Madrigal v. CA (GR No.

142944)
Petitioner: Edenbert Madrigal and Virgilio Mallari
Respondent: Court of Appeals and Jose Mallari
Date: Aprile 15, 2005

Summary: Spouses Jose and Fermina Mallari owned a 340sqm lot with a 2-storey house in Olongapo. When Jose
was in need of money for Fermina’s trip to the US, he wanted to mortgage the property but their son, Virgilio,
convinced him not to and persuaded him to assign a portion to Virgilio with some conditions like allowing them to stay
there, renovating a room for the mother, getting one room for Virgilio, and to ask for Jose’s permission before
disposing it. The consideration stated in the Deed, however, was only P50k. Thereafter, unknown to Jose, Virgilio
sold the lot to Madrigal for P50k, who demanded that Jose and company vacate the same. So Jose filed a case
against both of them. TC and CA ruled for Jose. Issue relevant to Evidence: WoN the TC and CA erred in taking
into account parol evidence presented by Jose to prove the existence of an equitable mortgage instead of a sale
between him and Virgilio –NO H: As held in Lustan v. CA: Even when a document appears on its face to be a sale,
the owner of the property may prove that the contract is really a loan with mortgage by raising an issue the fact that
the document does not express the true intent of the parties. In this case, parol evidence then becomes competent
and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a
loan.

Facts:
1. Jose Mallari and his wife Fermina Mallari are the owners of a 340 sqm. residential lot with a 2-storey
residential house at Olongapo City. They had 10 children, 5 of whom are staying with them and the other 5
residing abroad or elsewhere.
2. In need of money for his wife’s planned travel to the US, Jose thought of mortgaging the property with a
bank. However, his son Virgilio residing in Bulacan, convinced him not to and to instead assign to him a
portion, assuring his father that the latter could continue in occupancy and that he will allow his sister
Elizabeth who operates a store thereat to continue. Virgilio told his father, however, that he will occupy one
of the rooms in case he goes to Olongapo and that he will renovate the other room and reserve it for his
mother. Virgilio assured his father that he will not dispose of the property without his father’s consent and
that he could redeem the property any time.
3. Jose and Fermina executed a document denominated as “Deed of Absolute Sale,” where the couple
appeared to have conveyed to Virgilio the house and lot for P50k although the property commands much
more. Worse, the deed described the properties sold as a one-storey residential house and the 135 sqm. lot.
4. Without Jose’s knowledge, Virgilio, via a document entitled “Kasulatan ng Bilihang Tuluyan,” sold the same
property for P50k to Edenbert Madrigal, a longtime neighbor of the Mallaris. Thereafter, Jose was demanded
by Madrigal to vacate the property.
5. In the RTC of Olongapo, Jose filed against Virgilio and Madrigal the complaint for annulment, redemption
and damages with preliminary injunction/TRO. He prayed that the Deed of Absolute Sale executed by him
and Fermina be declared null and void, or, in the alternative, that he be allowed to redeem the property. He
likewise prayed for a writ of preliminary injunction and/or a TRO enjoining Virgilio and Madrigal from
entering, demolishing or introducing improvements on the properties, plus damages and attorney’s fees.
6. TC: rendered judgment for Jose by ordering Madrigal to allow Jose to redeem the property based on the
amount it was sold to him and for the 2 to pay damages and attorney’s fees. CA: affirmed en toto.

Issue:
1. WoN the Deed of Sale is a Mortgage and WoN Madrigal was a buyer in GF – YES MORTGAGE and NO BF
2. WoN there should be an award of moral, exemplary, and attorney’s fees - YES

Held: WHEREFORE, the instant petition is hereby DENIED and the assailed decision and resolution of the CA
AFFIRMED.

The Deed of Sale was an Equitable Mortgage

1. Both courts correctly construed the Deed of Absolute Sale as an equitable mortgage and not a sale. As
pointed out by the CA, evidence clearly shows that there was no intent to sell the property. Rather, what
transpired was only a mortgage involving P50k over a portion of a lot. In dire need of money, coupled with
the fact that the one who offered to help was his son who agreed to all the conditions, Jose signed a
document, a Deed of Sale, although the agreement was only a mortgage. The consideration appearing in
the Deed of Sale is grossly inadequate considering the location of the property, the area and the fact that it
was a 2-storey house.

Parol Evidence [MAIN]

 1. Virgilio and Jose fault the TC for receiving parol evidence to establish the instrument in question is actually
one of equitable mortgage. Indirectly, they also put the CA to task for giving weight to those evidence
instead of rejecting them, conformably with the Parol Evidence Rule under Sec. 9, Rule 130.
2. We cannot view the Deed of Absolute Sale in question in isolation of the circumstances under which the
same was executed by Virgilio’s parents, more so in the light of his father’s disavowal of what the document,
on its face, purports to state.
3. Also, Lustan v. CA: even if the document appears to be a sale, parol evidence may be resorted to if the
same does not express the true intent of the parties.
a. “Even when a document appears on its face to be a sale, the owner of the property may prove that
the contract is really a loan with mortgage by raising an issue the fact that the document does not
express the true intent of the parties. In this case, parol evidence then becomes competent and
admissible to prove that the instrument was in truth and in fact given merely as a security for the
repayment of a loan.”

SC is not a trier of facts, bitchez

1. At bottom of petitioner’s submission is their inability to accept the factual finding of the 2 courts below that
the transaction between Virgilio and his parents is in reality an equitable mortgage. In short, petitioners
would want us to revisit the factual findings of both courts, scrutinize and examine those findings anew and
calibrate the validity of their conclusions on the basis of our own factual assessment. But the desired task
cannot be done. Time and again, we have made it clear that this Court is not a trier of facts, and that in a
petition for review under Rule 45, only questions of law may be raised in this Court.
2. We do acknowledge that the rule is not cast in stone. For sure it admits exceptions.1 Unfortunately, however,
we have made a close hard look into this case and found none of the exceptions.
3. Nor are we inclined to disturb the findings of the two (2) courts below that Madrigal is not buyer in good faith.
Again, a reversal of such finding would impose upon us a reevaluation of the same set of facts appreciated
by said courts in arriving at their common conclusion that Madrigal is not a buyer in good faith. At any rate,
we nonetheless took the pains of reviewing the factors taken into account by both courts and found no
reason to disagree with their rejection.
4. With the view we take of this case, petitioners’ lament against the award of moral and exemplary damages
and attorney’s fees in favor of Jose, based as their lament is on their contention that respondent has no
cause of action against them, must simply fall.

1
(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the TC; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in
the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.