A.M. No. P-11-2927 - Leave Division, Office of Administrative Services-OCA vs. Wilma Salvacion P. Heusdens

Luz S. Nicolas (petitioner) and Leonora C. Mariano (respondent) are the principal parties in the controversy.
The subject property is a one‑half portion of a 155‑square meter parcel known as Lot 13‑A, Block 40 located at 109 Kapayapaan Street, Bagong Barrio, Caloocan City, covered by Transfer Certificate of Title (TCT) No. C‑44249.
The parcel is part of the National Housing Authority’s (NHA) Bagong Barrio Project and originally granted to Mariano through an approved application, subject to conditions and an existing mortgage.

Upon approval of her grant in the 1970s, Mariano had her title subject to a mortgage entered on TCT No. C‑44249 to guarantee a principal amount, with a proviso restricting any transfer or encumbrance for five years from the release of the mortgage without NHA’s prior consent.
The NHA withheld the issuance of the original TCT pending full payment of the mortgage loan; Mariano later made payments but still had an outstanding obligation as of September 30, 2004.

On January 28, 1998, Mariano obtained a loan of P100,000.00 from Nicolas, executing a Mortgage Contract over the subject property as security, with a 10‑month payment term at a monthly interest rate of 7%.
After defaulting on her obligation, on February 22, 1999, Mariano executed a second mortgage deed (Sanglaan ng Lupa at Bahay) over the subject property and its improvements for a consolidated amount of P552,000.00, with a payment term of one year.
On June 7, 2000, amid further default, Mariano executed a Deed of Absolute Sale of Real Property, purportedly conveying ownership of the subject property and improvements to Nicolas in consideration of P600,000.00.
A related document (Pagtanggap ng Kabuang Halaga) attested to the full payment of the purchase price while rental collections from the apartment (built on the aforesaid land) were being remitted by tenants to Nicolas.
From June 1999 to June 2004, Nicolas collected significant rental proceeds that, cumulatively, amounted to sums exceeding the alleged indebtedness.

Mariano initiated an Amended Complaint in the Regional Trial Court (RTC) on July 8, 2004 seeking specific performance, damages, and injunctive relief to release her from the second mortgage and stop rental collections by Nicolas.
The RTC rendered a decision on August 26, 2009, declaring the Deed of Absolute Sale invalid for defects such as lack of proper consideration and consent; it found that both mortgage agreements were tainted by bad faith and ultimately ordered their cancellation along with a reduced moral damages award.
Nicolas appealed the RTC ruling, raising issues on the validity of the Deed of Absolute Sale and mortgage cancellations. The Court of Appeals (CA) issued a June 21, 2011 Decision and a subsequent March 1, 2012 Resolution, affirming the cancellation of the mortgage contracts and declaring the deed of sale invalid based on her lack of ownership.
Petition for Review on Certiorari was later filed by Nicolas before the Supreme Court.

Whether the Deed of Absolute Sale executed by Mariano is valid considering issues of consent, consideration, and the absence of ownership by Mariano.
Whether the evidence of receipt of P600,000.00 (through documents such as the Pagtanggap ng Kabuuang Halaga) establishes adequate consideration for the sale.

Validity of the Mortgage Contracts (Mortgage Contract and Sanglaan ng Lupa at Bahay)

Whether Mariano, having an outstanding obligation to the NHA and hence not the full owner of the property, had the capacity to validly mortgage the property.
Whether the cancellation of these mortgage agreements by the RTC and CA is proper given the factual background and terms of the executed contracts.

Whether both parties, being in equal fault (in pari delicto), are precluded from obtaining positive judicial relief on the interpretation of their agreements.
Whether Nicolas’ entitlement to rental collections as a result of the executed contracts is vindicated or should be voided.

Whether the RTC’s award of moral damages (later reduced by the CA) is appropriate in view of the void nature of the contracts.
Whether damages and additional reliefs should be granted given the malicious conduct and bad faith exhibited by either party.