Asuncion Juanir Vda. de Alvarez vs. Court of Appeals

A contract purporting to be an absolute sale is presumed to be an equitable mortgage under Article 1602 of the Civil Code when any of the enumerated circumstances exists, but this presumption is rebuttable and cannot override the parties' own judicial admissions and contemporaneous acts that clearly establish a true sale. The Court held that the petitioner's failure to challenge the transfer of title for eight years, her judicial admissions in prior pleadings that Almeda had purchased the land, and her receipt of additional payments totaling P120,000.00 all confirmed the transaction was a genuine sale.

The case involves a dispute over Lot 129 at Penefrancia Avenue, Naga City, with an area of 510 square meters. The petitioner, Asuncion Juanir Vda. de Alvarez, was the registered owner of the lot, while the private respondent, Josefa Almeda, was a party who allegedly offered to lend money to the petitioner to settle an unpaid loan with the Continental Bank. The transaction between the parties was documented in a contract denominated as a deed of sale, which the petitioner later claimed was actually a mortgage. The Civil Code provisions on equitable mortgage (Articles 1602 and 1604) and the rules on parol evidence were central to the dispute.

Asuncion Juanir Vda. de Alvarez was the registered owner of Lot 129 at Penefrancia Avenue, Naga City, with an area of 510 square meters. Sometime in 1973, Josefa Almeda offered to lend Alvarez money to settle her unpaid loan of P20,000.00 with the Continental Bank, Naga City, provided that the land given as security for the said loan would be mortgaged to Almeda instead. For this purpose, Almeda asked Alvarez to sign a document, which Alvarez claimed she did not read nor was it read to her, and which she assumed was a mortgage pursuant to their agreement. It was only later that she discovered it was a deed of sale of her land together with the improvements thereon for the sum of P80,000.00.

In May 1973, Almeda caused the registration of the disputed deed of sale, resulting in the cancellation of Original Certificate of Title No. 289 in the name of the petitioner and the consequent issuance of Transfer Certificate of Title No. 6999 in Almeda's favor. The petitioner admitted having learned this fact as early as 1973, first from her lawyer and personally afterwards, when she went to the Register of Deeds to verify the matter. Also in 1973, Almeda declared the subject property in her name for tax purposes, resulting in the cancellation of the tax declaration in the petitioner's name. Alvarez never questioned the said cancellation nor did she ask the tax declaration in her name to be revived.

When the petitioner and Almeda were sued in 1979 by Dolores Salvan, one of the lessees of the subject property, Alvarez declared in her answer that she had been receiving rentals for Josefa Almeda "after the latter purchased the land from her" and that Almeda was "the owner of the land." Similarly, when another lessee, Basilio Caning, filed a complaint against her in May 1979, the petitioner alleged in her answer that Almeda was "the present owner of both the land and the building" and that "defendant sold the lot including the building to Mrs. Josefa Almeda since 1973." These answers bore the signature of the petitioner, who acknowledged them at the trial.

Alvarez claimed that she could not have sold the disputed property for only P80,000.00 because she had turned down an offer in 1971 to buy the land at P265,200.00, but she presented no corroboration. She also pointed to Tax Declaration No. 16807 and a deed of sale covering a nearby 906 square meter lot sold for P600,000.00 in 1987 to show that the consideration was grossly inadequate. However, the tax declaration issued on May 14, 1974 placed the true market value of the land at only P60,000.00 and the building at P7,200.00, for a total of P67,200.00.

The record showed that Almeda made payments to the petitioner as follows: P40,000.00 on May 23, 1973; P60,000.00 on February 11, 1974; P2,000.00 on February 7, 1975; and P18,000.00 on April 22, 1976. All the receipts acknowledging the said payments were signed by the petitioner, who did not controvert them at the trial. The petitioner admitted that she never paid the alleged indebtedness and there was no evidence that she attempted or offered to discharge the alleged mortgage. The petitioner also asserted that if the deed of sale were considered a contract of antichresis, the loan of P80,000.00 would be deemed fully paid or offset by the rentals received by Almeda from the 340 square-meter portion of the subject lot since 1973, which could aggregate more than P211,400.00.

• Equitable Mortgage Presumption: Petitioner argued that the contract should be treated as an equitable mortgage under Article 1602 of the Civil Code, in relation to Article 1604, because the document purporting on its face to be an absolute sale was in fact a mortgage given as security for repayment of a loan.
• Lack of Understanding: Petitioner argued that being merely a second grader, she could not have intelligently understood the document she signed, and that Almeda took advantage of her illiteracy.
• Grossly Inadequate Price: Petitioner argued that the price of P80,000.00 was grossly inadequate, pointing to a 1971 offer of P265,200.00 and a 1987 deed of sale of a nearby lot for P600,000.00.
• Continued Possession: Petitioner argued that she continued to possess the property in the concept of an owner, which gave rise to the presumption of an equitable mortgage.
• Antichresis: Petitioner asserted that if the deed of sale were considered a contract of antichresis, the loan of P80,000.00 would be deemed fully paid or offset by the rentals received by Almeda from the subject lot since 1973.

• Finality of Judgment: Private respondents argued that the decision of the respondent court had already become final and executory, as the petitioner allegedly failed to timely file a motion for new trial or reconsideration.
• Non-Compliance with Circular: Private respondents contended that the petitioner failed to comply with Par. 4 of Circular 1-88 regarding the verification of the petition.

• Equitable Mortgage vs. Absolute Sale: Whether the contract between Asuncion Juanir Vda. de Alvarez and Josefa Almeda was an absolute sale or merely an equitable mortgage securing a loan.
• Admissibility of Judicial Admissions: Whether the petitioner's admissions in prior pleadings in other cases could be admitted in evidence against her in the present case.
• Grossly Inadequate Consideration: Whether the price of P80,000.00 was grossly inadequate so as to give rise to the presumption of an equitable mortgage.
• Antichresis: Whether the transaction could be considered a contract of antichresis such that the loan would be deemed fully paid by the rentals received by Almeda.
• Finality of Judgment: Whether the decision of the respondent court had become final and executory.
• Compliance with Circular 1-88: Whether the petitioner failed to comply with the verification requirements of Circular 1-88.

• Equitable Mortgage vs. Absolute Sale: No. The contract was an absolute sale, not an equitable mortgage. The petitioner failed to present clear, satisfactory, and convincing evidence that the real intention of the parties was to make the property merely a security for a loan, and her own judicial admissions and subsequent acts confirmed the sale.
• Admissibility of Judicial Admissions: Yes. The petitioner's admissions in her answers in prior cases were admissible against her, as the pleadings bore her signature and she acknowledged them at the trial.
• Grossly Inadequate Consideration: No. The price of P80,000.00 was not grossly inadequate, as the 1974 tax declaration placed the market value of the land and building at only P67,200.00, and the 1987 deed of sale could not be considered evidence of market value in 1973.
• Antichresis: No. The disputed documents contained no provision specifically authorizing Almeda to receive the fruits of the land with the obligation to apply them to the payment of interest and principal, and the instrument did not fix the amount of P80,000.00 as the petitioner's principal obligation.
• Finality of Judgment: No. The petitioner received the decision on May 5, 1993, and mailed her motion on May 14, 1993, well within the period to stay enforcement of the judgment.
• Compliance with Circular 1-88: No. The verification accompanying the petition clearly stated the material dates, including the date of receipt of the questioned decision, the date of filing of the motion for new trial and/or reconsideration, and the date of receipt of the order denying such motion.

• Equitable Mortgage vs. Absolute Sale: The Court applied Article 1602 of the Civil Code, which creates a presumption of equitable mortgage in certain cases, and Article 1604, which extends this presumption to contracts purporting to be absolute sales. However, the Court found that the petitioner failed to present clear, satisfactory, and convincing evidence to overcome the express stipulations in the deed of sale. Under Article 1371 of the Civil Code, the contemporaneous and subsequent acts of the parties must be principally considered in judging their intention. The facts clearly showed a contract of sale: Almeda registered the deed of sale in May 1973, resulting in the cancellation of the petitioner's title and issuance of a new title in Almeda's name; Almeda declared the property in her name for tax purposes; and the petitioner did nothing to challenge these actions for eight years. The petitioner's judicial admissions in the Salvan and Caning cases, where she declared that Almeda had "purchased the land from her" and was "the present owner of both the land and the building," were particularly damning. The Court found it inconceivable that Alvarez would still have trusted Almeda if she had earlier been deceived by this person, especially six years after learning of the transfer.

• Admissibility of Judicial Admissions: The Court cited Section 9, Rule 130 of the Rules of Court, which allows a party to present evidence to modify, explain, or add to the terms of a written agreement if he puts in issue in his pleading an intrinsic ambiguity, mistake, or imperfection in the written agreement, or the failure of the written agreement to express the true intent and agreement of the parties. The Court found no ambiguity, mistake, or imperfection in the deed of sale. The Court also cited the rule that an admission in a pleading in one action may be admitted in evidence against the pleader or his successor-in-interest at the subsequent trial of the same suit or in another action involving the same issue. The Court noted that the rule will not apply if the pleading was not signed by the party and no proof was presented that he authorized the making of such admission, but in this case, the answers bore the petitioner's signature and she acknowledged them at the trial.

• Grossly Inadequate Consideration: The Court rejected the petitioner's claim of grossly inadequate consideration. The 1974 tax declaration placed the true market value of the land at only P60,000.00 and the building at P7,200.00, for a total of P67,200.00, which belied the claim that P80,000.00 was grossly inadequate. The 1987 deed of sale of a nearby lot for P600,000.00 could not be considered evidence of market value in 1973, fourteen years earlier. The Court cited Tolentino's view that the presumption of equitable mortgage applies only if it is clearly shown that the consideration was unusually inadequate such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be likely to consent to it. The Court also cited Cuyugan vs. Santos, which held that another test to determine whether a conveyance is a sale or merely a security for the payment of a loan is the continued existence of a debt or liability on the part of the alleged mortgagor. In this case, the petitioner admitted she never paid the alleged indebtedness and there was no evidence she attempted to discharge the alleged mortgage. The payments made by Almeda totaling P120,000.00 suggested the true selling price was P120,000.00, well above the market value stated in the 1973 tax declaration.

• Antichresis: The Court rejected the petitioner's antichresis argument, citing Articles 2132 and 2134 of the Civil Code. There was no provision in the disputed documents specifically authorizing Almeda to receive the fruits of the land with the obligation to apply them to the payment of interest and principal, and the instrument did not fix the amount of P80,000.00 as the petitioner's principal obligation. The Court also noted that the petitioner's continued possession of the property could not override her own judicial admission that Almeda was the new owner, as her possession was by virtue of a lease from Almeda.

• Finality of Judgment: The Court found no merit in the private respondents' claim that the decision had become final and executory. The petitioner received the decision on May 5, 1993, and had until May 20, 1993, to file a motion for new trial or reconsideration. The registry receipt and envelope containing her motion disclosed that it was mailed on May 14, 1993, well within the period.

• Compliance with Circular 1-88: The Court found that the verification accompanying the petition clearly stated the material dates, including the date of receipt of the questioned decision, the date of filing of the motion for new trial and/or reconsideration, and the date of receipt of the order denying such motion.

• Equitable Mortgage Presumption (Article 1602, Civil Code) — The contract shall be presumed to be an equitable mortgage in any of the following cases: (1) when the price of a sale with right to repurchase is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise; (3) 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; (4) when the purchaser retains for himself a part of the purchase price; (5) when the vendor binds himself to pay the taxes on the thing sold; (6) 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. The Court applied this provision but found the presumption rebutted by the petitioner's judicial admissions and subsequent acts.

• Parol Evidence Rule (Section 9, Rule 130, Rules of Court) — When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon, and there can be no evidence of such terms other than the contents of the written agreement. However, a party may present evidence to modify, explain, or add to the terms of the written agreement if he puts in issue in his pleading an intrinsic ambiguity, mistake, or imperfection in the written agreement, or the failure of the written agreement to express the true intent and agreement of the parties. The Court found no ambiguity, mistake, or imperfection in the deed of sale.

• Test for Sale vs. Mortgage (Cuyugan vs. Santos) — Another test to determine whether a conveyance is a sale or merely a security for the payment of a loan is the continued existence of a debt or liability on the part of the alleged mortgagor. If such a relationship exists, the transaction is a mortgage; otherwise, it is a contract of sale. The Court applied this test and found that the petitioner admitted she never paid the alleged indebtedness, indicating no debt relationship existed.

• Judicial Admissions in Prior Pleadings — An admission in a pleading in one action may be admitted in evidence against the pleader or his successor-in-interest at the subsequent trial of the same suit or in another action involving the same issue or in which the admission is pertinent to the issues. The Court applied this rule to admit the petitioner's answers in the Salvan and Caning cases, which bore her signature and which she acknowledged at the trial.

• "The petitioner has not presented clear, satisfactory and convincing evidence that the real intention of the parties to the said deed was to make the property in question merely a security for a loan extended by Almeda to the petitioner." — This passage states the core ratio decidendi: the petitioner failed to overcome the express terms of the deed of sale with the required quantum of evidence.

• "If Alvarez was really misled into signing the deed of sale, she should have protested or at least notified the Register of Deeds that she had only mortgaged and not sold the land to Almeda. Better still, she should have taken steps to annul the sale and recover the property. Inexplicably, she did nothing at all." — This passage highlights the significance of the petitioner's inaction for eight years, which the Court found inconsistent with her claim of having been deceived.

• "According to Tolentino, the presumption of equitable mortgage will apply only if it is clearly shown that the consideration was unusually inadequate such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be likely to consent to it." — This passage defines the standard for "unusually inadequate" consideration under Article 1602(1), which the Court adopted in rejecting the petitioner's claim.

• "In Cuyugan v. Santos, the Court held that another test to determine whether a conveyance is a sale or merely a security for the payment of a loan is the continued existence of a debt or liability on the part of the alleged mortgagor. If such a relationship exists, the transaction is a mortgage; otherwise, it is a contract of sale." — This passage articulates the controlling test for distinguishing a sale from a mortgage, which the Court applied to find that no debt relationship existed.

• Cuyugan vs. Santos, 34 Phil., 100 — Cited as controlling precedent for the test to determine whether a conveyance is a sale or merely a security for the payment of a loan: the continued existence of a debt or liability on the part of the alleged mortgagor. The Court applied this test and found no debt relationship existed.

• Sons of de la Rama vs. Benedicto, 5 Phil., 512 — Cited for the rule that an admission in a pleading will not apply if the pleading was not signed by the party and no proof was presented that he had authorized the making of such admission. The Court distinguished this case because the petitioner's answers bore her signature and she acknowledged them at the trial.

• Article 1602, Civil Code — Creates the presumption of equitable mortgage in enumerated cases, including unusually inadequate price, vendor remaining in possession, execution of instruments extending the period of redemption, purchaser retaining part of the purchase price, vendor binding himself to pay taxes, and any other case where it may be fairly inferred that the transaction shall secure the payment of a debt. The Court applied this provision but found the presumption rebutted.

• Article 1604, Civil Code — Extends the application of Article 1602 to contracts purporting to be absolute sales. The Court applied this provision to the deed of sale in question.

• Article 1371, Civil Code — Provides that in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. The Court applied this provision to examine the parties' conduct after the execution of the deed.

• Section 9, Rule 130, Rules of Court — Provides that when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon, but a party may present evidence to modify, explain, or add to the terms if he puts in issue in his pleading an intrinsic ambiguity, mistake, or imperfection, or the failure of the written agreement to express the true intent. The Court found no such grounds in the deed of sale.

• Article 2132, Civil Code — Defines the contract of antichresis, whereby the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit. The Court found no provision in the disputed documents authorizing Almeda to receive the fruits of the land.

• Article 2134, Civil Code — Requires that the amount of the principal and of the interest be specified in writing in a contract of antichresis; otherwise, the contract shall be void. The Court found that the instrument did not fix the amount of P80,000.00 as the petitioner's principal obligation.

• Section 34, Rule 132, Rules of Court — Provides that the court shall not consider evidence not formally offered. The Court applied this provision to reject documents the petitioner filed with the Court of Appeals that had not been formally offered as evidence with the trial court.

Davide, Jr., Bellosillo, Quiason, and Kapunan, JJ., concurred.