Case Summary (G.R. No. 160408)
Facts
The Julians borrowed ₱60,000 on April 9, 1986, ₱50,000 on May 23, 1986, and ₱10,000 on May 27, 1986. Interest deductions were made upfront. Two promissory notes evidenced the ₱60,000 and ₱50,000 loans, both at 6% monthly interest. As security, on May 23, 1986, the Julians mortgaged their Quezon City property. When the loans matured in mid-1986, the debt remained unpaid. Facing foreclosure, Linda proposed payment in kind. After an ocular inspection valuing the lot at ₱70,000, she signed a blank two-page deed of sale on October 22, 1986. Adelaida then paid the capital gains and real property taxes, and title issued in the Pens’ names on July 17, 1987.
Procedural History
- RTC (Branch 77, Quezon City) rendered judgment on August 30, 1999, declaring the deed of sale void, canceling the Pens’ title, reconveying the property to the Julians, and ordering the Julians to pay the remaining debt of ₱319,065 plus legal interest.
- On appeal, the CA (October 20, 2003) affirmed with modification: kept the deed of sale void, adjusted the unpaid balance to ₱43,492.15 as of June 28, 1990, and imposed 12% per annum compensatory interest from that date.
- Petitioner Pens elevated the case by certiorari, challenging only legal conclusions.
Issues
- Whether the deed of sale is valid.
- Whether monetary interest is due on the outstanding obligation.
Analysis on Deed of Sale Validity
– Both the RTC and CA found the deed of sale “void or inexistent,” albeit on different grounds. Factual findings by the CA carry great weight and are conclusive under rule 45 of the Rules of Court.
Pactum Commissorium
– Article 2088 of the Civil Code prohibits automatic transfer of mortgaged property upon default (pactum commissorium).
– Elements present: (a) a valid mortgage; (b) an implied stipulation that, on default, the creditor may appropriate the property.
– Linda’s signing of the deed of sale in blank simultaneous with the mortgage and its prompt completion upon default confirm the forbidden pactum commissorium. The transaction was not a valid sale or a genuine dacion en pago but a masked appropriation.
Dacion en Pago Argument
– Dacion en pago requires (a) an existing money obligation; (b) consensual alienation of property; and (c) extinguishment of the debt.
– Here, the debt persisted despite the transfer, negating any valid dacion en pago. The absence of a meeting of minds on price (consideration left blank) further shows the sale was never perfected under Article 1318 of the Civil Code.
Interest
– Monetary interest arises only by express written stipulation (Article 1956). The promissory notes lack
Case Syllabus (G.R. No. 160408)
Facts and Antecedents
- On April 9, 1986, Santos and Linda Julian obtained a ₱60,000 loan from Adelaida Pen; on May 23 and 27, 1986, additional loans of ₱50,000 and ₱10,000 were extended by Adelaida, with interest deducted upfront (₱3,600; ₱2,400; ₱600 respectively).
- Two promissory notes were executed: one dated April 9, 1986 (payable June 15, 1986) for ₱60,000; another dated May 22, 1986 (payable July 22, 1986) for ₱50,000; both charged at 6% per month.
- On May 23, 1986, the Julians mortgaged their property (TCT No. 327733) in favor of Adelaida as security; the owner’s duplicate title was delivered to Petitioners.
- Title to the property was transferred to the Pens by TCT No. 364880 (July 17, 1987) and reconstituted as RT-45272 (July 9, 1994) after a fire at the Registry of Deeds.
Petitioners’ Version of the Deed of Sale and Repurchase Offers
- Upon default, Linda Julian persuaded Adelaida not to foreclose, offering the mortgaged land in kind; after ocular inspection, the parties agreed on a ₱70,000 valuation.
- On October 22, 1986, Linda signed a two-page Deed of Sale (left margin signature, printed name) blank as to date and consideration; Adelaida thereafter paid capital gains and real property taxes.
- In July 1989, Linda offered to repurchase at ₱436,115 (cash by July 31, 1989) but failed; further offers in February and June 1990 likewise went unfulfilled, though ₱100,000 was tendered as good faith and later credited against the outstanding balance (₱319,065 as of October 15, 1997).
- On September 8, 1994, the Julians filed suit, annotated lis pendens and adverse claim on title, and demanded reconveyance.
Respondents’ Version of the Transaction
- At mortgage execution, Adelaida required signing of an “Absolute Deed of Sale” one-page document, undated, unfilled and unnotarized, without stated consideration.
- The Julians claim total payments of ₱115,400, the last being ₱100,000 on June 28, 1990; in December 19