Ceballos vs.

Intestate of the Late Emigdio Mercado

GR No. 155856
May 28, 2004

FACTS:

The petitioner Leonatdo Ceballos insists that the transaction engaged in with the
late Emigdio Mercado is one of an equitable mortgage. The plaintiff claims that Emigdio
Mercado registered the necessary documents late. The petitioner also claims that the
validity of the sale is not as reliable as written or document evidence. He failed to
present clear and convincing evidence to overcome the presumption of validity of the
notarized Deed conveying the land to private respondents.

Sometime in 1991, the petitioner started to gather documentations that could
serve as her evidence to the court against respondents. After finding the Deed of
Absolute Sale with Pacto De Retro, the document turned out not to have been
submitted by the deceased for notarization. Petitioner submitted said deed of sale to
disinterested parties to confirm its being fake, she sought the assistance of the
Philippine National Police (PNP). The plaintiff further claimed that the said document of
sale is a forgery and hence, it is patent that the transfer of title on the property was
done through fraud.

The respondents answered against the counterclaim that what was written in the
Deed of Real Estate Mortgage Sale was true and that the Pacto De Retro were not
pushed through because the petitioner decided to sell the property to the deceased. In
addition the plaintiff already has knowledge that she had sold the property to the late
Mr. Mercado and that she was already the one who delivered to him the Deed of
Absolute Sale signed by her and her husband which was also notarized by the public
notary and since that time respondents have been in possession of said property and
were the ones who have been paying the taxes.

ISSUES:

One of the issues in the case whether or not the transaction is one of equitable
mortgage or not. Concededly, the original transaction was a loan.

DECISION:

Petitioner failed to pay the loan; consequently, the parties entered into another
agreement. In addition to that, the new agreement did not embody the true intention
of the parties which is one of the characteristics of an equitable mortgage.

The award of moral damages, attorneys fees and costs of suit finds no support,
in law, and in prevailing jurisprudence. The petitioner does not impute authorship of the
alleged forgery to the deceased Emigdio Mercado. Hence, the courts a quo erred in
awarding moral damages. For some reasons, the said expenses cannot be sustained.
The petition was partly granted and the judgment was affirmed with modification.

LAW:

A contract, regardless of its nomenclature may be presumed to be equitable
mortgage were enumerated in Article 1602 of the Civil Code. Article 1606 of the Civil
Code which is about the vendor may not exercise his right to repurchase in a sale
judicially declared as a pacto de retro was also covered by this case.