G.R. No. 86883-85 - People vs. Manero Jr.

Rafael Fernandez (plaintiff-appellant) initiated proceedings seeking ejectment of Paz V. del Rosario (defendant-appellee) from a parcel of land and a building under construction.
The complaint demanded not only the vacation of the property but also the payment of rent, penalties, and other sums accrued from alleged breaches of contractual obligations.

On May 21, 1928, the defendant executed an instrument (Exhibit 6) in favor of Engracio de Asis y Parafina whereby she purportedly sold a parcel of land with a partially constructed building for P7,000.

This instrument contained a reference to a mortgage lien in favor of Alfredo Chicote.
The nature of the instrument, although in the form of a sale, later became central to the dispute regarding its true intent.

On the same day, a separate instrument (Exhibit 4) was executed in which the defendant entered into a lease of the property at a monthly rental of P70 for a two-year period.
On June 12, 1928, the defendant executed another instrument (Exhibit 5) acknowledging the receipt of P3,000 from Engracio de Asis y Parafina as an additional sum—purportedly for improvements, using first-class materials.
On June 29, 1928, further transactions were recorded:

The defendant executed an instrument (Exhibit 3) acknowledging receipt of P2,000 for additional improvements, bringing the sale price to a total of P12,000 as reflected in Exhibit 5.
On the same day, an instrument (Exhibit A) was executed that revoked the earlier lease (Exhibit 4) and established a new lease with revised terms, including an increased monthly rental of P120 and conditions covering expenses such as insurance premiums, land tax, repairs, and partial mortgage repayments.

The defendant defaulted on several contractual obligations under Exhibit A, including:

Payment of monthly installments from May 1929 onward.
Payment of insurance premiums due on the property.
Payment of the land tax, which was originally advanced by Engracio de Asis y Parafina for the year 1929.
Partial payments toward Alfredo Chicote’s mortgage on the property.
Payment of stipulated penalties, such as the sum of P400 for court costs.

On December 6, 1929, Engracio de Asis y Parafina sold the property, with all improvements, to Rafael Fernandez through a deed of sale (Exhibit D) for P13,000.

Upon this sale, the plaintiff received all related instruments (Exhibits 3, 5, 6, and A) and the transfer certificate of title (Exhibit B), evidencing the chain of transactions and the property’s value.

Attempts by the defendant to negotiate a redemption of the property following the sale were unsuccessful.

The central factual dispute revolves around the true nature of the transactions executed between the defendant and Engracio de Asis y Parafina, particularly those evidenced by Exhibits 3, 5, and 6.
Testimony from Benita Quiogue Vda. de Del Rosario was admitted to support the claim that these instruments were merely security for the payment of a loan and not intended as absolute conveyances of title.

Whether the trial court erred in admitting the testimony of Benita Quiogue Vda. de Del Rosario regarding the true nature of the transactions (Exhibits 3, 5, and 6) as being mere guarantees of a loan rather than absolute sales.

Whether the lower court correctly determined that the instruments executed by the defendant were, in substance, a mortgage meant to secure a loan, despite their form suggesting an absolute conveyance.

Whether the defendant was properly estopped from asserting that the contracts were security instruments in light of the evidence and the special defense raised under oath.

Whether the plaintiff acquired title in good faith by relying on the transfer certificate of title (Exhibit B) and other documents, given that these documents revealed the true, mortgage-like nature of the transaction.

Whether the cancellation of the transfer certificate of title No. 34475 was proper in view of the fraudulent or simulated nature of the transaction.