Case Digest (G.R. No. L-36821)
Facts:
In Jose P. Dizon v. Alfredo G. Gaborro et al. (G.R. No. L-36821, June 22, 1978), petitioner Jose P. Dizon owned three agricultural parcels in Mabalacat, Pampanga (TCT No. 15679) subject to a first mortgage of ₱38,000 with the Development Bank of the Philippines (DBP) and a second mortgage of ₱93,831.91 with the Philippine National Bank (PNB). Upon default, DBP extrajudicially foreclosed under Act 3135 (as amended by Act 4118) and purchased the lands on May 26, 1959. Dizon retained only the one-year right of redemption. On October 6, 1959, Dizon and Alfredo G. Gaborro executed two instruments: a “Deed of Sale with Assumption of Mortgage,” by which Gaborro ostensibly purchased the parcels for ₱131,831.91 (in truth merely the aggregate mortgage debts) and assumed payment to DBP and PNB; and an “Option to Purchase Real Estate,” granting Dizon an option to repurchase within five years upon refunding Gaborro’s payments plus 8% interest. Gaborro took possession, made improvements, paidCase Digest (G.R. No. L-36821)
Facts:
- Title, Mortgages, and Foreclosure
- Jose P. Dizon owned three parcels in Mabalacat, Pampanga (TCT No. 15679; total ±1,305, in hectares).
- He secured a first mortgage with Development Bank of the Philippines (DBP) for ₱38,000.00 and a second mortgage with Philippine National Bank (PNB) for ₱93,831.91.
- Dizon defaulted; DBP extrajudicially foreclosed under Act No. 3135 on May 26, 1959. The three parcels sold to DBP for ₱31,459.21 (Certificate of Sale) and recorded in DBP’s name under TCT No. 24292 (Oct. 6, 1960).
- Contracts between Dizon and Gaborro (Oct. 6, 1959)
- Deed of Sale with Assumption of Mortgage (Exh. A):
- Purported absolute sale for ₱131,831.91 (sum of DBP and PNB debts), “paid in cash,” with purchaser to assume both mortgages.
- No actual cash changed hands; Dizon transferred only his right to redeem and possess during the redemption period.
- Option to Purchase Real Estate (Exh. B):
- Gave Dizon the option to repurchase the parcels for ₱131,831.91 plus 8% p.a., valid Jan. 1965–Dec. 31, 1970.
- Required Dizon to reimburse amounts paid on the mortgages before full reconveyance.
- Post-Contract Transactions
- Gaborro took possession on Oct. 7, 1959; wrote DBP to assume its mortgage; DBP conditioned acceptance on 20% down.
- July 11, 1960: DBP and Gaborro executed a conditional sale (₱36,090.95 down; balance in 10 annual amortizations at 8% p.a.).
- Jan. 7, 1960: Dizon assigned his right of redemption and mortgage assumption to Gaborro (Exh. D).
- Gaborro paid both banks (principal and some interest), cultivated lands, appropriated fruits, and paid land taxes.
- Judicial Proceedings
- July 30, 1962: Dizon sued in CFI Pampanga for reformation, reimbursement, reconveyance, accounting of fruits, and damages.
- DBP and Gaborro denied material allegations; DBP asserted Dizon’s only right was redemption under Act 3135.
- Pre-trial stipulation of facts admitted: mortgages, foreclosure, conditional sale, payments, possession, cultivation, appropriation of fruits.
- Mar. 14, 1970: CFI reformed both instruments into equitable mortgage/antichresis; denied other reliefs.
- June 22, 1978: CA affirmed with modification—Dizon may refund ₱131,831.91 + 8% p.a. from Oct. 6, 1959, within one year or lose rights; costs against Dizon.
- Supreme Court review on certiorari ensued.
Issues:
- Do the “Deed of Sale with Assumption of Mortgage” and “Option to Purchase Real Estate” constitute an absolute sale of the parcels or rather an equitable mortgage/security?
- Does the “Assignment of Right of Redemption and Assumption of Obligation” prove an absolute sale or merely confirm the equitable mortgage?
- Is Gaborro (or his estate) obliged to account for fruits, harvests, and other income from Oct. 6, 1959?
- What remedies and reliefs should be granted—reformation, reconveyance, reimbursement, accounting, damages?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)