OSCAR D. RAMO vs. HON.

COURT OF APPEALS, ADELAIDA RAMOS

G.R. No. 42108 December 29, 1989
FACTS:
Sometime in January 1959, private respondent Adelaide Ramos borrowed from her brother,
petitioner Oscar D. Ramos, the amounts of P 5,000.00 and P 9,000.00 in connection with her
business transaction involving the recovery of a parcel of land. As security for said loan, Adelaida
executed in favor of Oscar (2) deeds of conditional sale of her rights, shares, interests and
participation on several parcels of land.
Upon the failure of said private respondent as vendor a retro to exercise her right of repurchase
within the redemption period, Oscar filed a petition for consolidation and approval of the
conditional sale in a Special Proceedings, which were approved by the court.
Adelaida remained in possession of these properties until sometime in 1964 when
petitioner took possession thereof.
On February 1968, Adelaida filed Civil Case with the then Court of First Instance for declaration
of nullity of orders, reformation of instrument, recovery of possession with preliminary injunction
and damages. The complaints therein alleged that the deeds of conditional sale, are mere
mortgages and were vitiated by misrepresentation, fraud and undue influence and that the
orders issued by the probate and cadastral courts, were null and void for lack of
jurisdiction. Petitioners, specifically deny the allegations of fraud and misrepresentation and
interposed as defense the fact that the questioned conditional sales were voluntarily
executed by private respondent Adelaida Ramos and truly expressed the intention of the
parties; that the action, if any, has long prescribed; that the questioned orders, approving
the consolidation of ownership of the lands in question in favor of petitioner were within
the jurisdiction of the lower court.
In its order dated February 17, 1971, the trial court also declared: "Both parties agreed and
manifested in open court the principal obligation in the transaction reflected is one of loan
secured by a Real Estate Mortgage.
Oscar appealed the decision, the CA affirmed the lower courts decision in toto.
ISSUE: Whether the conditional sale was one of equitable mortgage.
RULING:
Article 1602 of the Civil Code provides:
The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1)
When the price of a sale with right to repurchase is unusually inadequate;
(2)
When the vendor remains in possession as lessee or otherwise;
(3)
When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed;
(4)
When the purchaser retains for himself a part of the purchase price;
(5)
When the vendor binds himself to pay the taxes on the thing sold;
(6)
In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits or other benefit to be received by the vendee as rent
or otherwise shall be considered as interest which shall be subject to the usury laws.

Several undisputed circumstances persuade this Court (that) the questioned deeds should be
construed as equitable mortgages as contemplated in Article 1602 of the Civil Code, namely: (1)
plaintiff vendor remained in possession until 1964 of the properties she allegedly sold in 1959 to
defendants; (2) the sums representing the purchase price were advanced to plaintiff by way of
loans; and (3) the properties purchased by Oscar Ramos and his wife have never been declared
for taxation purposes in their names.
o Even if we indulge the petitioners that they are justified in not taking possession
considering that what were sold to them were only the rights, shares, interests and
participation of Adelaida Ramos. However, such fact will not justify a reversal of the
conclusion that the purported deeds of sale con pacto de retro are equitable
mortgages. Such a conclusion is buttressed by the other circumstances catalogued
especially the undisputed fact that the two deeds were executed by reason of the loan
extended by Oscar Ramos to Adelaida Ramos and that the purchase price stated
therein was the amount of the loan itself.

The above-stated circumstances are more than sufficient to show that the true intention
of the parties is that the transaction shall secure the payment of said debt and, therefore,
shall be presumed to be an equitable mortgage under Paragraph 6 of Article 1602
hereinbefore quoted. Settled is the rule that to create the presumption enunciated by
Article 1602, the existence of one circumstance is enough. 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 the
right of repurchase is an equitable mortgage.

The rule is firmly settled that whenever it is clearly shown that a deed of sale with pacto de retro,
regular on its face, is given as security for a loan, it must be regarded as an equitable mortgage.

As to the Lack of Jurisdiction

o The approval of the probate court of the conditional sale is not a conclusive determination of the
intrinsic or extrinsic validity of the contract but a mere recognition of the right of private respondent
Adelaida Ramos as an heir, to dispose of her rights and interests over her inheritance even before
partition. A reading of the order of the probate court will show that it is merely an approval of the
deed of conditional sale executed by Adelaida Ramos. There is nothing in said order providing for
the consolidation of ownership over the lots allegedly sold to petitioners nor was the issue of the
validity of said contract discussed or resolved therein. "To give approval" means in its essential and
most obvious meaning, to confirm, ratify, sanction or consent to some act or thing done by
another.
o The approval by the probate court of the conditional sale was without prejudice to the filing of
the proper action for consolidation of ownership and/or reformation of instrument in the proper
court within the statutory period of prescription.
o Article 1607 of the Civil Code provided for consolidation as follows: In case of real property, the
consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the
provisions of article 1616 shall not be recorded in the Registry of Property without a judicial
order, after the vendor has been duly heard.
On the issue of prescription,
o The present case, having been filed on February 28, 1960, approximately seven (7) years from
the execution of the questioned deeds, was seasonably instituted. The prescriptive period for
actions based upon a written contract and for reformation is ten (10) years under Article 1144
of the Civil Code. Such right to reformation is expressly recognized in Article 1365 of the same
code.

Aurora P. De Leon vs. Hon. Serafin Salavador

G.R. No. L-30871. December 28, 1970
FACTS:
o A judgment for P35,000.00-actual was obtained by Enrique de Leon against respondent Bernabe
in a Civil Case, a writ of execution was issued by said court. The city sheriff, levied on execution
on two parcels of land registered in the names of Bernabe. At the execution sale, the city
sheriff sold the said properties to herein petitioner, Aurora (sister of the judgment creditor) as
the highest bidder for the total sum of P30,194.00, (the property then being subject to an
existing mortgage lien in the amount of P120,000.00). The sheriff executed the corresponding
certificate of sale in her favor, which was duly with register of deeds.
o Two weeks before the expiration of the one-year period to redeem, the judgment debtor
Bernabe filed a separate civil action against his judgment creditor Enrique de Leon, petitioner
Aurora P. de Leon as purchaser and the sheriff as defendants for the setting aside or
annulment of the execution sale "for being anomalous and irregular," and for the ordering of a
new auction sale. This second case, instead of being referred to Judge Cruz presiding who
issued the writ of execution, was assigned to Judge Serafin Salvador, who issued on February
19, 1968 a writ of preliminary injunction enjoining therein defendants, particularly the sheriff
to desist "from taking further proceedings against the properties of the plaintiff [Bernabe]
that were sold at public auction, and from issuing a sheriff's deed of sale at the expiration of
the period of redemption in favor of Aurora P. de Leon." Aurora moved to dissolve the
injunction and to dismiss this second case on the grounds of laches and lack of jurisdiction of
Judge Salvador's court to interfere with the execution proceedings pending in the first case
before Judge Cruz' court which is of equal and co-ordinate jurisdiction, but Judge Salvador
denied the same for not being indubitable and tried the case.
o Judge Salvador issued an order to allow Bernabe to redeem the properties sold at public
auction more than two years ago. On the following day, Bernabe deposited with the sheriff the
sum of P33,817.28 as the redemption price, who issued a certificate of redemption. Bernabe
then registered said certificate on the following day with the register of deeds, who in turn
cancelled the entry of the execution sale in favor of Aurora.
o Aurora's motion to set aside the order and certificate and registration of mortgage for lack of
jurisdiction was denied by Judge Salvador.
o Aurora also filed in the first case before Judge Cruz for consolidation of title and to order the
sheriff to issue in her favor a final deed of sale over the subject parcels of land. Judge Cruz
granted Aurora's motion over Bernabe's opposition that he had redeemed the said properties
by virtue of Judge Salvador's order in the second case and ordering Bernabe to surrender his
owner's duplicates of title for transfer to Aurora.
ISSUE: Whether the purchase price was grossly inadequate and sufficient to avoid the sale.
RULING: "However, while in ordinary sales for reasons of equity a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts
to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is
made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect
the redemption. And so it was aptly said: 'When there is the right to redeem, inadequacy of price should
not be material, because the judgment debtor may reacquire the property or also sell his right to
redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the
auction sale.

ALFONSO FLORES vs. JOHNSON SO

G.R. No. L-28527
June 16, 1988
FACTS:
o Johnson So filed an action for specific performance against Alfonso Flores to effect the
redemption of a parcel of land which was alleged to have been ostensibly sold to the latter by
Valentin Gallano, with right of repurchase within (4) years from the date of the sale. Valentin
Gallano sold in an absolute manner the same land to Johnson So. On the allegation that the
Pacto de Retro Sale did not embody the real intent of the agreement, that the transaction is a
mere mortgage to secure a loan, Johnson So prayed that the court declare the said Pacto de
Retro Sale as a mere equitable mortgage and order Alfonso Flores receive the sum of P2,550.00
deposited with the court and to consider the land in question redeemed from the latter for all
legal purposes.
o The lower court ruled that, on the issue of the nature of the contract in question, it is a contract
of sale of a parcel of land with the reservation in favor of the vendor a retro of the right to
repurchase it within a period of four (4) years from execution thereof, that the execution of
the affidavit of consolidation of ownership and its subsequent did not make his ownership
over the land absolute and indefeasible because of non-compliance with Articles 1606 and
1607 of the New Civil Code, which require a judicial order for consolidation of the title of
vendee a retro; and that the right of redemption belonging to Valentin Gallano was, ipso facto,
acquired by Johnson So when he brought the land in question.
ISSUE: Whether the execution of the affidavit of consolidation of ownership by Alfonso Flores and
its subsequent registration in the Office of the Register of Deeds of Sorsogon made his ownership
over the land in question absolute and indefeasible.
RULING:
o The pacto de retro sale between Gallano and Flores was executed when the Civil Code of
Spain was still in effect. It is provided in Article 1509 thereof that if the vendor does not
comply with the provisions of Article 1518, (i.e. to return the price, plus expenses) the
vendee shall acquire irrevocably the ownership of the thing sold.
o Under the old Civil Code, the ownership was consolidated in the vendee a retro by
operation of law. Accordingly, upon the failure of Valentin Gallano, as the vendor a retro,
to redeem the property subject of the pacto de retro sale within the period agreed upon,
the vendee a retro, Alfonso Flores, became the absolute owner of the subject property.
o This right of ownership which had already vested in Alfonso Flores way back in 1954 upon
Gallano's failure to redeem within the stipulated period cannot be defeated by the
application of Articles 1606 and 1607 of the New Civil Code which requires registration of
the consolidation of ownership in the vendee a retro only by judicial order.
o Article 2252 on Transitional Provisions in the New Civil Code provides that: Changes
made and new provisions and rules laid down by this Code which may prejudice or impair
vested or acquired rights in accordance with the old legislation shall have no retroactive
effect ...
The trial court, therefore, erred in allowing redemption of the subject property by plaintiffappellee, Johnson So. Valentin Gallano was no longer the owner of the same at the time of sale to
Johnson So, thus, no right whatsoever was transmitted to the latter, except the right to redeem
the property. Ownership over the subject property had long vested upon the defendant appellant
Alfonso Flores.

CARLOS ALONZO and CASIMIRA ALONZO vs. INTERMEDIATE APPELLATE COURT

G.R. No. 72873
May 28, 1987
FACTS:
o Five brothers and sisters inherited in equal pro indiviso a parcel of land. On March 1963, one
of them, Celestino Padua, transferred his undivided share of the herein petitioners for the
sum of P550.00 by way of absolute sale. One year later 1964, Eustaquia Padua, his sister,
sold her own share to the same vendees, in an instrument denominated "Con Pacto de
Retro Sale ".
o The petitioners occupied an area corresponding to two-fifths of the said lot, representing
the portions sold to them. The vendees subsequently enclosed the same with a fence.
o Tecla Padua, another co-heir, filed her own complaint invoking the same right of
redemption claimed by her brother.
o The trial court also dismissed this complaint, now on the ground that the right had lapsed,
not having been exercised within thirty days from notice of the sales in 1963 and 1964.
Although there was no written notice, it was held that actual knowledge of the sales by
the co-heirs satisfied the requirement of the law.
o Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by
reimbursing him for the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the vendor.
ISSUE: Was there a valid notice? Granting that the law requires the notice to be written, would such
notice be necessary in this case? Assuming there was a valid notice although it was not in writing.
would there be any question that the 30-day period for redemption had expired long before the
complaint was filed in 1977?
RULING:
o In the face of the established facts, we cannot accept the private respondents' pretense that
they were unaware of the sales made by their brother and sister in 1963 and 1964. By
requiring written proof of such notice, we would be closing our eyes to the obvious truth in
favor of their palpably false claim of ignorance, thus exalting the letter of the law over its
purpose. The purpose is clear enough: to make sure that the redemptioners are duly notified.
We are satisfied that in this case the other brothers and sisters were actually informed,
although not in writing, of the sales made in 1963 and 1964, and that such notice was
sufficient.
o While we do not here declare that this period started from the dates of such sales in 1963 and
1964, we do say that sometime between those years and 1976, when the first complaint for
redemption was filed, the other co-heirs were actually informed of the sale and that
thereafter the 30-day period started running and ultimately expired. This could have happened
any time during the interval of thirteen years, when none of the co-heirs made a move to
redeem the properties sold. By 1977, in other words, when Tecla Padua filed her complaint, the
right of redemption had already been extinguished because the period for its exercise had
already expired. While the general rule is, that to charge a party with laches in the assertion of
an alleged right it is essential that he should have knowledge of the facts upon which he bases
his claim, yet if the circumstances were such as should have induced inquiry, and the means of
ascertaining the truth were readily available upon inquiry, but the party neglects to make it,
he will be chargeable with laches, the same as if he had known the facts.

MANUEL LAO vs. COURT OF APPEALS and BETTER HOMES REALTY

G.R. No. 115307 July 8, 1997

FACTS:
o On June 24, 1992, (herein Private Respondent Better Homes Realty and Housing Corporation)
filed with the MTC, a complaint for unlawful detainer, on the ground that (said private
respondent) is the owner of the premises that (herein Petitioner Manuel Lao) occupied the
property without rent, but on (private respondent's) pure liberality with the understanding
that he would vacate the property upon demand, but despite demand to vacate made by
letter received the (herein petitioner) refused to vacate the premises.
o Herein petitioner claimed that he is the true owner of the house and lot that the respondent
purchased the same from N. Domingo Realty but the agreement was actually a loan secured
by mortgage; and that plaintiff's cause of action is for accion publiciana, outside the jurisdiction
of an inferior court.
o Metropolitan Trial Court rendered judgment ordering the petitioner to vacate the premises; to
pay (Better Homes) reasonable rent for the use and occupation of the premises.
o On appeal to the Regional Trial Court rendered a decision reversing that of the Metropolitan
Trial Court, and ordering the dismissal of the (Better Homes) complaint for lack of merit. The
Regional Trial Court held that the subject property was acquired by (Better Homes) from N.
Domingo Realty, by a deed of sale, and (Better Homes) is now the registered owner under the
Registry of Deeds, but in truth the (Lao) is the beneficial owner of the property because the
real transaction over the subject property was not a sale but a loan secured by a mortgage
thereon.
ISSUE: Absolute Sale or Equitable Mortgage?
RULING:
o A conveyance in the form of a contract of sale with pacto de retro will be treated as a mere
mortgage, if really executed as security for a debt, and that this fact can be shown by oral
evidence apart from the instrument of conveyance. To the effect that any conveyance
intended as security for a debt will be held in effect to be a mortgage, whether so actually
expressed in the instrument or not, operates regardless of the form of the agreement
chosen by the contracting parties as the repository of their will.
o The agreement between Better Homes and N. Domingo Realty, as represented by Lao,
manifestly one of equitable mortgage. First, possession of the property remained with
Manuel Lao who was the beneficial owner of the property, before, during and after the
alleged sale. It is settled that a "pacto de retro sale should be treated as a mortgage where
the (property) sold never left the possession of the vendors." Second, the option given to
Manuel Lao to purchase the property had been extended twice through documents
executed by Better Homes. The wording of the first extension is a refreshing revelation that
indeed the parties really intended to be bound by a loan with mortgage, not by a pacto de
retro. These extensions clearly represent the extension of time to pay the loan given to
Manuel Lao upon his failure to pay said loan on its maturity.

RODOLFO LANUZA vs. MARTIN DE LEON

G.R. No. L-22331
June 6, 1967
FACTS:
o Rodolfo Lanuza and his wife Belen were the owners of a two-story house which the spouses
leased from the Consolidated Asiatic Co. Lanuza executed a document entitled "Deed of Sale
with Right to Repurchase" whereby he conveyed to Maria Bautista Vda. de Reyes and Aurelia R.
Navarro the house, together with the leasehold rights to the lot, a television set and a
refrigerator in consideration of the sum of P3,000.
o When the original period of redemption expired, the parties extended it by an annotation to
this effect. Lanuza's wife, who did not sign the deed, this time signed her name below the
annotation.
o It appears that after the execution of this instrument, Lanuza and his wife mortgaged
the same house in favor of Martin de Leon to secure the payment of a loan within one
year. This mortgage was executed and recorded in the Office of the Register of Deeds.
o As the Lanuzas failed to pay their obligation, De Leon filed in the sheriff's office a
petition for the extra-judicial foreclosure of the mortgage. On the other hand, Reyes and
Navarro followed suit by filing in the Court of First Instance of Manila a petition for the
consolidation of ownership of the house on the ground that the period of redemption
expired without the vendees exercising their right of repurchase. The petition for
consolidation of ownership was filed.
o The house was sold to De Leon as the only bidder at the sheriffs sale. De Leon
immediately took possession of the house secured a discharge of the mortgage on the
house in favor of a rural bank. He intervened in court and asked for the dismissal of the
petition filed by Reyes and Navarro on the ground that the unrecorded pacto de
retro sale could not affect his rights as a third party.
ISSUE: Is it a Sale or an Equitable Mortgage?
RULING:
These are circumstances which indeed indicate an equitable mortgage.4 But their relevance
emerges only when they are seen in the perspective of other circumstances which indubitably show
that what was intended was a mortgage and not a sale.These circumstances are:
1. The gross inadequacy of the price.The fact has not been mentioned that for the price of
P3,000, the supposed vendors "sold" their house which had an assessed value of P4,000, but also
their leasehold right television set and refrigerator, indeed, the petition for consolidation of ownership
is limited to the house and the leasehold right, while the stipulation of facts of the parties merely
referred to the object of the sale as "the property in question." The failure to highlight this point,
that is, the gross inadequacy of the price paid, accounts for the error in determining the true
agreement of the parties to the deed.
2. The non-transmission of ownership to the vendees. The Lanuzas did not really transfer
their ownership of the properties to Reyes and Navarro. What was agreed was that ownership
of the things supposedly sold would vest in the vendees only if the vendors failed to pay
P3,000. In fact the emphasis is on the vendors payment of the amount rather than on the redemption
of the things supposedly sold. This stipulation is contrary to the nature of a true pacto de retro
sale under which a vendee acquires ownership of the thing sold immediately upon execution
of the sale, subject only to the vendor's right of redemption.
3. The delay in the filing of the petition for consolidation. The fact that the period of
redemption expired on July 12, 1961 and yet this action was not brought until October 19,
1962 and only after De Leon had asked on October 5, 1962 for the extra-judicial for closure of
his mortgage.