Petitioner's ArgumentsCando avers that despite the waiver of her right to adduce her evidence before the RTC, Spouses Solis still failed to prove the elements of an equitable mortgage.
39 Cando submits the following:
First, Spouses Solis did not impugn the validity of the deed of mortgage dated February 27, 2012.
40Second, Spouses Solis did not deny that after they failed to pay the loan covered by the mortgage, they executed and signed the deed of sale dated October 29, 2012 in her favor.
41Third, the RTC's finding that there was no
pactum commissorium to speak of was not questioned before the CA and had attained finality insofar as the issue is concerned.
42Fourth, the CA committed an error when it concluded that the deed of sale was intended to guarantee an existing debt by way of mortgage because the debt was already secured by a deed of mortgage. To issue a second document denominated as a deed of sale in order to secure anew the same existing debt did not make sense.
[43]
Fifth, the deed of mortgage was more than enough to secure the previously existing debt.
44Sixth, had the intent been confined to mortgage, she could have simply foreclosed the property.
45Seventh, the deed of mortgage states, among others, that the "
MORTGAGEE [may] enforce her rights herein without judicial proceedings and the MORTGAGEE has the right [to] transfer the ownership of the subject property in her favor without any legal intervention of herein MORTGAGOR." Thus, the parties agreed that she need not go through the process of foreclosure, judicial or extrajudicial.
46Eighth, the only legal way to transfer ownership of the subject properties was for Spouses Solis to execute a deed of sale in her favor, which they did.
47And
ninth, based on the tax declarations of the subject properties, their total market value at the time of the mortgage was only P4,023,230.00; thus, Spouses Solis received more than triple the amount than the properties' declared market value.
48Further, Cando maintains that Spouses Solis tried to mislead the RTC when they did not mention both in their complaint and amended complaint that they executed a deed of sale in her favor covering the subject properties.
49 Also, she avers that the allegation that the properties remained in possession of Spouses Solis until their caretaker was evicted therefrom was not supported by any evidence; the caretaker was not even presented as a witness and the deed of mortgage clearly states that possession thereof was already delivered to her.
50Respondents' Counter-ArgumentsIn their Comment,
51 respondents counter that the CA correctly affirmed the RTC's Order dated June 27, 2016 which allowed them to present their evidence
ex parte considering that Cando and her counsel repeatedly failed to appear and caused postponements during the pre-trial of the case.
52 They argue that the RTC had given Cando more than adequate leniency and enough chances to attend the pre-trial that she cannot argue that she was not accorded due process; her predicament is entirely due to her own fault.
53Respondents also contend that the CA did not err when it upheld the RTC in ordering the annulment of the deed of sale dated October 29, 2012 due to the lack of consent from Spouses Solis. They assert that Spouses Solis never intended to sell their lots as they were merely asked to sign the deed of sale based on Cando's false representation that it was simply a formality or accommodation in support of her loan. Had they intended to sell the subject properties, Spouses Solis would have asked for an adjustment in the price and a much higher consideration.
54Moreover, respondents stress that Cando had misrepresented that the deed of sale was notarized by one Atty. Jesus P. Calades, Jr. They point out that no record exists as regards the alleged notarization per Certification from the Office of the Clerk of Court of Quezon City. More importantly, they aver that during the date of the alleged execution of the deed of sale, Spouses Solis were in Bulan, Sorsogon where Jose eventually died.
55The IssueThe main issue in the case is whether the agreement between Spouses Solis and Cando is one of equitable mortgage that warrants the annulment of the deed of sale they supposedly entered into.
The Courts RulingThe petition is without merit.
In
Meralco Industrial Engineering Services Corp. v. National Labor Relations Commission,
56 the Court explained that the scope of its review in Rule 45 proceedings is ordinarily limited to resolving only legal, not factual issues,
viz.:
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of support from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts. x x x.
57A judicious perusal of the petition shows that Cando raises in the main a question of fact,
i.e., whether the agreement between the parties is an equitable mortgage, which requires the Court to review the evidence in the case. As earlier stated, however, questions of fact are generally not subject to review in a petition under Rule 45. While this rule admits of exceptions,
58 none of them exists in the case. Thus, the Court finds no coAgent reason to depart from the findings of fact and conclusions of law of the CA, more so when these are supported by the evidence on record.
59"An equitable mortgage is defined as one which, although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law."
60 The intention of the parties to an agreement is determined not only by the terminology used in the document but also by all the surrounding circumstances that would show the real nature of their understanding.
61Corollarily, Article 1602 of the New Civil Code provides that a contract shall be presumed as an equitable mortgage in any of the instances enumerated therein:
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; |
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(2) | When the vendor remains in possession as lessee or otherwise; |
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(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; |
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(4) | When the purchaser retains for himself a part of the purchase price; |
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(5) | When the vendor binds himself to pay the taxes on the thing sold; |
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(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."For the presumption of an equitable mortgage to arise under Article 1602, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale; and (b) that their intention was to secure an existing debt by way of a mortgage."
62 Moreover, the existence of
any of the circumstances stated under Article 1602 is sufficient for a contract of sale to be presumed as an equitable mortgage.
63Applying the foregoing, the CA correctly affirmed the ruling of the RTC that an equitable mortgage existed in the case. Thus, the annulment of the deed of sale is warranted.
It is undisputed that on February 27, 2012, Spouses Solis borrowed P15,000,000.00 from Cando which was guaranteed by a deed of mortgage covering the subject properties. In the document, Spouses Solis, as mortgagors, undertook to pay their indebtedness to Cando, as mortgagee, within a period of six months with interest at five percent (5%) per month.
64 It is also a fact that Spouses Solis executed the deed of sale dated October 29, 2012 wherein they sold the subject properties to Cando for the same amount of P15,000,000.00.
65Cando submits that the principle of equitable mortgage only applies when the parties enter into a contract of sale while their real intent is to secure an existing debt by way of mortgage. However, in the case, she posits that the parties
first executed a deed of mortgage which was their real intent, but they eventually executed a deed of sale when Spouses Solis could no longer redeem the subject properties
66 in order to obviate the rigors of judicial proceedings for the transfer of titles under her name.
67 Otherwise stated, Cando wants the Court to disregard the deed of mortgage and consider it to have been superseded by the deed of sale of the subject properties.
The Court is not persuaded.
The requisites for the presumption of an equitable mortgage to arise under Article 1602 are present in the case: (a) Spouses Solis and Cando entered into a contract of sale dated October 29, 2012 and (b) the circumstances show that they executed the contract to guarantee the loan amounting to P15,000,000.00. Verily, the facts and evidence in the case show that
the true intent of the parties was to secure the payment of the loan and not to transfer the ownership of the subject properties in favor of Cando. In particular, the presence of the following badges of equitable mortgage cannot be ignored:
First, there was an
existing loan obtained by Spouses Solis from Cando amounting to P15,000,000.00 which was guaranteed by a deed of mortgage covering the subject properties. This circumstance alone proves that the transaction between the parties is a contract of loan and not a
bona fide sale.
Second, as the lower courts found, the stated purchase price of P15,000,000.00 was inadequate as compared to the actual market value of the subject properties at P60,000,000.00.
68Third, Spouses Solis continued their possession of the subject properties even after the supposed sale thereof on October 29, 2012. In fact, Cando's counsel sent them a demand letter on February 19, 2013 demanding them to vacate the house and lotaa circumstance that is inconsistent with a contract of sale voluntarily entered into between the parties. Had they intended to enter into a sale, there would have been no need to repeatedly demand from the supposed sellers to vacate the properties subject thereof.
Fourth and last, Flocerfida was able to sufficiently explain why she and her husband signed the deed of sale. She testified that during the course of their transaction, Cando requested them to sign the deed of sale and told them that it would only be used in the bank to obtain the amount for their loan. In other words, they only executed the deed of sale to show the bank that there was a transaction between the parties;
69 there was no real intent on their part to sell the subject properties.
The presence of the foregoing badges thus creates a strong presumption of the existence of an equitable mortgage in the case. Considering further that the presumptions remained uncontroverted as the proceedings in the RTC were held
ex parte, the Court finds that the deed of sale entered into by the parties is indeed an equitable mortgage. Consequently, the deed of sale being null and void, the deed of mortgage entered into between the parties on February 27, 2012 stands.
All told, the Court finds that the CA correctly affirmed the decision of the RTC declaring the sale between Spouses Solis and Cando as null and void, and the transaction of the parties as a deed of mortgage.
WHEREFORE, the petition is DENIED. The Decision dated January 29, 2020 of the Court of Appeals in CA-G.R. CV No. 111032 is AFFIRMED.
SO ORDERED.
Caguioa (Chairperson), Gaerlan, J. Lopez,
**** and
Singh, JJ., concur.
* Referred to as "Florcefida" and "Florcerfida" in some parts of the
rollo.
Referred to as "Michell" in some parts of the
rollo.
* Spouses Jose Gulaya Solis and Florcefida De Guzman Solis were named as respondents on the first page of the petition,
rollo, p. 27.
**** Per raffle dated February 21, 2023.
1 Rollo, pp. 27-40.
2 Id. at 10-21. Penned by Associate Myra V. Garcia-Fernandez and concurred in by Associate Justices Japar B. Dimaampao (now a Member of the Court) and Perpetua Susana T. Atal-PaAo.
3 Id. at 46-56. Penned by Prc iding Judge Marilou D. Runes-Tamang.
4 In the caption of the RTC Decision Jose Guyala Solis was already substituted by his legal heirs, namely, Flocerfida de Guzman Solis, and Joanne and Michelle Solis,
id. at 46, 49.
5 Id. at 46, 55.
6 Id. at 74-75.
7 Id. at 76-77.
8 Id. at 46.
9 Id. at 78-80.
10 Id. at 46.
11 Id. at 81.
12 Id.13 Id. at 46.
14 Id. at 79.
15 Id. at 46-47.
16 Id. at 47.
17 Id.18 Id. at 86-87.
19 Id. at 47.
20 Id.21 Id. at 47-48.
22 Id. at 48.
23 Id.24 Id. at 65-66.
25 Id. at 49.
26 Id. at 46-56.
27 Id. at 55-56.
28 Id. at 51-52.
29 Id. at 53.
30 Entitled "An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages," approved on March 6, 1924.
31 Rollo, p. 54.
32 Id. at 55.
33 Id. at 57-61.
34 Id. at 10-21.
35 Id. at 20.
36 Id. at 19.
37 Id. at 20.
38 Id. at 27-40.
39 Id. at 35.
40 Id.41 Id.42 Id.43 Id.44 Id.45 Id.46 Id. at 36.
47 Id.48 Id.49 Id. at 37.
50 Id. at 38.
51 See Respondents Comment and Opposition,
id. at 151-166.
52 Id. at 155-156.
53 Id. at 156-157.
54 Id. at 157.
55 Id. at 157-158.
56 572 Phil. 94 (2008).
57 Id. at 117.
58 As provided in Twin Towers Condominium Corp. v. Court of Appeals, 446 Phil. 280, 310 (2003), citing Fuentes v. CA, 335 Phil. 1163, 1168-1169 (1997), the following are the exceptions: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its finding, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and, (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.
59 See CIR v. Embroidery and Garments Industries (Phil.), Inc., 364 Phil. 541, 546 (1999). Citations omitted.
60 Molina v. Court of Appeals, 446 Phil. 133, 141 (2003) Emphasis in the original.
61 Id.62 Sps. Reyes v. Court of Appeals, 393 Phil. 479, 490 (2000).
63 Id.64 Rollo, pp. 33, 46, and 78-80.
65 Id. at 33, 47-48, and 86-87.
66 Id. at 169.
67 Id. at 33.
68 Id. at 51-52.
69 Id. at 49.