G.R. No. 109383 - Manila Central Line Corp. vs. Manila Central Line Free Workers Union-NFL

Petitioner Adoracion Lustan is the registered owner of Lot 8069 of the Cadastral Survey of Calinog, Iloilo, containing 10.0057 hectares, covered by Transfer Certificate of Title (TCT) No. T-561.
On February 25, 1969, Lustan leased the property to private respondent Nicolas Parangan for 10 years at an annual rent of ₱1,000.00.

During the lease, Parangan extended small loans to petitioner to cover daily expenses and education expenses of petitioner’s daughter.
On July 29, 1970, petitioner executed a Special Power of Attorney (SPA) authorizing Parangan to secure an agricultural loan from Philippine National Bank (PNB) using the property as collateral.
On February 18, 1972, a second SPA was executed allowing Parangan to obtain four additional loans amounting to ₱24,000.00, ₱38,000.00, ₱38,600.00, and ₱25,000.00 on respective dates between 1975 and 1980. The last three loans were without petitioner’s knowledge and used by Parangan for his own purposes.
These loans were duly annotated as liens and encumbrances on the certificate of title.

Petitioner signed a Deed of Pacto de Retro Sale on April 16, 1973, and later a Deed of Definite Sale on May 4, 1979, which Parangan claimed evidenced the loans extended to petitioner.
Petitioner demanded the return of her certificate of title due to fear of prejudice from continued borrowing. Parangan claimed ownership by virtue of the Deed of Definite Sale for ₱75,000.00 consideration.
Petitioner filed an action for cancellation of liens, quieting of title, recovery of possession, and damages against Parangan and PNB.

The Regional Trial Court (RTC) ordered cancellation of unauthorized loans and declaration of the Deeds of Pacto de Retro Sale and Definite Sale as null and void, considering them as deeds of equitable mortgage.
The RTC ordered Parangan to pay all loans secured from PNB, return TCT No. T-561 to petitioner, and return possession of the land upon payment of ₱75,000.00 by petitioner within 90 days; otherwise, the land would be sold to satisfy payment.
Parangan was ordered to pay attorney’s fees and suit costs.

The CA reversed the RTC's ruling, holding that none of the conditions in Article 1602 of the New Civil Code indicating an equitable mortgage were proven by the preponderance of evidence.
The CA ruled that petitioner signed the Deed of Sale with knowledge of its content and credited the testimony of Parangan’s witness, Delia Cabial.
The CA upheld the validity of the Special Power of Attorney authorizing “unlimited” loans.

Petitioner filed the present petition alleging errors by the CA in invalidating the RTC findings.
Two main issues were raised: (1) whether the Deed of Definite Sale was in reality an equitable mortgage; (2) whether petitioner’s property was liable to PNB for the loans contracted by Parangan under the SPA.

Whether the Deed of Definite Sale is an absolute sale or an equitable mortgage securing the indebtedness of petitioner to Parangan.
Whether petitioner’s property is liable for the loans secured by Parangan from PNB through the Special Powers of Attorney executed by petitioner.