Sy V de Vera

Sy v De Vera-Navarro
G.R. No. 239088. April 3, 2019

Justice Caguioa
FACTS:
1. John Sy, as one of the co-owners of a parcel of land, borrowed from De Vera-Navarro
P3.7M as loan, secured by a REM over such property. Sy then alleged that immediately
after the execution of the Mortgage Contract, as per usual practice, respondent De
Vera-Navarro asked petitioner John to execute an undated Deed of Absolute Sale with a
stated consideration in the amount of P5,000,000.00, supposedly for the purpose of
providing additional security for the loan.
2. To his surprise, he was informed that the ownership over the property was transferred
to De Vera-Navarro. Respondnt then issued a new title to BHTLI, a third-party buyer.
3. Sy filed a complaint for declaration of nullity of the deed of sale between De Vera-
Navarro and BHTLI. Sy claims that they ar the rightful owners of the subject property.
4. RTC held that the deed of sale was void, because it was an EQUITABLE MORTGAGE,
since there was really no intention on the part of the parties to enter in a contract of
sale. CA reversed, ruling that the case was only a dacion en pago.
ISSUE: Whether there was equitable mortgage in this case. YES

RATIO:
1. The purported contract of sale between petitioner John and respondent De Vera-
Navarro is an equitable mortgage and not a legitimate contract of sale.
a. An equitable mortgage is defined as one which although lacking in some
formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property as
security for a debt, and contains nothing impossible or contrary to law. Its
essential requisites are: (1) that the parties entered into a contract denominated
as a contract of sale; and (2) that their intention was to secure an existing debt
by way of a mortgage.
b. Article 1602 states that a contract shall be presumed to be an equitable
mortgage in an of the following cases:
i. When the price of a sale with right to repurchase is unusually
inadequate;
ii. When the vendor remains in possession as lessee or otherwise;
iii. When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period
is executed; ETHIDa
iv. When the purchaser retains for himself a part of the purchase price;
v. When the vendor binds himself to pay the taxes on the thing sold;
vi. In any other case where it may be fairly inferred that the real intention
of the parties is that the transaction shall secure the payment of a debt or
the performance of any other obligation.
c. the abovementioned badges of an equitable mortgage apply to a contract
purporting to be an absolute sale, such as in the instant case.
2. There was equitable mortgage in this case. The presence of EVEN ONE of the
circumstances suffices to convert a purported contract of sale into an equitable
mortgage.
a. When in doubt, courts are generally inclined to construe a transaction
purporting to be a sale as an equitable mortgage, which involves a lesser
transmission of rights and interests over the property in controversy.
b. the presence of at least four badges of an equitable mortgage creates a very
strong presumption that the purported contract of sale entered between
petitioner John and respondent De Vera- Navarro is an equitable mortgage.
c. First, it is not disputed by any party that the supposed vendor of the subject
property, petitioner John, remains to be in possession of the subject property
despite purportedly selling the latter to respondent De Vera-Navarro. It is
uncanny for a supposed buyer to desist from taking possession over property
which he/she has already purchased.
d. Second, the purchase price of the purported sale indicated in the undated Deed
of Absolute Sale is inadequate.
i. the RTC took judicial notice of the public knowledge that similar
establishments located at the commercial center of Zamboanga City have
a value of around P20,000,000.00. Thus, the P5,000,000.00 purchase
price supposedly agreed upon by the parties is grossly inadequate.
ii. The inadequacy of the purchase price is even con􏰝rmed by the acts of
respondent De Vera-Navarro herself. As noted by the RTC, respondent De
Vera-Navarro was able to mortgage the subject property with Landbank
of the Philippines for an amount of P13,000,000.00. Respondent De Vera-
Navarro also sold the subject property to respondent BHTLI for the same
amount of P13,000,000.00.
e. Third, the evidence on record shows that respondent De Vera-Navarro retained
for herself the supposed purchase price. Aside from the testimony of petitioner
John that no consideration was paid at all for the supposed contract of sale, the
RTC also noted that no proof was presented by respondent De Vera-Navarro that
she actually parted with the sum of P5,000,000.00 in favor of petitioner John
pursuant to the undated Deed of Absolute Sale.
f. Fourth, from the evidence presented by petitioners Sps. Sy, it is established that
the real intention of the parties is for the purported contract of sale to merely
secure the payment of their debt owing to respondent De Vera-Navarro.
3. The nomenclature given by the parties to the contract is not conclusive of the nature
and legal effects thereof. Even if a document appears on its face to be a sale, the owner
of the property may prove that the contract is really a loan with mortgage, and that the
document does not express the true intent of the parties.
a. the presence of even one of the circumstances enumerated in Article 1602
su􏰇ces to convert a purported contract of sale into an equitable mortgage, 44
and that courts are inclined to construe a transaction purporting to be a sale as
an equitable mortgage, as it involves a lesser transmission of rights and interests
over the subject property. 45 Bearing that in mind, the concurrence of four
badges of equitable mortgage, which in fact is a majority of the six circumstances
identi􏰝ed under Article 1602 of the Civil Code, creates the very strong
presumption of the existence of an equitable mortgage in the instant case.
4. BHTLI Is NOT an innocent purchaser for value.
a. he who alleges that he is a purchaser of registered land is burdened to prove
such statement. Such burden is not discharged by simply invoking the ordinary
presumption of good faith.46 In the instant case, the Court 􏰝nds that respondent
BHTLI failed to discharge such burden. Instead of showing good faith on the part
of respondent BHTLI, the incontrovertible facts establish respondent BHTLI's
status as a buyer in bad faith.
b. The Court has held that actual lack of knowledge of the 􏰘aw in title by one's
transferor is not enough to constitute a buyer in good faith where there are
circumstances that should put a party on guard, such as the presence of
occupants in the subject property. 47 Again, it is not disputed that petitioners
Sps. Sy have been in continuing possession of the subject property. Yet, this fact
did not prompt respondent BHTLI to investigate further as to the contract of sale
it entered with respondent De Vera-Navarro.
5. With the Court's finding that the purported contract of sale between petitioner John
and respondent De Vera-Navarro is an equitable mortgage and not a legitimate contract
of sale, and that respondent BHTLI is not a buyer in good faith, the Court finds merit in
the instant Petition.

Sy V de Vera

Uploaded by

Copyright:

Available Formats

Sy V de Vera

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sy V de Vera

Uploaded by

Copyright:

Available Formats

Sy v De Vera-Navarro

G.R. No. 239088. April 3, 2019

ISSUE: Whether there was equitable mortgage in this case. YES

You might also like