Case Summary (G.R. No. 169055)
Applicable Law
The resolution of this case is guided by the provisions of the 1987 Philippine Constitution and relevant civil law principles, particularly those governing contracts.
Factual Background
Josephine De Guzman filed a complaint against the spouses Villaceran and Far East Bank & Trust Company (FEBTC) seeking a declaration of nullity of sale, reconveyance, redemption of mortgage, and damages. She claimed ownership of a parcel of land in Echague, Isabela, which she had mortgaged to the Philippine National Bank (PNB). Subsequently, she executed a simulated deed of sale transferring ownership to the Villacerans, purportedly to secure a larger loan for a business venture.
Sequence of Transactions
De Guzman’s financial difficulties led her to execute a Special Power of Attorney in favor of Milagros Villaceran to secure a larger loan. On June 19, 1996, De Guzman executed a deed of sale to the Villacerans, who used the proceeds from a loan with FEBTC to pay off the outstanding mortgage with PNB. However, the Villacerans concealed the use of the loan proceeds from De Guzman, leading to further complications when they failed to carry out their promise to reconvey the property.
Proceedings in Trial Court
The RTC concluded that the June 19, 1996 deed was valid but simulated regarding its purchase price, affirming that the actual transaction served the purpose of allowing the Villacerans to secure a larger loan for De Guzman. The RTC ordered the Villacerans to pay De Guzman the loan proceeds less the amounts they had previously paid to PNB.
Decision of the Court of Appeals
The CA upheld the RTC’s finding of relative simulation but modified the ruling by clarifying the financial implications stemming from the transaction. The CA found that there was no credible evidence that De Guzman paid the Villacerans the agreed amount for the property reconveyance. The court determined that only the net balance from the FEBTC loan, after deducting the amount paid to PNB, should be returned to De Guzman.
Legal Principles on Simulation of Contracts
The court noted the distinction between absolute and relative simulation as provided in Article 1345 of the Civil Code. It highlighted that relative simulation involves a contract that conceals the true intention of the parties. The determination of a contract’s true nature relies on the parties' intent, and in this case, the intent behind the deed of sale was to secure a loan, rather than an actual transfer of ownership.
Affirmation of Findings
The Supreme Court found no errors in the CA
...continue readingCase Syllabus (G.R. No. 169055)
Background and Parties Involved
- Petitioners: Spouses Jose and Milagros Villaceran and Far East Bank & Trust Company (FEBTC)
- Respondent: Josephine De Guzman
- Legal proceeding involves petition for review on certiorari challenging decisions of the Court of Appeals (CA) and the Regional Trial Court (RTC) Echague, Isabela
- Civil Case No. 24-0495: Complaint filed by De Guzman for declaration of nullity of sale, reconveyance, redemption of mortgage, damages, and annulment of foreclosure
Facts of the Case
- Josephine De Guzman registered owner of parcel of land in Echague, Isabela covered by TCT No. T-236168; area 971 square meters (Lot 8412-B)
- April 17, 1995: De Guzman mortgaged lot to Philippine National Bank (PNB) for P600,000 loan
- De Guzman requested Milagros Villaceran to obtain additional loan via Special Power of Attorney
- Due to De Guzman’s poor credit, Villacerans suggested transferring title to their names (Jose and Milagros Villaceran) for greater loan access (up to P5,000,000 credit line)
- June 19, 1996: De Guzman executed a Deed of Absolute Sale to petitioners (simulated sale)
- Petitioners paid P721,891.67 to PNB to redeem mortgage using their own money
- Deed of Sale registered; TCT No. T-257416 issued to petitioners
- Petitioners mortgaged property with FEBTC for P1,485,000 without informing De Guzman
- De Guzman later discovered mortgage and asked for loan proceeds less amount paid to PNB, which petitioners refused
- September 6, 1996: Petitioners executed a Deed of Absolute Sale back to De Guzman for P350,000 consideration
- Petitioners failed to pay FEBTC loan, resulting in extrajudicial foreclosure and issuance of Sheriff’s Certificate of Sale to FEBTC
Contentions of the Parties
- De Guzman asserted:
- She is the true owner
- The June 19, 1996 sale was simulated
- Petitioners should be compelled to redeem mortgage to protect her ownership
- Petitioners and FEBTC contended:
- De Guzman originally requested help to settle a P300,000 obligation with PNB
- Advanced P300,000 and P200,000 to De Guzman’s cousin, expecting property conveyance
- Deed of Absolute Sale was supported by valuable consideration
- Petitio