G.R. No. 169055 - Spouses Villaceran vs. Josephine De Guzman

Josephine De Guzman filed a complaint with the Regional Trial Court (RTC) of Echague, Isabela against spouses Jose and Milagros Villaceran and Far East Bank & Trust Company (FEBTC), Santiago City Branch.
The complaint sought declaration of nullity of sale, reconveyance, redemption of mortgage, damages, and preliminary injunction.
The complaint was later amended to include annulment of foreclosure and Sheriff's Certificate of Sale.

De Guzman is the registered owner of a 971-square-meter parcel of land in Echague, Isabela, covered by Transfer Certificate of Title (TCT) No. T-236168.
On April 17, 1995, De Guzman mortgaged the lot with Philippine National Bank (PNB), Santiago City, to secure a loan of P600,000.
To obtain a larger loan, De Guzman gave Milagros Villaceran a Special Power of Attorney.
Milagros suggested transferring the title to herself and Jose Villaceran, who had a higher credit line, to secure a bigger loan.
On June 19, 1996, De Guzman executed a simulated Deed of Absolute Sale in favor of the spouses Villaceran.
The spouses paid P721,891.67 to PNB using their own money to redeem the mortgage.
The spouses registered the deed and secured TCT No. T-257416 in their names, subsequently mortgaging the property with FEBTC for P1,485,000, without informing De Guzman.

Upon learning of the loan release, De Guzman asked for the loan proceeds minus P721,891.67 but the spouses refused, claiming ownership and promising reconveyance upon payment.
De Guzman offered to pay P350,000 for reconveyance; spouses Villaceran executed a Deed of Absolute Sale in favor of De Guzman dated September 6, 1996.
The spouses failed to pay their FEBTC mortgage, leading to extrajudicial foreclosure and issuance of a Sheriff's Certificate of Sale in favor of FEBTC for P3,594,000.
De Guzman asserted that spouses should redeem the mortgage to avoid prejudice on her ownership.

The spouses argued that De Guzman asked Milagros to help a relative with a PNB loan balanced by their payment, with property held in trust.
Milagros paid P300,000 to PNB, advanced P200,000 to the cousin, and later paid the total PNB loan of P880,000 using their own funds.
Due to the total outstanding obligation of P1,380,000, De Guzman was requested to execute a deed of sale in favor of spouses Villaceran who allegedly became lawful owners as evidenced by TCT No. 257416.
The spouses denied executing the September 6, 1996 deed reconveying the property and claimed forged signatures.

The RTC ruled the June 19, 1996 Deed of Sale was valid but relatively simulated only as to purchase price.
The true consideration was P300,000 plus P721,891.67 paid to PNB by spouses Villaceran.
The spouses deceived De Guzman by concealing the FEBTC loan release proceeds.
De Guzman was ordered to be paid P763,108.33 (net loan proceeds) plus P350,000 paid for September 6 reconveyance, with interest and attorney's fees.

The CA affirmed with modification the RTC ruling.
It declared both June 19 and September 6 deeds as not reflecting the true intention but made for loan accommodation.
Ordered spouses Villaceran to pay De Guzman the balance of the FEBTC loan proceeds after deducting P721,891.67.
Declared the extrajudicial foreclosure and certificate of sale as valid.
Deleted attorney’s fees for lack of justification.

The spouses argued the June 19, 1996 Deed of Sale was a valid absolute sale supported by valuable consideration including previous loans totaling P1,821,891.67.
They invoked the legal rules on contracts and evidence to claim error in the CA’s ruling.

Whether the Deed of Sale dated June 19, 1996 executed by De Guzman in favor of spouses Villaceran is a simulated contract or a valid absolute sale.

Whether the spouses Villaceran were properly ordered to pay De Guzman the balance of the FEBTC loan proceeds after deduction of payment to PNB.

Whether the extrajudicial foreclosure by FEBTC and related certificate of sale are valid.