption price of the land aforementioned by virtue of a DEED OF MORTGAGE the VENDOR has executed in favor of said Maximino Gumayan on May 8, 1950, ratified before Notary Public Felix Ravena and entered in his Notarial Register as Doc. No. 404; Page No. 24; Book No. VII; series of 1950, the said Mortgage could be redeemed on or before May 21, 1955, by the herein VENDOR. In other words, the VENDEE, upon the execution of this instrument shall take the responsibility of redeeming the land aforementioned from one Maximino Gumayan for the sum of P5,000.00 in so far as the Deed of Pacto de Retro Sale is concerned to be due on May 21, 1955 and for another sum also in favor of said Maximino Gumayan for the amount of Pl,600.00 in so far as the Deed of Mortgage is concerned to be due on or before May 21, 1955; That upon the redemption of the land aforementioned by the VENDEE from one Maximino Gumayan on May 21, 1955, then this instrument shall be considered for all legal purposes, a DEED OF ABSOLUTE AND DEFINITE SALE by the VENDOR in favor of the VENDEE, his heirs, assigns, executors and administrators, and the Register of Deeds for the City and Province of Iloilo is hereby authorized to cancel Transfer Certificate of Title No. 7428 and to issue a new Transfer Certificate of Title in favor of the VENDEE;

That upon the execution of this instrument, the VENDOR, her heirs, assigns, executors and administrators, has no more rights, interests or participations over the parcel of land aforementioned. (Exhibit "E") (Emphasis supplied). Exhibit "E" was registered in the Office of the Register of Deeds of Iloilo under Entry No. 43082 and annotated in the Memorandum of Encumbrances of Transfer Certificate of Title No. T-7428. On the same date, 25 November 1952, the vendee, Aurelio, signed another document (Exhibit "F") giving the vendor, Olimpia, the "option to repurchase" the property "at any time after May 1958 but not later than May 1960." The full text of that document reads: This is to certify that as per instrument of Definite Sale of Lot No. 9234-B of the subdivision plan Psu-26187, being a portion of Lot No. 9234 of the Cadastral Survey of Sta. Barbara, covered by Transfer Certificate of Title No. T-7428, executed by Olimpia Fernandez in my favor, ratified before Notary Public Eugenio G. Gemarino, and entered in his Notarial Register as Doc. No. 119; Page No. 25; Book No. IV; Series of 1952, although same is a Deed of Definite Sale, however, I am giving the said Vendor, Olimpia Fernandez the option to repurchase the aforesaid property from me at any time after May, 1958 but not later than May, 1960. Should she fail to redeem the aforesaid property by paying me back the sum of EIGHT THOUSAND SIX HUNDRED AND 00/100 (P8,600.00) PESOS, Philippine Currency within the period of time stated above, then she will lose all the right to repurchase the land from me. (SGD.) AURELIO B. OCTAVIANO Unlike the deed of sale, this document was not registered. Aurelio took possession of the land after the sale. Sometime in May, 1953, Aurelio tried to get the certificate of title covering the subject land from Olimpia for the purpose of registering the deed of absolute sale (Exhibit "E"), but was told that the same was in the possession of Maximino Gumayan, who, in turn, informed him that the title had been deposited with the Philippine National Bank. Consequently, on January 7, 1953, Aurelio filed Civil Case No. 2660 (Aurelio Octaviano vs. Olimpio Fernandez, Maximino Gumayan & PNB) to compel them to deliver the title. Aurelio also caused the annotation of a notice of lis pendens. Four months after the filing of the above Complaint, Aurelio again approached Gumayan for the same purpose, but the latter refused to release the certificate of title unless Aurelio would first pay him the "pagare "receipts representing additional sums of money in the total amount of P1,486.00 borrowed by Olimpia from Gumayan in 1951, 1952 and 1953, which amounts were not included in the mortgage obligation of Olimpia assumed by Aurelio. Aurelio confronted Olimpia about these receipts contending that she had already agreed to sell the property for P8,600.00. To avoid further trouble, Aurelio offered Olimpia the option to repurchase the property. Olimpia did not accept the offer alleging that she had no money at that time to buy back the land. In fact, Olimpia even suggested to Aurelio that he better sell the land to anybody and simply disregard 2 the option to repurchase. Relying on the express consent of Olimpia to sell the land and believing that she had renounced the option granted her to repurchase the same, Aurelio negotiated with his own brother, respondent Isauro, for the sale of the property sometime in 1954. Isauro agreed to buy the property, and paid Aurelio P10,500.00. Out of this amount, Aurelio paid Gumayan on 8 August 1954 the amount of P6,600.00 representing the obligation of Olimpia that was assumed by Aurelio under the deed of definite sale (Exhibit "E"). This payment was evidenced by certificate of payment annotated as Entry No. 43083 at the back of TCT No. 7428. Additionally, Aurelio also paid Gumayan Pl,486.00 covering the "pagare" receipts representing the additional sums of money borrowed by Olimpia from

Gumayan, as evidenced by Exhibit "4-Aurelio". The total amount paid by Aurelio for the property, therefore, was P10,086.00, compared to P8,600.00 contracted for in the deed of sale, Exhibit "E". On 8 September 1954, Aurelio executed an Affidavit stating that since the defendants in Civil Case No. 2260 had surrendered the title to him, he was causing the cancellation of the notice of lis pendens. On the same date of 8 September 1954, Aurelio executed in favor of his brother, Isauro, a deed of absolute sale (Exhibit "B"), reflecting a price of P2,000.00 only, allegedly in order to reduce the notarial and registration expenses. Thereafter, TCT No. 7428 in the name of Olimpia was cancelled and TCT No. 16882 was issued, in the name of respondent Isauro Octaviano. On 16 February 1962 (or about two years after the deadline of May, 1960) Olimpia, through her lawyer, desired to "repurchase" the land and wrote Isauro a letter asking him if he was willing to resell the land as she had the money already to buy it back (Exhibit "1"). Isauro was initially receptive as shown by his reply letter of March 26, 1962 (Exhibit "G" and "2" - Isauro). Olimpia herself also wrote Isauro an undated letter offering to repurchase the property for (P12,000.00, with the request that Isauro lend her the title which she would use as a collateral for a loan that she was intending to secure from a bank to cover the repurchase price (Exhibit "3-A"). Apparently, Isauro eventually refused to allow "repurchase" except allegedly according to Olimpia, for P40,000.00 Olimpia contends that since 1958, she was looking for Aurelio to tell him of her desire to "repurchase" the 3 property but that Aurelio could nowhere be found. On 4 October 1971, Olimpia commenced suit for recovery of ownership and possession of the subject land against the Octaviano brothers, both respondents herein. The case was docketed in the Court of First Instance of Iloilo, Branch III, as Civil Case No. 8809. The Complaint averred, inter alia, that Aurelio expressly allowed her in writing to repurchase the land at any time after May, 1958, but not later than May, 1960; that Aurelio fraudulently sold the said land to his brother Isauro without first having consolidated his ownership pursuant to Article 1607 of the Civil Code; that plaintiff could not have exercised her option to repurchase because Aurelio sold the property to his brother, who, being aware of her option to repurchase, cannot be considered an innocent purchaser; that in 1962, Isauro refused to recognize the plaintiff's option to repurchase, but, instead, offered to sell the property at the prevailing price; and, that despite repeated demands made by Olimpia, the Octavianos refused to allow her to redeem the land. It was then prayed that the certificate of title issued in the name of Isauro Octaviano be annulled, and that plaintiff be allowed to repurchase the land. The Octavianos separately filed their Answers with counterclaims. For his part, Aurelio traversed the material allegations of the Complaint and specifically denied the assertion that, through fraud and with evident intent to deceive Olimpia he sold the lot to his brother without consolidating ownership unto himself. As special and affirmative defenses, Aurelio alleged that the document (Exhibit "F"), purportedly an option to repurchase, was not an express grant to Olimpia of her right to repurchase, but rather, a unilateral offer of Aurelio to resell the property to the said vendor, which offer was not accepted by her; that neither consent nor written authority, nor waiver of Olimpia was necessary for the sale of the land in question for there was no acceptance of his unilateral offer to sell; nor was there any necessity for the consolidation of ownership pursuant to Article 1607 of the New Civil Code, for, as admitted by Olimpia, what was executed by her was a deed of definite sale and that Olimpia is estopped from alleging fraud for the reason that she herself admitted in her Complaint the existence of that deed of sale. For his part, respondent Isauro interposed the special defenses that he purchased the land in dispute in good faith; that he took possession thereof upon a just title, free from any liens and encumbrances; that he possessed the land in the concept of owner, continuously, openly and adversely for more than 17 years since 8 September 1954; that he was not privy to the alleged option given to Olimpia by Aurelio; neither had he (Isauro) any knowledge of the said option which Olimpia should have asserted without delay, within the statutory limitation; that more than

ten (10) years had elapsed since the alleged violation by Aurelio of the supposed option to resell, without Olimpia having taken any action thereon. As counterclaim, Isauro claimed moral damages and attorney's fees. After trial on the merits, the Court a quo rendered a Decision on 30 June 1975, finding for Olimpia, the decretal portion of which reads: WHEREFORE, decision is hereby rendered in favor of the plaintiff, ordering the defendants: 1) To execute the sale of the property in favor of the plaintiff upon the payment of P8,600.00 representing the repurchase price pursuant to their agreement; 2) To declare null and void the registration and transfer certificate of title in favor of Isauro B. Octaviano of Lot 9234-B in 1954, the same having been made without the seller having been legally and lawfully entitled to the property being registered in his name at the time when such sale was executed in 1954, no consolidation of ownership pursuant to law having been made; and 3) To return immediately Lot No. 9234-B to the plaintiff plus damages equal to the produce from 1958 until return is complied with. Without pronouncement as to costs. SO ORDERED.
4

On appeal by the Octaviano brothers to the then Court of Appeals, that Tribunal reversed the findings of the Trial Court that the contract was a sale with right of repurchase, ruled instead that the transaction between Olimpia and Aurelio was an absolute sale, and declared Isauro the lawful and absolute owner of the lot in question. Olimpia moved for reconsideration but the same was denied for lack of merit. In the meantime, Olimpia died, and was substituted by her heirs, Josefina, Liberty and Gregorio, all surnamed Zulueta. The Petition before us seeks a review of respondent Court's Decision. We affirm. 1) The nature of the transaction between Olimpia and Aurelio, from the context of Exhibit "E" is not a sale with right to repurchase. Conventional redemption takes place "when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have 5 been agreed upon". In this case, there was no reservation made by the vendor, Olimpia, in the document Exhibit "E". The "option to repurchase" was contained in a subsequent document and was made by the vendee, Aurelio. Thus, it was more of an option to buy or a mere promise on the part of the vendee, Aurelio, to resell the property to the vendor, 6 7 Olimpia. As held in Villarica vs. Court of Appeals: The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrumentbut is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the

vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. ... (Emphasis ours) Neither is the contract between Olimpia and Aurelio one of the equitable mortgage, which has been defined as "one in which although it lacks some formality, form of words or other requisites, prescribed by a statute, show the intention of the parties to charge a real property as security for a debt and contain nothing impossible or 8 contrary to law". From the provisions of the deed of sale, Exhibit "E", there is nothing therein from which it could be inferred that the property was being utilized as security for a debt. The document was labelled a deed of absolute and definite sale with the vendee Aurelio assuming the payment of the mortgage obligations owing by Olimpia to Maximino Gumayan, and specifically stipulating that upon payment of that indebtedness, the transaction became a deed of definite sale. The presumption that the contract was an equitable mortgage neither arises because the price of the sale at the time it was executed in 1952 was not unusually inadequate; the vendor, 9 Olimpia, did not remain in possession as lessee or otherwise; nor did she bind herself to pay taxes on the land. Inasmuch as the contract was neither a sale with right of repurchase, nor an equitable mortgage, neither can it be successfully alleged that it partook of a "pactum commissorium " and was, therefore, void. "Pactum commissorium "is a stipulation for automatic vesting of title over the security in the creditor in case of the debtor's default. It bears reiterating, however, that Olimpia was not a debtor, but a vendor. She was so described in the document, Exhibit "E". Olimpia owed nothing to Aurelio, and offered nothing to him as security for the payment of any indebtedness, It should also be recalled that, irked by the additional "pagares" incurred by Olimpia from Maximino Gumayan, Aurelio had asked Olimpia to buy back the property in 1954 but she demurred for lack of funds. And what is of greater import is that petitioner waited for an unexplained delay of about 19 years, from the date of the execution of the deed of sale (Exhibit "E") in 1952 and the option to repurchase (Exhibit "F") in the same year up to the time of filing of the Complaint in 1971, before she assailed the nature of her transaction with Aurelio, claiming that the contract was a sale with right of repurchase. If Olimpia really believed so, an action for reformation of instrument was open to her. Likewise, it took her more than 17 years-from the time of registration of the sale to Isauro and the subsequent issuance of a new certificate of title in the latter's name in 1954 up to the commencement of the action in 1971 for recovery of possession and ownership-before she questioned the validity of the sale by Aurelio to Isauro, contending that Aurelio was not yet the registered owner when he sold the land to Isauro, hence, could not transfer ownership thereof, and that he had sold the land without first consolidating ownership in himself. In point of fact, however, there was no need for Aurelio to consolidate ownership since the contract was one of absolute sale and not a pacto de retro sale. It also took Olimpia nine years from the time she sought to exercise her right of repurchase in 1962 up to the institution of the suit for recovery in 1971. Petitioner's long inaction to assert her alleged right should now be deemed barred by laches. For a party to deserve the consideration of the courts, he must not only show that he is entitled to the relief prayed for, but must show also that he is not guilty of laches, indifference, 10 negligence or ignorance. Again, The defense of laches is an equitable one and does not concern itself with the character of the defendant's title, but only with whether or not by reason of the plaintiff's long inaction or inexcusable neglect he should be barred from asserting this claim at all, because to allow him to 11 do so would be inequitable and unjust to the defendant.

And even granting, arguendo that the sale was a pacto de retro sale, the evidence shows that Olimpia, through her lawyer, opted to repurchase the land only on 16 February 1962, approximately two years beyond the stipulated period, that is, "not later than May, 1960". If Olimpia could not locate Aurelio, as she contends, and based on her allegation that the contract between her was one of sale with right to repurchase, neither, however, did she tender the redemption price to private respondent Isauro, but merely wrote him letters expressing her readiness to repurchase the property. It is clear that the mere sending of letters by the vendor expressing his desire to repurchase the property without 12 accompanying tender of the redemption price fell short of the requirements of law. Neither did petitioner make a judicial consignation of the repurchase price within the agreed period. In a contract of sale with a right of repurchase, the redemptioner who may offer to make the 13 repurchase on the option date of redemption should deposit the full amount in court. ... To effectively exercise the right to repurchase the vendor a retro must make an actual and 14 simultaneous tender of payment or consignation. 2) While it is true that Aurelio was not the registered owner of the property at the time of the sale to his brother in 1954, it should be recalled that by that time he had already complied with the conditions of the deed of sale by redeeming the property from Maximino Gumayan and paying the latter in full Aurelio may, therefore, be said to 15 have had the right to transfer ownership as also shown by the fact that Maximino Gumayan had rendered the certificate of title to him so that the authorization to the Register of Deeds to cancel the same and issue a new one as stipulated in the deed of sale became fully operative (Exhibit "E"). Aurelio was not duty bound to wait for the expiration of the alleged redemption period before he could dispose of or transfer ownership of the land for, as elsewhere discussed, the sale was not a sale with right of repurchase. It is true that by virtue of Exhibit "F", Olimpia could have "repurchased" the property between 1958 and 1960. If she had done so, perhaps, her rights would have been entitled to protection. She was remiss, however, and only attempted to do so in 1962, or way beyond the period granted her. We might sympathize with her plight, but an individual is expected to take ordinary care of his concerns and 16 cannot expect the law to protect him all the way. To be noted also is the fact that her own lawyer prepared the 17 deed of sale and the separate document giving her the option to "repurchase". For his part, private respondent Isauro was an innocent purchaser for value and in good faith. As heretofore stated, the instrument granting the "option to repurchase" (Exhibit "F") was not registered nor annotated at the back of the corresponding certificate of title. A purchaser need not explore further than what the Torrens title on its face indicates. A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in such property and pays a full price for the same, at the time of such purchase or before he has notice of the claim or interest of some other persons in the property. Good faith consists in an honest intention to abstain from taking any unconscientious 18 advantage of another. Where there was nothing in the certificate of title to indicate ... any encumbrance thereon, the purchaser is not required to explore farther than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. If

the rule were otherwise, the efficacy and conclusiveness of the certificate of title which the 19 Torrens system seeks to insure would entirely be futile and nugatory. WHEREFORE, the decision of respondent Court of Appeals, being in accordance with law and the evidence, is hereby affirmed, with costs against petitioners.

MARY ANN DEHEZA-INAMARGA, Petitioner,

G.R. No. 171321 Present: QUISUMBING, J., Chairperson, CARPIO MORALES, TINGA, VELASCO, JR., and BRION, JJ.

- versus -

CELENIA C. ALANO, BERNALDA A. PAROHINOG, GODOFREDO ALANO, AVELINO ALANO, ESTRELLA ALANO, FORTUNATA ALANO,NANY ALANO, SALLY ALANO, ADIONITO ALANO, and SUFRONIA ALANO, Respondents.

Promulgated:

December 18, 2008 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION QUISUMBING, J.:


[1]

This petition for review on certiorari assails the Decision


[2] [3]

dated September 8, 2004 and

Resolution dated January 4, 2006 of the Court of Appeals in CA-G.R. CV No. 64164. The appellate court had affirmed the Decision Case No. 4278. dated November 26, 1998 of the Regional Trial Court (RTC) Branch 1, Kalibo, Aklan in Civil

The facts of the case are as follows: Tomas Alano, husband of respondent Celenia Alano, owned two parcels of land covered by Original Certificates of Title (OCT) Nos. P-761 and P-762. He mortgaged the properties in favor of Renato Gepty on September 20, 1972. In 1976, Gepty demanded that Tomas pay the loan. Tomas, however, did not have money at that time to redeem his properties so he sought help from his niece, petitioner Mary Ann DehezaInamarga. Petitioner agreed to pay the loan while the spouses, in turn, mortgaged said properties to

her. Petitioner kept in her possession OCT Nos. P-761 and P-762 and asked the spouses to sign blank pieces of paper which petitioner said will be converted into receipts evidencing their indebtedness to her. In November 1990, after Tomas had passed away, respondents Celenia and her children went to petitioner to redeem the property. Petitioner, however, told them that she had mortgaged the property to the Rural Bank of Libacao. Respondents verified the matter with the bank and discovered that OCT Nos. P-761 and P762 have been cancelled and in lieu thereof, Transfer Certificates of Title (TCT) Nos. T-9080 and T-9081 were issued in petitioners name. Respondents learned that the TCTs in petitioners favor were issued by virtue of a Deed of Sale purportedly executed by the Spouses Alano in her favor. On January 24, 1991, respondents filed a complaint for the declaration of nullity of document, reconveyance and damages against petitioner and the Rural Bank of Libacao. Respondents contended that the deed of sale is null and void because the signatures of the Spouses Alano were forged and even if they were the signatures of the spouses, they were affixed on blank sheets of paper which were not intended to be a deed of sale. Petitioner, on the other hand, denied the allegation of forgery and maintained that the deed of sale was valid. She claimed that the spouses offered to sell her the property so they can use the purchase price of P7,000 to redeem the property from Gepty. Petitioner added that the action is barred by prescription, laches and estoppel.

On November 26, 1998, the RTC rendered its decision, the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered: 1. Declaring the transaction between the plaintiffs and defendant Mary Ann Deheza (Inamarga) as an EQUITABLE MORTGAGE and declaring the plaintiffs entitled to redeem the mortgaged properties which shall be effected upon payment of the mortgage debt to said defendant in the amount of P2,400.00 with legal rate of interest from 1983, the year plaintiffs ceased paying said defendant interests; 2. Declaring the nullity of the Deed of Absolute Sale (Exh. B) dated March 4, 1978 allegedly executed by Tomas Alano in favor of Mary Ann Deheza; 3. Declaring the nullity of Transfer Certificate of Title No. T-9080 and Transfer Certificate of Title No. T-9081 in the name of Mary Ann Deheza; 4. Ordering the reconveyance of Lot 7 and Lot 2, all of Psu-235010, by defendant Mary Ann Deheza Inamarga in favor of the plaintiffs. In the event that said defendant fails to reconvey to plaintiffs said lots, the Clerk of Court is hereby directed to execute it pursuant to the provisions of Section 10 of Rule 39 of the 1997 Rules of Civil Procedure. As Amended; 5. Ordering defendant Mary Ann Deheza-Inamarga to pay plaintiffs exemplary damages in the amount of P50,000.00 and attorneys fees in the amount of P10,000.00.

Costs against said defendant. SO ORDERED.


[4]

Petitioner elevated the case to the Court of Appeals but her appeal was denied.

[5]

The appellate court

held that the signatures in the Deed of Sale were forged and even if they were genuine, the agreement entered into by the parties was one of equitable mortgage. It likewise upheld the trial courts award of damages, rul ing that the transactions involved in the case were repeatedly tainted with fraud.

Petitioners motion for reconsideration having been denied, petitioner filed the instant appeal, assigning errors as follows: I. THE LOWER COURT ERRED IN DECLARING THE TRANSACTION BETWEEN [THE] SPOUSES TOMAS AND CELENIA ALANO AND THE [PETITIONER] MARY ANN DEHEZA-INAMARGA AS ONE OF EQUITABLE MORTGAGE AND NOT ONE OF SALE. II. THE LOWER COURT ERRED IN ORDERING THE RECONVEYANCE OF THE LANDS IN QUESTION IN FAVOR OF THE [RESPONDENTS] AND ORDERING THE NULLITY OF TCT NO. T-9080 AND TCT NO. T9081 IN THE NAME OF MARY ANN DEHEZA. III. THE LOWER COURT ERRED IN FINDING THAT THE QUESTIONED DEED OF SALE WAS A FORGERY OR THAT IT WAS SIGNED IN BLANK BY [THE] SPOUSES TOMAS AND CELENIA ALANO AND I[N] GIVING CREDENCE TO THE EVIDENCE OF THE [RESPONDENTS]. IV. THE LOWER COURT ERRED IN NOT DECLARING THAT *RESPONDENTS+ ACTION IS ALREADY BARRED BY PRESCRIPTION, LACHES OR ESTOPPEL. V. THE LOWER COURT ERRED IN AWARDING EXEMPLARY DAMAGES AND ATTORNEYS FEE*S+ TO [6] THE [RESPONDENTS].

Essentially, the issues for resolution are: (1) whether the Deed of Sale is a forgery; (2) whether the transaction between petitioner and the Spouses Alano is one of sale or equitable mortgage; (3) whether respondents action is already barred by prescription, laches or estop pel; and (4) whether the award of exemplary damages and attorneys fees in favor of respondents is legal and justifiable.

As to the first issue, petitioner contends that respondents never presented a handwriting expert to prove that the signatures of Tomas and Celenia Alano were forged and such allegation of forgery cannot overcome the presumption of regularity in the performance of duty of the notary public as well as the due execution of the public

document. Respondents, in turn, contend that the findings of handwriting experts are not conclusive upon the trial court.
[8]

[7]

The question of forgery is one of fact.


[9]

It is well-settled that when supported by substantial evidence or

borne out by the records, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court.

It is a hornbook doctrine that the findings of fact of trial courts are entitled to great weight on appeal and should not be disturbed except for strong and valid reasons. It is not a function of this Court to analyze and weigh evidence by the parties all over again. Our jurisdiction is limited to reviewing errors of law that might have been committed by the Court of Appeals. Where the factual findings of the trial court are affirmed in toto by the Court of Appeals as in this case, there is great reason for not disturbing such findings and for regarding them as not reviewable by this Court.
[10]

Moreover, after a careful perusal of the records and a thorough consideration of this case, this Court finds sufficient basis for the finding of the Court of Appeals that the said signatures were indeed forged. The Court of Appeals cited apparent differences in the signatures on the face of the documentary evidence submitted before the RTC. Also, it found that the signatures on the deed of sale appeared to be different in characteristics, spacing and strokes from the signatures of the Spouses Alano appearing in other documents forming part of the records of this case which are admittedly genuine. Moreover, contrary to petitioners contention, the presentation of a handwriting expert is not necessary. Handwriting experts are usually helpful in the examination of forged documents because of the technical procedure involved in analyzing them. But resort to these experts is not mandatory or indispensable to the examination or the comparison of handwriting.
[11]

The findings of handwriting experts are not conclusive upon

the courts. As this Court has once observed, the authenticity of signatures is not a highly technical issue in the same sense that questions concerning, e.g., quantum physics or topology or molecular biology, would constitute matters of a highly technical nature. The opinion of a handwriting expert on the genuineness of a questioned signature is certainly much less compelling upon a judge than an opinion rendered by a specialist on a highly technical issue. The signatures on a questioned document can be examined visually by a judge who can and should exercise independent judgment on the issue of authenticity of such signatures.
[12]

With regard to the second issue, petitioner contends that it was the Spouses Alano who caused the execution of the deed of sale in question and that the document was signed by them in the presence of the notary public. She likewise argues that after the sale, she took possession of the land; and she adds that the consideration for the property was adequate because the property was not productive.
[13]

On the other hand,

respondents aver that the transaction between the Spouses Alano and petitioner is not one of sale but one of equitable mortgage. Respondents stress that they continued to be in possession of the property even after the alleged execution of the Deed of Sale and they claim that the P7,000 consideration is grossly inadequate for the market value of the property. Respondents further stated that they paid P500 interest annually for the loan.
[14]

In our considered view, the appellate court did not err in sustaining the decision of the trial court holding that the transaction between the parties is an equitable mortgage. An equitable mortgage is 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, and contains nothing impossible or contrary to law.
[15]

Articles 1602 and 1604 of the Civil Code of the Philippines state: ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of the 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 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 case, 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. ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.

In the instant case, the RTC, as affirmed by the Court of Appeals, correctly found that more than one of the circumstances enumerated in Article 1602 are present, to wit: the inadequacy of the selling price of the properties in relation to its true value; the vendors (Spouses Alano) remained in possession as lessee or otherwise; respondents paid the real property taxes; and the spouses secured the payment of the principal debt owed to petitioner with said properties.
[16]

On this score, we are in agreement that the parties intended an equitable

mortgage and not a contract of sale.

On the third issue, petitioner claims that the complaint was barred by extinctive prescription as it was filed only on January 24, 1991, or almost 13 years from March 7, 1978when the TCTs were issued in favor of petitioner. Petitioner argues that the prescriptive period for reconveyance of land based on implied or constructive trust is 10 years.
[17]

Respondents counter that since the deed of sale and the certificates of title in the
[18]

name of petitioner are all null and void, prescription, laches or estoppel has not set in.

Again, we find for the respondents. Where there is no consent given by one party in a purported contract, such contract was not perfected; therefore, there is no contract to speak of. The deed of sale relied upon by petitioner is deemed a void contract. This being so, the action based on said deed of sale shall not prescribe in accordance with Article 1410
[19]

of the Civil Code.

On the issue of damages, petitioner contends that the award of exemplary damages and attorneys fees were not justified under the law and the facts obtaining in this case.
[21] [20]

Respondents, on their part, state that

petitioner having acted in bad faith to the damage and prejudice of respondents, it is but proper that she should pay for such deception and unlawful acts.

We do not find any cogent reason to disturb the findings of the RTC on this point as affirmed by the Court of Appeals with respect to the award of damages and attorn eys fees. As correctly held by the RTC, the act of petitioner of inducing her two trusting old relatives to sign blank pieces of paper purporting to be a deed of sale so that the certificates of title of their properties could be transferred in her name is a fraudulent act. Exemplary damages were rightfully imposed in order to deter persons similarly disposed from committing such acts of fraud. Consequently, with the grant of exemplary damages, attorneys fees should likewise be awarded.
[22]

WHEREFORE, the Decision dated September 8, 2004 and the Resolution dated January 4, 2006 of the Court of Appeals in CA-G.R. CV No. 64164 are AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. 104784 March 3, 1994 FELIMON vs. THE COURT OF APPEALS and MARIA DEL ROSARIO-TANJUAKIO, respondents. UY, petitioner,

Candido G. Del Rosario & Associates for petitioner. Salvador A. Navarro for private respondent.

NOCON, J.: Petitioner assails the appellate court's decision declaring his loan to private respondent as an equitable 1 mortgage. Emphatically declaring that what private respondent signed was a deed of absolute sale over her house and lot, petitioner asks us to reverse. Private respondent, on the other hand, states that the real intention of the parties was that her house and lot would only be mortgaged to petitioner as shown by an "Option To Repurchase." Since the decisions of the trial court and the appellate court are worlds apart, the Court has decided to scrutinize the evidence thoroughly. The facts of the case as summed up by the trial court and adopted by the appellate court are as follows: As summed by the trial court: This case is for reconveyance of a house and lot with TCT No. 214580 Quezon City, then in the name of plaintiff (herein private respondent Maria del Rosario-Tanjuakio) but which was cancelled by virtue of a Deed of Absolute Sale dated June 11, 1979, executed by plaintiff for a consideration of P70,000.00 in favor of defendant (herein petitioner Felimon Uy) who was issued his TCT No. 28338 on November 18, 1981. Brought to fore is the said Deed of Absolute Sale. Pursuant to the pre-trial Order of August 5, 1983, the issue of whether the said Deed of Absolute Sale may be declared as an equitable mortgage was agreed by the parties to be submitted for decision on the basis of the facts stipulated and reflected in the said pre-trial order, to wit: By virtue of a Deed of Sale, dated June 11, 1979, executed by plaintiffs in favor of defendants, the latter caused the cancellation of the former's T.C.T. No. 214580, Quezon City, and a new TCT No. 283384-Q.C., was issued to said defendants on November 18, 1981. By virtue also of a letter, dated June 11, 1979, said defendants granted plaintiffs 60 days from said date an option to purchase the subject land covered by the aforesaid titles. It appears that plaintiffs have failed to exercise that said option. Culled from the foregoing is the singular issue of whether the aforesaid Deeds of Sale may be declared as an equitable mortgage. This being a legal issue, the same may be resolved without further reception of evidence and for this purpose, parties are given 15 days from receipt hereof to submit their memoranda after which the case shall be deemed submitted for decision. Both parties submitted their respective memoranda and accordingly, a decision was rendered on October 18, 1983, "finding no justification to consider the subject Deed of Absolute Sale an equitable mortgage, the complaint is hereby DISMISSED. Plaintiff went on appeal and in a decision dated February 27, 1987, in CA-G.R. CV No. 05001, the Honorable Court of Appeals set aside the aforesaid decision remanded the instant case for trial on the merits before this Court. Defendant elevated that decision of the Court of Appeals by way of petition for review on certiorari. In a Resolution, dated December 2, 1987 in G.R. No. 78532, the Honorable Supreme Court denied said petition.

Accordingly, the records were remanded to this Court for trial on the merits. The records of the instant case were, however, among those burned in the conflagration of the Quezon City Hall on June 11,1988. It was only on September 27, 1988 that the records of the case was officially declared reconstituted. Pre-trial briefs were then submitted by the parties, with proffer ( sic) of their documentary exhibits on the same issue as defined in the aforequoted pre-trial order of August 5, 1983: Whether the Deed of Absolute Sale between plaintiff vendor and defendant as vendee may be declared as an equitable mortgage. After trial the court a quo rendered judgment as stated at the outset, the decretal portion of which reads: WHEREFORE, premises above considered, finding no merit in plaintiff's claim that the Deed of Absolute Sale was an equitable mortgage, the instant complaint is hereby DISMISSED. Further, plaintiff is hereby ordered to pay P10,000.00 for attorney's fee of defendant and costs of suit. SO ORDERED. Not satisfied, plaintiff elevated her cause once again to this Tribunal.
2

The second time around with the appellate court, petitioner received a decision which, in its dispositive portion, stated as follows: PREMISES CONSIDERED, the decision of the trial court is hereby SET ASIDE and in lieu thereof another rendered declaring the deed of absolute sale between the parties an equitable mortgage. Plaintiff is declared entitled to redeem the mortgaged property which shall be effected upon the payment of plaintiff's mortgage debt to defendants in the total amount of P70,000.00 with legal rate of interest from the time the deed in question was executed on June 3 11, 1979 until it is fully paid. Hence, this petition where petitioner faults the appellate court with the following errors: 1. A finding that the Deed of Absolute Sale did not express the true intention of the parties; 2. A finding that the sale price of P70,000.00 for the house and lot in 1979 was inadequate; 3. A finding that the private respondent was still in possession of the house and lot which was the subject matter of the case; 4. A finding that the private respondent had paid all the real estate taxes; 5. The doctrine of "doubt to be settled in favor of the greatest reciprocity of interest" for onerous contracts was misapplied. Petitioner claims that:

Private respondent's own witness testified that he explained to her that the document she was signing is a deed of absolute sale. Nevertheless, private respondent signed the said deed voluntarily. Private respondent is a college graduate. She is presumed to know the contents of the deed of absolute sale, especially so when her own witness explained to her the contents thereof (tsn., pp. 24-25, Hearing on July 25, 1969).The deed of absolute sale is so simply worded. There is absolutely no room to impute unto the document that the same didn't express the true 4 intention of the parties. . . . In answer, the private respondent states that: Suffice it to say that Respondent Court of Appeals appreciated the facts that Petitioner controlled the preparation of the deed of sale and option to repurchase; and that the Private Respondent was a borrower out of necessity; and that the context of Morales' testimony is that the contract that should have been prepared by Petitioner and signed by Private Respondent is that of a 5 mortgage and not sale. The following testimony on cross-examination of private respondent's witness, Mr. Jesus Morales, was used by the trial court in declaring that private respondent's own witness negated her claim that her transaction with petitioner was one of the mortgage: Q: You impress to the Hon. Court that there were discussions prior to the signing of the document? A: There was sir, I even asked the plaintiff why is it that the document is a deed of sale whereas she is mortgaging her 6 property. which same testimony was seized upon by petitioner and reiterated in his memorandum with the following crossexamination testimony of said Mr. Morales added: Q But in your personal observation Mr. Witness, you get the impression that plaintiff got clearly your message that actually she is signing the document deed of sale? A Perhaps, sir, because I explained to her that what she is signing is a deed of sale. Q That is extending your friendly reminder to her that what actually she is signing is a deed of sale and she signed the document in your presence? A Yes. (tsn., pp. 24-25, July 25, 1989 hearing).
8 7

The Court notes that the following cross-examination testimony 9 of petitioner Uy does indicate that there could exist doubts about the authenticity of petitioner's Deed of Absolute Sale: CROSS BY ATTY. GINETE (of petitioner F. Uy) xxx xxx xxx EXAMINATION

Q You also testified Mr. witness and confirm the testimony of Mr. Morales explaining to the witness the import of the Deed of Sale she signed, is it not also a fact that per testimony of Mr. Morales you replied that the signing of the absolute sale was only for formality sake when in fact the transaction was only a mortgage, do you confirm that testimony of Mr. Morales? A I was not here when Mr. Morales testified. Q And in the testimony of Mr. Morales, Mr. Morales informed the plaintiff that what she was signing is a deed of absolute sale but the plaintiff replied that the document she is signing is only for formality sake and you did not make any comment, what do you say to that? A Mr. Morales kept pointing to the plaintiff that the 10 document she is signing was a deed of absolute sale. When counsel for private respondent tried to have petitioner confirm that private respondent's witness, Mr. Jesus Morales, testified that petitioner stated that the signing of the deed of sale was only a formality, he evaded answering the same by saying that: "I was not here when Mr. Morales testified." However, petitioner FORGOT his defense strategy when he wanted to emphasize the fact that private respondent signed a document entitled deed of absolute sale in response to private respondent's counsel's question as to what he had to say about Morales' testimony that he(Morales) told private respondent that what she was signing was a deed of absolute sale. Petitioner answered: "Mr. Morales kept pointing to the plaintiff that the document she was signing was a deed of absolute sale." Now, how could petitioner answer that way if he were indeed not present when Mr. Morales testified? It should be noted that the question petitioner answered started with: "And in the testimony of Mr. Morales . . . ." Necessarily, the cross-examination testimony of Mr. Morales must be studied to provide any clue as to the real nature of the transaction between private respondent and petitioner. The significant cross-examination testimony of Mr. Morales is the following: Q: And you wish to picture to the Court that on the occasion the person nearest you were Mr. and Mrs. Uy and your wife? A: Yes. xxx xxx xxx Q: After the signing of the deed of absolute sale, the defendants delivered to her a document which you identified as Exh. C the right to repurchase? A: Yes. Q: And you were present when this Exh. C was delivered by Atty. And Mrs. Uy to the plaintiff?

A: Yes. Q: You made the impression that she was aware that she was to redeem the property as stated in the document within 60 days? A: Yes. Q: Did you also talk to the plaintiff about her capability to redeem the property within the 60 days period stated in Exh. C? A: I also reminded the plaintiff about this 60 day period and she informed me that they have an agreement with the Uy's that provided she will be able to pay the interest, the property will not be foreclosed. Q: She told that to you not-withstanding the fact according to your explanation to her the significance of the document that what she is signing is a deed of absolute sale? A: Yes.
11

(NOTE: "Sic" not used to avoid cluttering up the testimony). Mr. Morales' cross-examination testimony is very clear that although private respondent signed a deed of absolute sale over her house and lot in favor of the petitioner, she did so because she was granted the right to repurchase the same. And she could still redeem the same even after the 60-day period granted as long as she would pay the corresponding interest. Of course, Mr. Morales' testimony would have been pure hearsay were if not for the fact that, although petitioner's counsel tried to get private respondent to say something else during her cross-examination, she said the very same thing. Private respondent's cross-examination, testimony is as follows: Q: You made a statement to the effect that although you were given 60 days from June 11 to repurchase the property . . . you made a statement to the effect that as long as you can pay 5% or the equivalent of P3,500.00 you would be allowed to redeem the property, do you confirm or deny that? A: Because that was what Nena told me. Q: And you agreed to that? A: Yes, I believed her.
12

It is clear that private respondent intended to mortgage her property to the Uys to borrow P70,000.00, 13 incidentally, to pay Morales P50,000.00 which she owed him. She was, however, made to sign a deed of absolute sale with a right to repurchase the same granted in a separate document. The appellate court, therefore, did not abuse its discretion in holding that the deed of absolute sale was in reality an equitable mortgage.

As correctly held by the appellate court: Under Article 1604 of the Civil Code a contract purporting to be an absolute sale shall be presumed to be an equitable mortgage should any of the conditions in Article 1602 be present. Otherwise stated, the presence of only one circumstance defined in Article 1602 is sufficient for a contract of sale with right to repurchase to be presumed an equitable mortgage. The said article expressly provides therefor "in any of the following cases", hence, the existence of any of the circumstances enumerated therein, not a concurrence nor an overwhelming number of such circumstances suffices to give rise to the presumption that the contract with right to purchase is 14 an equitable mortgage. xxx xxx xxx Several circumstances . . . persuade this Court to construe the questioned documents as an equitable mortgage. First, while concededly plaintiff may have been aware of the contents of the Deed of Absolute Sale, the preponderance of the evidence shows however that she signed knowing that the said contract did not express the real intention of the contracting parties. She was, in fact, led to believe by the defendants whom she approached for a loan to pay her obligation to Jesus Morales that it was the policy of defendants in lending money to execute such a Deed of Absolute Sale over the mortgaged property before extending the loan, and that the turning over of the title to the property to the defendants was a mere formality. If plaintiff signed notwithstanding all these, it is more probable to believe that she did so because she was in urgent need of funds for, verily, "Necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any terms that the crafty may impose upon them." Second, the amount of P70,000.00, even in 1979, is too inadequate for a purchase price of plaintiff's property consisting of a house and lot measuring four hundred twenty (420) square meters together with all the other improvements made therein located at Novaliches, Quezon City. In Quinga vs.Court of Appeals, et al., although the contract between the parties upon its face was one of sale, the Supreme Court, nevertheless, upheld the findings of this Court that the transaction was not a sale but a loan secured by an equitable mortgage under the prevailing circumstances of the case, such as, that the price of the land was grossly inadequate and the vendor remained in possession thereof and enjoyed the fruits. Article 1602 of the Civil Code, in fact, expressly provides that in case of doubt a contract purporting to be a sale with a right to repurchase shall be construed as an equitable mortgage when the price or consideration of the sale is unusually inadequate. Third, although symbolically the possession of the property was transferred to defendant, it was plaintiff who continued to be in physical possession of the property. The second paragraph of Article 1602 of the Civil Code provides that when the vendor remains in possession as lessee or otherwise, the contract shall be construed as an equitable mortgage. Fourth, the supposed vendor had been paying the realty taxes thereon even after the execution of the document in 1979. It was only in 1982 that the alleged vendees-spouses started paying the same. In Santos vs. Duata, in affirming a decision of this Court, the Supreme Court considered the facts that the vendor remained in possession of the land and continued paying the taxes thereon significant circumstances which justified a judgment holding the transaction between the parties as an equitable mortgage and not a pacto de retro sale thereby applying Article 1602 of the Civil Code.

Finally, there is the rule that in case of any doubt concerning the surrounding circumstances in the execution of the contract, the least transmission of rights and interests shall prevail if the contract is gratuitous, and, if onerous, the doubt is to be settled in favor of the greatest reciprocity of interest. Thus, in the old case of Olino vs. Medina, Olino filed a complaint against Medina to recover a parcel of riceland which he alleged to have mortgaged for P175.00 and which Medina refused to return on the ground that the latter allegedly bought the property. In deciding the conflict of allegations between the parties, the Supreme Court through Justice Florentino Torres considered the transaction over the property as a loan reasoning that "such a contract involves a smaller transmission of rights and interests, and the debtor does not surrender all rights to his property but simply confers upon the creditor the right to collect what is owing from the value of the thing given as security, there existing between the parties a 15 greater reciprocity of rights and obligations." The other assigned errors need not be discussed as these are inconsequential after our holding that what transpired between private respondent and petitioner was an equitable mortgage and not a deed of absolute sale. WHEREFORE, the petition is hereby DENIED for lack of merit. The assailed appellate court's decision is hereby AFFIRMED in toto. Costs against the petitioner. SO ORDERED.

G.R. No. 151217

September 8, 2006 S. ROMULO, petitioners,

SPOUSES CESAR R. ROMULO and NENITA vs. SPOUSES MOISES P. LAYUG, JR., and FELISARIN LAYUG, respondents. DECISION TINGA, J.:

This is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Court of Appeals 1 2 3 Decision and Resolution in CA-G.R. CV No. 63965. Said Decision reversed and set aside the Decision of the Regional Trial Court (RTC), Branch 258, Paraaque City, which nullified the Deed of Absolute Sale and Contract of Lease executed between herein petitioners and respondents. The following factual antecedents are matters of record. On April 11, 1996, petitioners Spouses Cesar and Nenita Romulo filed a verified Complaint for Cancellation of Title, Annulment of Deed of Absolute Sale and Contract of Lease with Damages against respondents Spouses Moises and Felisarin Layug. The complaint was docketed as Civil Case No. 96-0172 and raffled to Branch 258 of the RTC of 4 Paraaque. Petitioners averred in their complaint that sometime in 1986, they obtained from respondents a loan in the amount of P50,000.00 with a monthly interest of 10%, which subsequently ballooned to P580,292.00. To secure

the payment of the loan, respondents allegedly duped petitioners into signing a Contract of Lease and a Deed of Absolute Sale covering petitioners house and lot located at Phase II, BF Homes, Sucat, Paraaque and covered by Transfer Certificate of Title (TCT) No. S-71528. The Deed of Absolute Sale purportedly facilitated the cancellation of petitioners title on the house and lot and the issuance of TCT No. 20489 in the name of respondents. Thus, petitioners prayed for the nullification of the Deed of Absolute Sale, the contract of lease and TCT No. 20489, and 5 the award of moral and exemplary damages. Respondents denied petitioners allegations. In their Answer, they vouched for the validity of the Deed of Absolute Sale, particularly as having been voluntarily executed by the parties for the purpose of extinguishing petitioners indebtedness to respondents. As consideration of the sale, respondents allegedly paid the amount ofP200,000.00 in addition to the writing off of petitioners obligation to them. That they allowed petitioners to occupy the house and lot as lessees thereof was founded on the trust they reposed on petitioners, claimed 7 respondents. Prior to the filing of Civil Case No. 96-0172, respondent Moises Layug, Jr. ("Moises") filed Civil Case No. 9422, an action for ejectment, against petitioners to compel the latter to vacate the house and lot allegedly sold by petitioners to Moises and subsequently rented out by him to petitioners. Moises alleged that petitioners violated the terms of the Contract of Lease when the latter failed to pay any rental or exercise their option to repurchase the house and lot and refused to vacate the property despite demand. The Metropolitan Trial Court (MeTC), 8 Branch 77, Paraaque dismissed the complaint for lack of cause of action. The RTC, Branch 257, Paraaque, likewise dismissed Moises appeal based on its finding that the parties did not intend to en ter into a lease 9 10 agreement. The Court of Appeals denied Moises petition for review on the ground of late filing. Upon elevation 11 to this Court, Moises petition for review on certiorari was denied with finality by this Court. On June 21, 1999, the trial court rendered judgment in favor of petitioners in Civil Case No. 96-0172. The dispositive portion of the decision reads: WHEREFORE, the plaintiffs having been able to prove their claim by preponderance of evidence, judgment is hereby rendered in their favor and against spouses Moises P. Layug and Felisarin Layug whereby the Contract of Lease as well as the Deed of Sale allegedly executed by the herein parties are hereby declared NULL and VOID and of no force and effect and the Register of Deeds of the City of Paraaque is hereby ordered to cancel Transfer Certificate of Title No. 20489 registered in the names of MOISES P. LAYUG married to FELISARIN LAYUG and to issue a new one in the name of Spouses Cesar R. Romulo and Nenita S. Romulo, upon the payment of the required fees by the plaintiffs. Likewise, defendants Spouses Moises P. Layug and Felisarin Layug are hereby ordered to pay jointly and severally Spouses Cesar R. Romulo and Nenita S. Romulo the following, to wit: 1. The amount of P100,000.00 as and by way of moral damages; 2. The amount of P80,000.00 as exemplary damages; 3. The amount of P50,000.00 as and by way of attorneys fees; and 4. The costs of suit. SO ORDERED.
12 6

Respondents elevated the matter to the Court of Appeals, questioning, among others, the trial courts finding that 13 the contract between petitioners and respondents was an equitable mortgage. The Court of Appeals reversed and set aside the RTC Decision, mainly on the ground that petitioners failed to present sufficient evidence to prove

their allegation that their signatures to the Deed of Absolute Sale were obtained fraudulently. Their motion for 14 reconsideration rebuffed, petitioners filed the instant petition raising the lone issue of whether or not the transaction between the parties constitutes an equitable mortgage. On this issue, the RTC and the Court of Appeals differ in opinion. The trial court based its declaration that an equitable mortgage was intended by the parties on the finding that petitioners remained in possession of the house and lot even after the property was supposedly sold to respondents. The trial court also gave evidentiary weight to the decisions of the MeTC and RTC dismissing the action for ejectment in Civil Case No. 9422, where both courts found that petitioners neither vacated the property nor paid any rental even after the execution of the Deed of Absolute Sale. The Court of Appeals disagreed and declared that an absolute sale was contemplated by the parties based on the express stipulations in the Deed of Absolute Sale and on the acts of ownership by respondents subsequent to its execution. Whether or not the parties intended an equitable mortgage is a factual issue. As a general rule, factual review is beyond the province of this Court. One of the exceptions to the rule is exemplified by the instant case where the factual findings of the RTC and Court of Appeals are contradictory. That petitioners obtained loans from respondents between 1985 and 1987, which remained unpaid up to the time 15 of the execution of the assailed Deed of Absolute Sale, is established. That petitioners signed the assailed instrument is also not disputed. Indeed, they admitted having signed said document qualifying, however, that they were forced by respondents to execute the same for the purpose of securing their indebtedness to 16 respondents. Respondents, on the other hand, insisted that the parties executed the Deed of Absolute Sale as an honest-to-goodness sales transaction. Respondents, however, admitted further that in addition to the amount of P200,000.00 stipulated in the Deed of Absolute Sale, the parties agreed to write off petitioners loan as consideration of the sale, although this clause 17 was not expressed in the instrument. From respondents admission, it can be gathered that the assailed Deed of Absolute Sale does not reflect the true arrangement of the parties. Now, is petitioners submission t hat the parties actually agreed to subject the house and lot as security for their unpaid obligation supported by the evidence? Did the parties execute the assailed Deed of Absolute Sale with the intention of subjecting petitioners house and lot covered by the deed as a mere security for the payment of their debt? The form of the instrument cannot prevail over the true intent of the parties as established by the evidence. We have also decreed that in determining the nature of a contract, courts are not bound by the title or name given by the parties. The decisive factor in evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior to, during 18 and immediately after execution of the agreement. In order to ascertain the intention of the parties, their contemporaneous and subsequent acts should be considered. Once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed 19 in unequivocal terms. As such, documentary and parol evidence may be submitted and admitted to prove such intention. And, in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as 20 an equitable mortgage. Between 1985 and 1987, petitioner Nenita Romulo ("Nenita") obtained from respondent Felisarin Layug ("Felisarin") loans in various amounts totaling around P500,000.00. Being close friends at that time, Felisarin did not require any written instrument to secure payment, other than the title to the house and lot, which Nenita 21 handed to Felisarin sometime in 1988. When respondents demanded payment of the loan, petitioners defaulted. Nevertheless, as admitted by Layug, despite her repeated demands, she allowed petitioners some more time 22 within which to pay their debts. Felisarin claimed that eventually petitioners offered their house and lot as 23 payment for their debt because petitioners no longer had any money. However, even after the execution of the assailed Deed of Absolute Sale, respondents continued to grant petitioners loan accommodations as evidenced by 24 the three promissory notes executed by petitioner Cesar Romulo.

Respondents continuing to lend money to petitioners does not make sense if the intention of the parties was really to extinguish petitioners outstanding obligation. The logical and inevitable conclusion is that respondents deemed it wise to formalize a security instrument on petitioners house and lot by executing the Deed of Absolute Sale after realizing that petitioners could no longer fully satisfy their obligation to respondents. At that time, as petitioners were hard-pressed to come up with funds to pay their loan, they were hardly in a position to bargain. The preponderance of evidence shows that they signed knowing that said documents did not express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining funds. "Necessitous men are not, truly speaking, free men; but to answer a present emergency will submit to any terms 25 that the crafty may impose upon them." The circumstances surrounding the execution of the Deed of Absolute Sale, particularly the fact that respondents continued to extend some loans to petitioners after its execution, precludes the Court from declaring that the parties intended the transfer of the property from one to the other by way of sale. Consistent with the foregoing state of the evidence, Articles 1604 and 1602 of the Civil Code come into play. The articles provide that when the parties to a contract of sale actually intended such contract to secure the payment of an obligation, it shall be presumed to be an equitable mortgage: Art. 1602. 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 vendor binds himself to pay the taxes on the thing sold; 5) When the purchaser retains for himself a part of the purchase price; 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. (Emphasis supplied.) Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. For the presumption of equitable mortgage to arise, two requisites must be satisfied, namely: that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of mortgage. Under Article 1604 of the Civil Code, a contract purporting to be an absolute sale shall be 26 presumed to be an equitable mortgage should any of the conditions in Article 1602 be present. To stress, the existence of any one of the conditions under Article 1602, not a concurrence, or an overwhelming number of such 27 circumstances, suffices to give rise to the presumption that the contract is an equitable mortgage. It must be emphasized too, however, that there is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. In fact, it is often a question difficult to resolve and is frequently made to depend on the surrounding circumstances of each case. When in doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser 28 transmission of rights and interests over the property in controversy. The Court has not hesitated to declare a purported contract of sale as an equitable mortgage even when only one 29 of the enumerated circumstances under Article 1602 is proved. In the case at bar, petitioners remained in possession of the house and lot even after the execution of the Deed of Absolute Sale. Moreover, they remained in

possession of the property for more than the reasonable time that would suggest that petitioners were mere lessees thereof. For one, it took respondents more than five years from the time of the execution of the Deed of Absolute Sale and the Contract of Lease to file the action for ejectment. Within this period, petitioners neither paid any rental nor exercised the option to buy purportedly the leased property from respondents. Incidentally, in the decisions of the MeTC and the RTC in the separate action for ejectment, both lower courts observed that when petitioners were made to sign a blank document, which turned out to be a Contract of Lease of their house and lot, they were of the belief that the blank document would serve only as guaranty for the payment of their obligation to respondents. The claim that petitioners possession of the house and lot was by sheer tolerance of respondents is specious. Respondents could not explain why they allowed petitioners more than five years to look for another place to transfer. These circumstances only support the conclusion that the parties never really intended to transfer title to the property. Under paragraph 2 of Article 1602, where the purported vendor remains in possession of the property subject of the sale and it can be inferred that the true intention of the parties was to secure an existing debt, the transaction shall be deemed an equitable mortgage. Under paragraph 1 of Article 1602, where the purchase price is inadequate, a contract of sale is also presumed to be an equitable mortgage. Based on respondents evidence, petitioners property was valued at P700,000.00 but the assailed Deed of Absolute Sale stated a consideration of only P200,000.00. Contrary to the appellate courts declaration that the inadequacy of the purchase price is not sufficient to set aside the sale, the Court finds the same as clearly indicative of the parties intention to make the property only a collateral security of petitioners debt. The Court is not convinced that petitioners would allow the sale of their residential property for even less than half of its market value. The appellate court ruled that petitioners failed to rebut the presumption of the genuineness and due execution of the questioned Deed of Absolute Sale. Based on the examination of the assailed instrument and the Contract of Lease and the testimonies of the parties, the Court cannot sustain respondents claim that petitioners offered to sell their house and lot in satisfaction of their indebtedness. As observed by the trial court, the Contract of Lease appears to have been signed sometime in November 1988 or before the execution of the Deed of Sale. Respondents were unable to explain why they had leased the property to petitioners before its supposed purchase by respondents. Furthermore, the records disclose that it was only after the institution of the ejectment case did petitioners learn about the cancellation of their title to the property although under the assailed Deed of Absolute Sale, petitioners were obliged to bear the expenses of its execution and registration. These circumstances lend credence to petitioners claim of the surreptitious manner by which respondents made them sign certain documents without completely disclosing the real import thereof. The Supreme Court is clothed with ample authority to review matters, even if they are not assigned as errors on 30 appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. Though petitioners did not raise in issue the appellate courts reversal of the award of damages in their favor, the Court has the discretion to pass upon this matter and determine whether or not there is sufficient justification for the award of damages. The trial court described respondents acts as "malevolent," necessitating the award for moral and exemplary damages. An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be a culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any 31 of the cases stated in Article 2219. However, petitioners are not completely without fault. Had they exercised ordinary diligence in their affairs, petitioners could have avoided executing documents in blank. Respondents wrongful act, although the proximate

cause of the injury suffered by petitioners, was mitigated by petitioners own contributo ry negligence. Hence, the 32 award of moral and exemplary damages must be reduced to one-half of the amounts awarded by the trial court. WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV 63965 are REVERSED and SET ASIDE and the Decision of the Regional Trial Court, Branch 258, Paraaque City in Civil Case No. 96-0172 is REINSTATED with a MODIFICATION that the award of moral and exemplary damages is REDUCED to P50,000.00 and P40,000.00, respectively. Costs against respondents. SO ORDERED.

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