G.R. No. 162365 January 15, 2014 with two Mi-Bed Trailers.

with two Mi-Bed Trailers.3 A deed of sale with assumption of mortgage (deed of
sale)4 embodied the terms of their agreement, stipulating that the consideration for the
ROBERTO R. DAVID, Petitioner, sale was ₱6,000,000.00, of which ₱2,000,000 was to be paid to Eduardo and Edwin,
vs. and the remaining ₱4,000,000.00 to be paid to Development Bank of the Philippines
EDUARDO C. DAVID, Respondent. (DBP) in Baguio City to settle the outstanding obligation secured by a mortgage on
such properties. The parties further agreed to give Eduardo and Edwin the right to
DECISION repurchase the properties within a period of three years from the execution of the
deed of sale based on the purchase price agreed upon, plus 12% interest per annum.
BERSAMIN, J.:
In April 1997, Roberto and Edwin executed a memorandum of agreement
In a sale with right to repurchase, title and ownership of the property sold are (MOA)5 with the Spouses Marquez and Soledad Go (Spouses Go), by which they
immediately vested in the vendee, subject to the resolutory condition of repurchase by agreed to sell the Baguio City lot to the latter for a consideration of ₱10,000,000.00.
the vendor within the stipulated period. The MOA stipulated that "in order to save payment of high and multiple taxes
considering that the x x x subject matter of this sale is mortgaged with DBP, Baguio
The Case City, and sold [to Roberto], Edwin will execute the necessary Deed of Absolute Sale
in favor of [the Spouses Go], in lieu of [Roberto]."6 The Spouses Go then deposited
Under review at the defendant's instance is the decision promulgated on October 10, the amount of ₱10,000,000.00 to Roberto’s account.7
2003,1 whereby the Court of Appeals (CA) affirmed the judgment rendered on
December 5, 2001 by the Regional Trial Court (RTC), Branch 61, in Baguio City After the execution of the MOA, Roberto gave Eduardo ₱2,800,000.00 and returned
ordering him to return to the plaintiff the motor vehicle and trailer subject of the to him one of the truck tractors and trailers subject of the deed of sale. Eduardo
complaint, or to pay their value of ₱500,000.00 should the return not be effected, and demanded for the return of the other truck tractor and trailer, but Roberto refused to
to pay the plaintiff ₱20,000.00 as litigation expenses, ₱50,000.00 as attorney's fees, heed the demand.
and the costs of suit.2
Thus, Eduardo initiated this replevin suit against Roberto, alleging that he was
Antecedents exercising the right to repurchase under the deed of sale; and that he was entitled to
the possession of the other motor vehicle and trailer.
Respondent Eduardo C. David (Eduardo) initiated this replevin suit against Roberto
R. David (Roberto), his first cousin and former business partner, to recover the In his answer, Roberto denied that Eduardo could repurchase the properties in
possession of one unit of International CO 9670 Truck Tractor and Mi-Bed Trailer. question; and insisted that the MOA had extinguished their deed of sale by novation.

It appears that on July 7, 1995, Eduardo and his brother Edwin C. David (Edwin), Judgment of the RTC
acting on their own and in behalf of their co-heirs, sold their inherited properties to
Roberto, specifically: (a) a parcel of land with an area of 1,231 square meters, On December 5, 2001,8 the RTC rendered judgment in favor of Eduardo, holding that
together with all the improvements existing thereon, located in Baguio City and the stipulation giving Eduardo the right to repurchase had made the deed of sale a
covered by Transfer Certificate of Title No. T-22983 of the Registry of Deeds of conditional sale; that Eduardo had fulfilled the conditions for the exercise of the right
Baguio City (Baguio City lot); and (b) two units International CO 9670 Truck Tractor to repurchase; that the ownership of the properties in question had reverted to

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Eduardo; that Roberto’s defense of novation had no merit; and that due to Roberto’s x x x IN HOLDING THAT THERE WAS NO NOVATION OF THE DEED OF
bad faith in refusing to satisfy Eduardo’s claim, Eduardo should be awarded litigation SALE WITH ASSUMPTION OF MORTGAGE WHEN THE PARTIES
expenses and attorney’s fees. The dispositive portion of the judgment reads: EXECUTED A MEMORANDUM OF AGREEMENT FOR THE SALE OF THE
SUBJECT HOUSE AND LOT AND, THEREAFTER SOLD THE SAID
WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff PROPERTY TO THIRD PERSONS;
and against the defendant ORDERING the latter to return to the former the motor
vehicle and trailer subject matter of the case or to pay its value in the amount of x x x IN RESOLVING THE INSTANT CASE IN FAVOR OF RESPO[N]DENT. 13
₱500,000 in case manual delivery can not be effected; to pay plaintiff the amount of
₱20,000 as litigation expenses; the amount of ₱50,000 as attorney's fees and the costs Ruling of the Court
of this suit.
The petition for review has no merit.
SO ORDERED.9
A sale with right to repurchase is governed by Article 1601 of the Civil Code, which
Roberto appealed to the CA. provides that: "Conventional redemption shall take place when the vendor reserves
the right to repurchase the thing sold, with the obligation to comply with the
Ruling of the CA provisions of Article 1616 and other stipulations which may have been agreed upon."
Conformably with Article 1616,14 the seller given the right to repurchase may
On October 10, 2003,10 the CA promulgated its decision affirming the RTC. It opined exercise his right of redemption by paying the buyer: (a) the price of the sale, (b) the
that although there was no express exercise of the right to repurchase, the sum of all expenses of the contract, (c) legitimate payments made by reason of the sale, and (d)
the relevant circumstances indicated that there was an exercise of the right to the necessary and useful expenses made on the thing sold.
repurchase pursuant to the deed of sale, that the findings of the RTC to the effect that
the conditions for the exercise of the right to repurchase had been adequately satisfied The deed of sale entered into by Eduardo and Roberto contained the following
by Eduardo, and that no novation as claimed by Roberto had intervened. stipulation on the right to repurchase, to wit:

On February 16, 2004,11 the CA denied Roberto’s motion for reconsideration. 12 x x x the Vendors are given the right to repurchase the aforesaid described real
property, together with the improvements thereon, and the two (2) motor vehicles,
Hence, this petition for review on certiorari. together with their respective trailers from the Vendee within a period of three (3)
years from the execution of this document on the purchase price agreed upon by the
Issues parties after considering the amount previously paid to the Vendors in the amount of
TWO MILLION PESOS (₱2,000,000.00), Philippine Currency, with an interest of
Roberto seeks a reversal, claiming that the CA erred: twelve percent (12%) per annum and the amount paid with the Development Bank of
the Philippines with an interest of twelve percent (12%) per annum. 15
x x x IN HOLDING THAT THE RESPONDENT HAS EXERCISED THEIR RIGHT
TO REPURCHASE; The CA and the RTC both found and held that Eduardo had complied with the
conditions stipulated in the deed of sale and prescribed by Article 1616 of the Civil
Code. Pertinently, the CA stated:

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It should be noted that the alleged repurchase was exercised within the stipulated In Metropolitan Bank and Trust Company v. Tan, 19 the Court ruled that a redemption
period of three (3) years from the time the Deed of Sale with Assumption of within the period allowed by law is not a matter of intent but of payment or valid
Mortgage was executed. The only question now, therefore, which remains to be tender of the full redemption price within the period. Verily, the tender of payment is
resolved is whether or not the conditions set forth in the Deed of Sale with the seller’s manifestation of his desire to repurchase the property with the offer of
Assumption of Mortgage, i.e. the tender of the purchase price previously agreed upon, immediate performance.20 As we stated in Legaspi v. Court of Appeals, 21 a sincere
which is Php2.0 Million, plus 12% interest per annum, and the amount paid by the tender of payment is sufficient to show the exercise of the right to repurchase. Here,
defendant to DBP, had been satisfied. Eduardo paid the repurchase price to Roberto by depositing the proceeds of the sale
of the Baguio City lot in the latter’s account. Such payment was an effective exercise
From the testimony of the defendant himself, these preconditions for the exercise of of the right to repurchase.
plaintiff's right to repurchase were adequately satisfied by the latter. Thus, as stated,
from the Php10 Million purchase price which was directly paid to the defendant, the On the other hand, the Court dismisses as devoid of merit Roberto’s insistence that
latter deducted his expenses plus interests and the loan, and the remaining amount he the MOA had extinguished the obligations established under the deed of sale by
turned over to the plaintiff. This testimony is an unequivocal acknowledgement from novation.
defendant that plaintiff and his co-heirs exercised their right to repurchase the
property within the agreed period by satisfying all the conditions stipulated in the The issue of novation involves a question of fact, as it necessarily requires the factual
Deed of Sale with Assumption of Mortgage. Moreover, defendant returned to plaintiff determination of the existence of the various requisites of novation, namely: (a) there
the amount of Php2.8 Million from the total purchase price of Php10.0 Million. This must be a previous valid obligation; (b) the parties concerned must agree to a new
only means that this is the excess amount pertaining to plaintiff and co-heirs after the contract; (c) the old contract must be extinguished; and (d) there must be a valid new
defendant deducted the repurchase price of Php2.0 Million plus interests and his contract.22 With both the RTC and the CA concluding that the MOA was consistent
expenses. Add to that is the fact that defendant returned one of the trucks and trailers with the deed of sale, novation whereby the deed of sale was extinguished did not
subject of the Deed of Sale with Assumption of Mortgage to the plaintiff. This is, at occur. In that regard, it is worth repeating that the factual findings of the lower courts
best, a tacit acknowledgement of the defendant that plaintiff and his co-heirs had in are binding on the Court.
fact exercised their right to repurchase. 16 x x x
In sales with the right to repurchase, the title and ownership of the property sold are
Considering that the factual findings of the trial court, when affirmed by the CA, are immediately vested in the vendee, subject to the resolutory condition of repurchase by
binding on the Court,17 the Court affirms the judgment of the CA upholding the vendor within the stipulated period. 23 Accordingly, the ownership of the affected
Eduardo’s exercise of the right of repurchase. Roberto could no longer assail the properties reverted to Eduardo once he complied with the condition for the
factual findings because his petition for review on certiorari was limited to the review repurchase, thereby entitling him to the possession of the other motor vehicle with
and determination of questions of law only. A question of law exists when the doubt trailer.
centers on what the law is on a certain set of undisputed facts, while a question of fact
exists when the doubt centers on the truth or falsity of the alleged facts. 18 Whether the WHEREFORE, the Court AFFIRMS the decision promulgated on October 10, 2003;
conditions for the right to repurchase were complied with, or whether there was a and ORDERS the petitioner to pay the costs of suit.
tender of payment, is a question of fact. With both the RTC and the CA finding and
holding that Eduardo had fulfilled the conditions for the exercise of the right to SO ORDERED.
repurchase, therefore, we conclude that Eduardo had effectively repurchased the
properties subject of the deed of sale.

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LUCAS P. BERSAMIN
Associate Justice

G.R. No. 219638, December 07, 2016

MARCELINO REPUELA AND CIPRIANO REPUELA, SUBSTITUTED BY

CARMELA REPUELA, MERLINDA R. VILLARUEL, WILLIAM REPUELA,
ROSITA P. REPUELA, CRISTINA R. RAMOS, ORLANDO REPUELA,
JUNNE REPUELA, AND OSCAR REPUELA, Petitioners, v. ESTATE OF THE
SPOUSES OTILLO LARAWAN AND JULIANA BACUS, REPRESENTED BY
NANCY LARAWAN MANCAO, GALILEO LARAWAN AND SOCRATES
LARAWAN, Respondents.

DECISION

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 MENDOZA, J.: Cipriano and the thumb mark of her uncle Marcelino; and that her father and uncle
remembered that they were made to sign a blank document.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
May 29, 2014 Decision1 and the June 10, 2015 Resolution2 of the Court of Appeals On January 17, 2003, Cipriano and Marcelino, on account of this predicament, were
(CA) in CA-G.R. CV No. 03976, which reversed and set aside the February 23, 2011 compelled to file a complaint before the RTC for the annulment of the Extrajudicial
Decision3 of the Regional Trial Court (RTC), Seventh Judicial Region, Branch 7, Declaration of Heirs and Sale and the cancellation of TCT No. 10506. During the
Cebu City, in Civil Case No. CEB-28524, a case for Annulment of Documents, trial, Catalina Burlas (Burlas), who lived next to the subject property, and Alma
Quieting of Title, Redemption, Damages, and Attorney's Fees. Abellanosa (Abellanosa), City Assessor of Talisay City, were also presented as
witnesses for the Repuela brothers.6
The Antecedents
Burlas testified that the Repuela brothers confided in her about Marcelino's desire to
Spouses Lorenzo and Magdalena Repuela owned Lot No. 3357 (subject property), go to Iligan City but they had no money for his fare; that another neighbor referred
situated in Lawaan III, Talisay City, Cebu, and covered by Transfer Certificate of the Repuela brothers to Otillo, who could lend them P200.00 but only upon the
Title (TCT) No. 5154. After they had passed away, their children Marcelino Repuela signing of a deed of mortgage and the surrender of the certificate of title as collateral;
(Marcelino) and Cipriano Repuela (Cipriano) succeeded them as owners of the that Marcelino was able to leave for Iligan but he came back after three months to
subject property.4 help Cipriano in cultivating the land; that she did not see any other person till the land
except the Repuela brothers; and that she could not recall a time when Otillo, whom
Cipriano and Marcelino (Repuela brothers) claimed that sometime in July 1963, after she personally knew, ever visited or cultivated the subject property.7
the death of their parents, they went to the house of Otillo Larawan (Otillo) to borrow
P200.00 for Marcelino's fare to Iligan City; that to secure the loan, the spouses Otillo Abellanosa, as City Assessor, stated that based on the records of her office, Lot No.
and Juliana Larawan (Spouses Larawan) required them to turn over the certificate of 3357 was declared for taxation purposes for the first time in 1961 when Tax
title for Lot No. 3357; that they were made to sign a purported mortgage contract but Declaration No. 12543 was issued in the name of Lorenzo Repuela; that in 1964, Tax
they were not given a copy of the said document; that Cipriano affixed his signature Declaration No. 24112 was issued in the name of Spouses Larawan on the basis of a
while Marcelino, being illiterate, just placed his thumb mark on the document; that deed of sale; and that the subsequent tax declarations had Spouses Larawan as the
they remained in possession of the land despite the mortgage and had been planting owners.8
bamboos, corn, bananas, and papayas thereon and sharing the produce between them;
and that they also paid the taxes due on the property. 5 For the Estate of Spouses Larawan, on the other hand, the transaction between the
Repuela brothers and Otillo was a sale and not a mortgage of a parcel of land. The
In October 2002, as recalled by Cipriano's daughter, Cristina Repuela Ramos Estate also invoked laches on the part of the Repuela brothers for failing to file a
(Cristina), she went to the City Treasurer's Office of Talisay City, upon the request of complaint during the lifetime of Spouses Larawan. Galileo Larawan (Galileo), son of
her father, to verify whether Spouses Larawan were paying the realty taxes on the Spouses Larawan and the sole witness for the Estate, testified that he knew of the
mortgaged property. She learned that Spouses Larawan did not pay the taxes and the transaction between his father and the Repuela brothers because his father brought
tax declaration on the subject property was already in their names as early as 1964; him along to the office of Atty. Celestino Bacalso (Atty. Bacalso), where the
that in the Registry of Deeds of Cebu, TCT No. 5154 was already cancelled and a document entitled Extrajudicial Declaration of Heirs and Sale was prepared; that the
new certificate of title, TCT No. 10506, had been issued to Otillo; that Spouses said document was signed by Cipriano and thumbmarked by Marcelino which was
Larawan were able to transfer the certificate of title to their names by virtue of witnessed by Hilario Bacalso and Fernando Abellanosa; that he witnessed the
the Extajudicial Declaration of Heirs and Sale bearing the signature of her father Repuela brothers affix their signature and thumbmark after Atty. Bacalso read and
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explained to them the contents of the document in the Cebuano dialect; that after the Otillo, was an equitable mortgage under Article 1602 of the Civil Code. 12 Thus, the
document was notarized, his father handed P2,000.00 to the Repuela brothers as RTC disposed: chanRoblesvirtualLawlibrary
consideration for the sale; and that he was only six (6) years old when these all
happened.9 Hence, the Court: ChanRoblesVirtualawlibrary

Galileo also pointed out that the new certificate of title, TCT No. 10506, in the name 1. Declares the sale in the document, "Extrajudicial Declaration of Heirs and Sale,"
of Spouses Larawan, was issued by the Register of Deeds on August 20, 1963; that signed by Cipriano and Marcelino Repuela in favor of Otillo Larawan and spouse on
his mother paid the real estate taxes during her lifetime and, after her death, he July 1, 1963, as in effect an equitable mortgage;
himself made the payments; that he secured the tax declaration for the subject
property from the office of the Talisay City Assessor; that their family had been in 2. Gives Cipriano and Marcelino Repuela thirty (30) days from the finality of this
possession of the subject property and they had harvested and enjoyed the produce of decision to redeem the property in the amount of Two Thousand Pesos (P2,000.00),
the land such as bamboos, jackfruit and 100 coconut trees; and that there were no with interest at the legal rate computed from the date of the filing of the Complaint;
other persons claiming ownership over the land, as the Repuela brothers never offered and
to redeem the subject property from their family.10
3. Directs defendants to pay plaintiffs: ChanRoblesVirtualawlibrary
The Ruling of the RTC
a. P20,000.00, as attorney's fees, and
After the trial, the RTC decided in favor of the Repuela brothers. It held that the b. P20,000.00, as litigation expenses.chanroblesvirtuallawlibrary
transaction between the parties was not a sale but an equitable mortgage. The
testimony of Galileo for the respondent, who was admittedly just six (6) years old Costs are assessed against the defendants.
then, was "likely colored by the lens of adult perspective and self-interest." It believed
the claim of Cipriano, who only had the benefit of a Grade One education, and the SO ORDERED.13
illiterate Marcelino, that they merely signed a document without knowing its nature.
The trial court gave more credence to the claim of possession of the Repuela brothers Not in conformity, the Estate of Spouses Larawan appealed the case to the CA.
because the same was affirmed by a disinterested person, Burlas, who had been living
in the area since she was small and whose lot adjoined the subject property. The Ruling of the CA
According to her, only Cipriano and Marcelino cultivated the land and she never saw
anyone, not even Otillo, work on the land. 11 On May 29, 2014, the CA reversed and set aside the February 23, 2011 Decision of
the RTC for the following reasons: ChanRoblesVirtualawlibrary
Moreover, it was the trial court's opinion that the evidence of possession weighed
more on the side of the Repuela brothers than that of the Estate of Spouses Larawan. 1. The Repuela brothers failed to present any direct and positive proof to rebut the
Their assertion of possession was bolstered by the fact that they too paid taxes on the presumption of the document's due execution. They failed to prove any factual
property, an indication that they were still in possession of the subject property. circumstance to point that the transaction covered therein was one of mortgage, or at
Considering that they still possessed the subject property even after the execution of the least, that such was their intention;
the sale, in the concept of an owner and continued paying the land taxes thereon, the
RTC was of the view that the contract, entered into by the Repuela brothers and

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2. The Repuela brothers had not proven continued possession of the subject property subject property from the time of the transaction in 1963 until the time when they
which would have given the impression that it was not sold but merely mortgaged; decided to partition their property and learned, in the process, that the tax declaration
and title of their lot were already transferred in the name of Spouses Larawan. They
3. None of the enumerated circumstances in Article 1602 of the Civil Code was argue that considering that they, who were claiming to be the owners thereof, were in
present in order for the presumption of equitable mortgage to apply. Contrary to the actual possession of the property, their right to seek reconveyance, which in effect
factual finding of the trial court, the evidence did not show that they were still in sought to quiet the title to the property, never prescribed. 16
possession of the property even after the execution of the document and that they
continued paying the taxes on the property immediately after the execution of the Petitioners further argue that the existence of the Extrajudicial Declaration of Heirs
deed; and, and Sale was not enough proof that the Repuela brothers really intended to sell the
property, and that the stipulations in the contract should be construed together with
4. Granting arguendo that the transaction was a mortgage, their cause of action was the parties' contemporaneous and subsequent acts as regards the execution of the
already barred by laches as 39 years had already elapsed before they asserted their contract. The same was true with the issuance of a new owner's TCT in favor of
rights over the subject property.14 Spouses Larawan. It neither imports conclusive evidence of ownership nor proves
that the agreement between the parties was one of sale. A conveyance by registration
The decretal portion of the CA decision reads: ChanRoblesVirtualawlibrary in the name of the transferee and the issuance of a new certificate is not secured from
the operation of the equitable doctrine, to the effect that any conveyance intended as
WHEREFORE, premises considered, the instant appeal is GRANTED. The security for a debt would be held in effect to be a mortgage, than most informal
February 23, 2011 Decision of the RTC Branch 7 of Cebu City in Civil Case No. conveyance that could be devised.17
CEB-28524 is REVERSED and SET ASIDE and the complaint for Annulment of
Documents, Quieting of Title, Redemption, Damages and Attorney's The CA, according to petitioners, should have given more credence to the testimonies
Fees is DISMISSED. of the Repuela brothers, as corroborated and affirmed by the disinterested witness,
Burlas, over that of Galileo, the lone witness for the respondent. As correctly
SO ORDERED. cralawlawlibrary15 observed by the trial court, Galileo was just six (6) years old when he supposedly
witnessed the alleged transaction in the office of Atty. Bacalso, and so he could not
After their motion for reconsideration was denied by the CA in its Resolution, dated have possibly known the nature of the executed contract. Echoing the RTC, they
June 10, 2015, the heirs of the Repuela brothers (petitioners) filed the subject petition. pointed out that a six-year old boy's curiosity and concerns could not have extended
to things of this nature and that his recollection of events was likely colored by the
Issue lens of adult perspective and self-interest, as Galileo himself admitted that he did not
read the document.18
Whether the Extrajudicial Declaration of Heirs
and Sale amounted to an equitable mortgage. Finally, they stress that the Repuela brothers remained in possession of the subject
property even after the transaction and they also paid the taxes thereon for the years
Petitioners explain that the Repuela brothers only filed the case in 2003 because they 1985 to 2002 on December 18, 2002. These circumstances surrounding the
found no urgency to file it as there were no indications that their title and possession transaction entered into by and between the Repuela brothers and Otillo would
over the subject property were threatened. They claim that their predecessors-in- naturally lead anyone to infer that this instance was espoused in Article 1602 of the
interest were in peaceful, open, continuous, and public possession as owners of the Civil Code. This is in line with jurisprudence consistently holding that the presence of

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one, and not the confluence of several circumstances, is sufficient to prove that a For a presumption of an equitable mortgage to arise, two requisites must first be
contract of sale is one of an equitable mortgage. 19 satisfied, namely: that the parties entered into a contract denominated as a contract of
sale and that their intention was to secure an existing debt by way of
The Position of Respondent mortgage.23 There is no single conclusive test to determine whether a deed of sale,
absolute on its face, is really a simple loan accommodation secured by a mortgage.
In its Comment,20 dated December 28, 2015, respondent Estate of Spouses Larawan Article 1602, in relation to Article 1604 of the Civil Code, however, enumerates
(respondent) averred that the extrajudicial settlement and sale executed by the parties several instances when a contract, purporting to be, and in fact styled as, an absolute
could not be presumed as an equitable mortgage. First, the said contract was "not a sale, is presumed to be an equitable mortgage. Thus: ChanRoblesVirtualawlibrary
sale with right to repurchase" and the price of the sale was not unusually inadequate.
Second, there is no documentary evidence that would support the claim of possession ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of
by the Repuela brothers, as lessee or otherwise, continuously from the execution of the following cases: chanRoblesvirtualLawlibrary
the document of sale until the filing of the case. Third, the third situation (when upon
or after the expiration of the right to repurchase, another instrument extending the (1) When the price of a sale with right to repurchase is unusually inadequate;
period of redemption or granting a new period was executed) wherein a contract shall
be presumed to be an equitable mortgage is not applicable in the instant case. The (2) When the vendor remains in possession as lessee or otherwise;
Extrajudicial Declaration of Heirs and Sale did not provide for a right to repurchase.
As such, there was no period of redemption to be extended or a new period to be (3) When upon or after the expiration of the right to repurchase another instrument
executed. Fourth, there was no showing that Otillo, as purchaser, retained for himself extending the period of redemption or granting a new period is executed;
a part of the purchase price. He paid the amount of P2,000.00 as sale consideration to
the Repuela brothers.21 Fifth, there was no agreement in the contract of sale that the (4) When the purchaser retains for himself a part of the purchase price;
Repuela brothers, as vendors, bound themselves to pay the taxes on the thing sold.
And finally, the Extrajudicial Declaration of Heirs and Sale was quite clear and (5) When the vendor binds himself to pay the taxes on the thing sold;
specific that what was involved was a sale of the subject property. From the terms of
the contract, no inference could be made that the real intention of the parties was to (6) In any other case where it may be fairly inferred that the real intention of the
secure the payment of a debt or the performance of any other obligation. parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
The Court's Ruling
In any of the foregoing case, any money, fruits, or other benefit to be received by the
The Court finds merit in the petition. vendee as rent or otherwise shall be considered as interest which shall be subject to
the usury laws.
An equitable mortgage is one which, although lacking in some formality, or form, or
words, or other requisites demanded by a statute, reveals the intention of the parties to xxx
charge real property as security for a debt, and contains nothing impossible or
contrary to law.22 ART. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale. [Emphases and underscoring supplied]

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Evident from Article 1602, the presence of any of the circumstances set forth therein as owner-mortgagor, conformably to the well-established doctrine that the mortgagee
suffices for a contract to be deemed an equitable mortgage. No concurrence or an does not become the owner of the mortgaged property because the ownership remains
overwhelming number is needed.24 In other words, the fact that some or most of the with the mortgagor pursuant to Article 2088, of the Civil Code. 26
circumstances mentioned are absent in a case will not negate the existence of an
equitable mortgage. Inference can be made
that the transaction was
In this case, it appears that two (2) instances enumerated in Article 1602 — an equitable mortgage
possession of the subject property and inference that the transaction was in fact a
mortgage attended the assailed transaction. From the attending circumstances of the case, it can be inferred that the real intention
of the Repuela brothers was to secure their indebtedness from Spouses Larawan.
Possession as Lessee or They needed money for Marcelino's fare so they went to the house of Otillo to borrow
otherwise P200.00. Considering that Spouses Larawan would only agree to extend the loan if
they would surrender their certificate of title over the subject property, they obliged in
Article 1602 (2) of the Civil Code provides that when the supposed vendor remains in the belief that its purpose was only to secure their loan. In other words, they
possession of the property even after the conclusion of the transaction, the purported surrendered the title to Spouses Larawan as security to obtain the much needed loan.
contract of sale is presumed to be an equitable mortgage. In general terms, possession It was never their intention to sell the subject property.
is the holding of a thing or the enjoyment of a right, whether by material occupation
or by the fact that the right is subjected to the will of the claimant. The gathering of As held in Banga v. Sps. Bello,27 in determining whether a deed, absolute in form, is a
the products of and the act of planting on the land constitute occupation, possession mortgage, the court is not limited to the written memorials of the transaction. "The
and cultivation.25cralawred decisive factor in evaluating such agreement is the intention of the parties, as shown
not necessarily by the terminology used in the contract but by all the surrounding
In this case, petitioners insist that the Repuela brothers remained in possession of the circumstances, such as the relative situation of the parties at that time, the attitude,
subject property after the transaction, as was corroborated by a disinterested person, acts, conduct, declarations of the parties, the negotiations between them leading to the
Burlas, who lived in the adjoining lot from the time she was a child. According to her, deed, and generally, all pertinent facts having a tendency to fix and determine the real
it was only the Repuela brothers who tilled the land and planted corn, bananas and nature of their design and understanding."28
camote. She never saw Otillo, whom she also knew, till or work on the land.
There is a presumption of
The respondent's claim of possession, as supported by a transfer certificate of title and mistake
tax declaration of the subject property, both in the name of Spouses Larawan is, to the
Court's mind, not persuasive. These documents do not prove actual possession. They Granting that indeed Cipriano and Marcelino, signed and thumbmarked, respectively,
do not rebut the overwhelming evidence of the Repuela brothers that they were in the Extrajudicial Declaration of Heirs and Sale, there is still reason to believe that
actual possession. The fact of registration in the name of Spouses Larawan does not they did so without understanding the real nature, effects and consequences of what
change the picture. A conveyance of land, accompanied by registration in the name of they did as they were never explained to them. Cipriano, who only finished Grade
the transferee and the issuance of a new certificate, is no more secured from the One, and Marcelino, an illiterate, were in dire need of money. As such, the possibility
operation of this equitable doctrine than the most informal conveyance that could be that they affixed their conformity to the onerous contract to their detriment just to get
devised. In an equitable mortgage, title to the property in issue, which has been the loan was not remote. In dire need as they were, they signed a document despite
transferred to the respondents actually remains or is transferred back to the petitioner knowing that it did not express their real intention. "Necessitous men are not, truly
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speaking, free men; but to answer a present emergency, will submit to any terms that be a sale as an equitable mortgage, which involves a lesser transmission of rights and
the crafty may impose upon them." 29 For this reason, the Repuela brothers should be interests over the property in controversy. 34
given the protection afforded by the Civil Code provisions on equitable mortgage.
There was no prescription
As aptly explained in Cruz v. Court of Appeals,30 the Court or laches
held: ChanRoblesVirtualawlibrary
Contrary to the findings of the CA that petitioners' cause of action was already barred
Vendors covered by Art. 1602 usually find themselves in an unequal position when by laches because of the 39 years that had already lapsed before they asserted their
bargaining with the vendees, and will readily sign onerous contracts to get the money rights over the property, the Court holds otherwise. In Inamarga v. Alano,35 the Court
they need. Necessitous men are not really free men in the sense that to answer a considered the deed of sale as equitable mortgage and
pressing emergency they will submit to any terms that the crafty may impose on wrote: ChanRoblesVirtualawlibrary
them. This is precisely the evil that Art. 1602 seeks to guard against. The evident
intent of the provision is to give the supposed vendor maximum safeguards for the xxx Where there is no consent given by one party in a purported contract, such
protection of his legal rights under the true agreement of the parties. 31 contract was not perfected; therefore, there is no contract to speak of. The deed of
sale relied upon by petitioner is deemed a void contract. This being so, the action
Besides, where a party is unable to read or when the contract is in a language not based on said deed of sale shall not prescribe in accordance with Article 1410 of the
understood by a party and mistake or fraud is alleged, the obligation to show that the Civil Code.36 [Emphasis supplied]
terms of the contract had been fully explained to the said party who is unable to read
or understand the language of the contract devolves on the party seeking to enforce it. Legal Interest
Indeed, that burden to show that the other party fully understood the contents of the
document rests upon the party who seeks to enforce the contract. If he fails to In the case of Muñoz v. Ramirez,37 the Court stated that where it was established that
discharge this burden, the presumption of mistake, if not, fraud, stands unrebutted and the reciprocal obligations of the parties were under an equitable mortgage,
controlling.32 Respondent failed to overcome this burden. reconveyance of the property should be ordered to the rightful owner therein upon the
payment of the loan within 90 days from the finality of that decision. 38
In the case at bench, Galileo's testimony that he had witnessed the Repuela brothers
affix their conformity after Atty. Bacalso read and explained to them the contents of In the case at bench, the RTC ordered the Repuela brothers to pay their loan
the document in the Cebuano dialect, fails to convince this Court. As keenly observed amounting to P2,000.00 with interest at the legal rate computed from the date of the
by the RTC, Galileo was just six (6) years old when he witnessed the transaction in filing of the complaint in order for them to repair the property.
the office of Atty. Bacalso. To the Court's mind, Galileo could not have possibly
known the nature of the purported contract, much less, perceived with certainty if the In determining the legal rate applicable in this case, Circular No. 799, series of 2013,
Repuela brothers were indeed apprised of the true nature of the said contract before issued by the Office of the Governor of the Bangko Sentral ng Pilipinas on June 21,
they were made to sign and thumbmark it. For this reason, the presumption of 2013, which was the basis of the Court in Nacar v. Gallery Frames,39 provides that
mistake, if not fraud, shall remain. effective July 1, 2013, the rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence of an express
Furthermore, it must be pointed out that the law accords the equitable mortgage contract as to such rate of interest, shall be six percent (6%) per annum. Applying the
presumption in situations when doubt exists as to the true intent of the parties to the foregoing, the rate of interest of 12% per annum on the obligation of the Repuela
contract,33 as in this case. Courts are generally inclined to construe one purporting to
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brothers shall apply from the date of the filing of the complaint on January 17, 2003
until June 30, 2013 only. From July 1, 2013 until fully paid, the legal rate of 6% per
annum shall be applied to their unpaid obligation.

WHEREFORE, the petition is GRANTED. The assailed May 29, 2014 Decision
and the June 10, 2015 Resolution of the Court of Appeals in CA-G.R. CV No. 03976 G.R. No. 72873 May 28, 1987
are SET ASIDE. The February 23, 2011 Decision of the Regional Trial Court, Cebu
City, Seventh Judicial Region, Branch 7 in Civil Case No. CEB-28524 CARLOS ALONZO and CASIMIRA ALONZO, petitioners,
is REINSTATED with MODIFACATION in that the 12% interest per annum shall vs.
only apply from January 17, 2003 until June 30, 2013 only, after which date and until INTERMEDIATE APPELLATE COURT and TECLA PADUA, respondents.
fully paid, the mortgage indebtedness of Cipriano Repuela and Marcelino Repuela
shall earn interest at 6% per annum. Perpetuo L.B. Alonzo for petitioners.
SO ORDERED. cralawlawlibrary Luis R. Reyes for private respondent.

CRUZ, J.:

The question is sometimes asked, in serious inquiry or in curious conjecture, whether

we are a court of law or a court of justice. Do we apply the law even if it is unjust or
do we administer justice even against the law? Thus queried, we do not equivocate.
The answer is that we do neither because we are a court both of law and of justice.
We apply the law with justice for that is our mission and purpose in the scheme of our
Republic. This case is an illustration.

Five brothers and sisters inherited in equal pro indiviso shares a parcel of land
registered in 'the name of their deceased parents under OCT No. 10977 of the
Registry of Deeds of Tarlac. 1

On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of
the herein petitioners for the sum of P550.00 by way of absolute sale. 2 One year
later, on April 22, 1964, Eustaquia Padua, his sister, sold her own share to the same
vendees, in an instrument denominated "Con Pacto de Retro Sale," for the sum of P
440.00. 3

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By virtue of such agreements, the petitioners occupied, after the said sales, an area Art. 1088. Should any of the heirs sell his hereditary rights to a
corresponding to two-fifths of the said lot, representing the portions sold to them. The stranger before the partition, any or all of the co-heirs may be
vendees subsequently enclosed the same with a fence. In 1975, with their consent, subrogated to the rights of the purchaser by reimbursing him for the
their son Eduardo Alonzo and his wife built a semi-concrete house on a part of the price of the sale, provided they do so within the period of one month
enclosed area.4 from the time they were notified in writing of the sale by the vendor.

On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem the In reversing the trial court, the respondent court ** declared that the notice required
area sold to the spouses Alonzo, but his complaint was dismissed when it appeared by the said article was written notice and that actual notice would not suffice as a
that he was an American citizen .5 On May 27, 1977, however, Tecla Padua, another substitute. Citing the same case of De Conejero v. Court of Appeals 11 applied by the
co-heir, filed her own complaint invoking the same right of redemption claimed by trial court, the respondent court held that that decision, interpreting a like rule in
her brother. 6 Article 1623, stressed the need for written notice although no particular form was
required.
The trial court * also dismiss this complaint, now on the ground that the right had
lapsed, not having been exercised within thirty days from notice of the sales in 1963 Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court, furnishing
and 1964. Although there was no written notice, it was held that actual knowledge of the co-heirs with a copy of the deed of sale of the property subject to redemption
the sales by the co-heirs satisfied the requirement of the law. 7 would satisfy the requirement for written notice. "So long, therefore, as the latter (i.e.,
the redemptioner) is informed in writing of the sale and the particulars thereof," he
In truth, such actual notice as acquired by the co-heirs cannot be plausibly denied. declared, "the thirty days for redemption start running. "
The other co-heirs, including Tecla Padua, lived on the same lot, which consisted of
only 604 square meters, including the portions sold to the petitioners . 8 Eustaquia In the earlier decision of Butte v. UY, 12 " the Court, speaking through the same
herself, who had sold her portion, was staying in the same house with her sister Tecla, learned jurist, emphasized that the written notice should be given by the vendor and
who later claimed redemption petition. 9 Moreover, the petitioners and the private not the vendees, conformably to a similar requirement under Article 1623, reading as
respondents were close friends and neighbors whose children went to school follows:
together. 10
Art. 1623. The right of legal pre-emption or redemption shall not be
It is highly improbable that the other co-heirs were unaware of the sales and that they exercised except within thirty days from the notice in writing by the
thought, as they alleged, that the area occupied by the petitioners had merely been prospective vendor, or by the vendors, as the case may be. The deed of
mortgaged by Celestino and Eustaquia. In the circumstances just narrated, it was sale shall not be recorded in the Registry of Property, unless
impossible for Tecla not to know that the area occupied by the petitioners had been accompanied by an affidavit of the vendor that he has given written
purchased by them from the other. co-heirs. Especially significant was the erection notice thereof to all possible redemptioners.
thereon of the permanent semi-concrete structure by the petitioners' son, which was
done without objection on her part or of any of the other co-heirs. The right of redemption of co-owners excludes that of the adjoining
owners.
The only real question in this case, therefore, is the correct interpretation and
application of the pertinent law as invoked, interestingly enough, by both the As "it is thus apparent that the Philippine legislature in Article 1623 deliberately
petitioners and the private respondents. This is Article 1088 of the Civil Code, selected a particular method of giving notice, and that notice must be deemed
providing as follows:
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exclusive," the Court held that notice given by the vendees and not the vendor would The spirit, rather than the letter of a statute determines its construction,
not toll the running of the 30-day period. hence, a statute must be read according to its spirit or intent. For what
is within the spirit is within the letter but although it is not within the
The petition before us appears to be an illustration of the Holmes dictum that "hard letter thereof, and that which is within the letter but not within the
cases make bad laws" as the petitioners obviously cannot argue against the fact that spirit is not within the statute. Stated differently, a thing which is
there was really no written notice given by the vendors to their co-heirs. Strictly within the intent of the lawmaker is as much within the statute as if
applied and interpreted, Article 1088 can lead to only one conclusion, to wit, that in within the letter; and a thing which is within the letter of the statute is
view of such deficiency, the 30 day period for redemption had not begun to run, much not within the statute unless within the intent of the lawmakers. 14
less expired in 1977.
In requiring written notice, Article 1088 seeks to ensure that the
But as has also been aptly observed, we test a law by its results; and likewise, we may redemptioner is properly notified of the sale and to indicate the date of
add, by its purposes. It is a cardinal rule that, in seeking the meaning of the law, the such notice as the starting time of the 30-day period of redemption.
first concern of the judge should be to discover in its provisions the in tent of the Considering the shortness of the period, it is really necessary, as a
lawmaker. Unquestionably, the law should never be interpreted in such a way as to general rule, to pinpoint the precise date it is supposed to begin, to
cause injustice as this is never within the legislative intent. An indispensable part of obviate any problem of alleged delays, sometimes consisting of only a
that intent, in fact, for we presume the good motives of the legislature, is to render day or two.
justice.
The instant case presents no such problem because the right of redemption was
Thus, we interpret and apply the law not independently of but in consonance with invoked not days but years after the sales were made in 1963 and 1964. The
justice. Law and justice are inseparable, and we must keep them so. To be sure, there complaint was filed by Tecla Padua in 1977, thirteen years after the first sale and
are some laws that, while generally valid, may seem arbitrary when applied in a fourteen years after the second sale. The delay invoked by the petitioners extends to
particular case because of its peculiar circumstances. In such a situation, we are not more than a decade, assuming of course that there was a valid notice that tolled the
bound, because only of our nature and functions, to apply them just the same, in running of the period of redemption.
slavish obedience to their language. What we do instead is find a balance between the
word and the will, that justice may be done even as the law is obeyed. Was there a valid notice? Granting that the law requires the notice to be written,
would such notice be necessary in this case? Assuming there was a valid notice
As judges, we are not automatons. We do not and must not unfeelingly apply the law although it was not in writing. would there be any question that the 30-day period for
as it is worded, yielding like robots to the literal command without regard to its cause redemption had expired long before the complaint was filed in 1977?
and consequence. "Courts are apt to err by sticking too closely to the words of a law,"
so we are warned, by Justice Holmes again, "where these words import a policy that In the face of the established facts, we cannot accept the private respondents' pretense
goes beyond them." 13 While we admittedly may not legislate, we nevertheless have that they were unaware of the sales made by their brother and sister in 1963 and 1964.
the power to interpret the law in such a way as to reflect the will of the legislature. By requiring written proof of such notice, we would be closing our eyes to the
While we may not read into the law a purpose that is not there, we nevertheless have obvious truth in favor of their palpably false claim of ignorance, thus exalting the
the right to read out of it the reason for its enactment. In doing so, we defer not to "the letter of the law over its purpose. The purpose is clear enough: to make sure that the
letter that killeth" but to "the spirit that vivifieth," to give effect to the law maker's redemptioners are duly notified. We are satisfied that in this case the other brothers
will. and sisters were actually informed, although not in writing, of the sales made in 1963
and 1964, and that such notice was sufficient.
13 | P a g e
Now, when did the 30-day period of redemption begin? The co-heirs in this case were undeniably informed of the sales although no notice in
writing was given them. And there is no doubt either that the 30-day period began and
While we do not here declare that this period started from the dates of such sales in ended during the 14 years between the sales in question and the filing of the
1963 and 1964, we do say that sometime between those years and 1976, when the complaint for redemption in 1977, without the co-heirs exercising their right of
first complaint for redemption was filed, the other co-heirs were actually informed of redemption. These are the justifications for this exception.
the sale and that thereafter the 30-day period started running and ultimately expired.
This could have happened any time during the interval of thirteen years, when none More than twenty centuries ago, Justinian defined justice "as the constant and
of the co-heirs made a move to redeem the properties sold. By 1977, in other words, perpetual wish to render every one his due." 16 That wish continues to motivate this
when Tecla Padua filed her complaint, the right of redemption had already been Court when it assesses the facts and the law in every case brought to it for decision.
extinguished because the period for its exercise had already expired. Justice is always an essential ingredient of its decisions. Thus when the facts
warrants, we interpret the law in a way that will render justice, presuming that it was
The following doctrine is also worth noting: the intention of the lawmaker, to begin with, that the law be dispensed with justice.
So we have done in this case.
While the general rule is, that to charge a party with laches in the
assertion of an alleged right it is essential that he should have WHEREFORE, the petition is granted. The decision of the respondent court is
knowledge of the facts upon which he bases his claim, yet if the REVERSED and that of the trial court is reinstated, without any pronouncement as to
circumstances were such as should have induced inquiry, and the costs. It is so ordered.
means of ascertaining the truth were readily available upon inquiry,
but the party neglects to make it, he will be chargeable with laches, the
same as if he had known the facts. 15

It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo,
who were not among them, should enclose a portion of the inherited lot and build
thereon a house of strong materials. This definitely was not the act of a temporary
possessor or a mere mortgagee. This certainly looked like an act of ownership. Yet,
given this unseemly situation, none of the co-heirs saw fit to object or at least inquire,
to ascertain the facts, which were readily available. It took all of thirteen years before
one of them chose to claim the right of redemption, but then it was already too late.

We realize that in arriving at our conclusion today, we are deviating from the strict
letter of the law, which the respondent court understandably applied pursuant to
existing jurisprudence. The said court acted properly as it had no competence to
reverse the doctrines laid down by this Court in the above-cited cases. In fact, and this
should be clearly stressed, we ourselves are not abandoning the De Conejero and
Buttle doctrines. What we are doing simply is adopting an exception to the general
rule, in view of the peculiar circumstances of this case.

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