De Ocampo vs. Zaporteza

A written instrument that appears to be a sale subject to repurchase may be declared a mortgage where the evidence shows it does not express the true agreement of the parties; and a certificate of transfer obtained during the pendency of litigation that includes land beyond the conveyance is held in trust by the registered owner for the rightful owner as to the excess.

Agripino de Ocampo and others, plaintiffs-appellees, and Juan Zaporteza and others, defendants-appellants, were parties to transactions involving two parcels of land within Lot No. 4210. The deceased Alejandro de Ocampo had conveyed a portion of land to the defendants to secure P1,000 he received from them. The plaintiffs later conveyed another portion to the same defendants to secure P2,000 that the defendants furnished to pay Alejandro’s debt to the National Bank in the amount of P1,604.44 and funeral expenses of P400. The portions conveyed by Alejandro and by the plaintiffs together comprised land planted with 700 coconut trees.

In March 1924, the plaintiffs executed Exhibit A in favor of the defendants. Although the instrument apparently evidenced a sale subject to repurchase, the plaintiffs alleged that it was in reality a simple mortgage. According to plaintiffs’ witnesses Agripino and Gregorio de Ocampo, the contract was made to appear as a sale subject to repurchase at the suggestion of Nazario P. de Mesa, the defendants’ attorney, who told them that because the matter was between brothers, there was no objection to drawing the deed in that form; if the agreement were evidenced as a loan, the defendants might appear in a bad light if the transaction were not dissimulated. The plaintiffs gave a substantially correct account of the conversations preceding the execution of the document.

When Exhibit A was executed in March 1924, the decree adjudicating Lot No. 4210, which included the two parcels, had not yet been issued in the registration proceeding. The decree was issued on August 31, 1925, in favor of Agripino de Ocampo and others. On January 27, 1926, the trial court in the registration proceeding amended its decree on motion of the defendants by including the lien of a sale subject to repurchase for P3,000 for a period of three years from March 4, 1924. On June 18, 1926, the original certificate was issued in favor of those to whom the lot was adjudicated under the amended decree. Subsequently, on September 14, 1927, certificate of transfer Exhibit 1 was issued in favor of the defendants.

The certificate of transfer in favor of the defendants included not only the two parcels described in Exhibit A, planted with 700 coconut trees, but all of Lot No. 4210, which contained 2,000 coconut trees. The certificate therefore included a portion planted with 1,300 coconut trees to which the defendants were not entitled, especially because it was obtained during the pendency of the present action in which the value of Exhibit A was the matter in dispute. The action brought by the plaintiffs prayed that Exhibit A be annulled. The trial court held that Exhibit A was a mortgage rather than a sale subject to repurchase, and the defendants appealed.

• Nature of Exhibit A: Defendants-appellants, as the appealing parties, maintained that the trial court erred in holding that Exhibit A is a mortgage deed rather than a deed of sale subject to repurchase.
• Agreed Statement of Facts: They contended that the parties submitted an agreed statement of facts showing that the appellees executed Exhibit A in favor of the appellants.
• Receipt of Price and Absence of Fraud: They alleged that they received the price of the sale and that there was no fraud in the execution of the instrument in question.

• True Nature as Mortgage: Plaintiffs-appellees contended that the contract between the parties was in reality a simple mortgage, not a sale subject to repurchase.
• Dissimulation at Defendants’ Attorney’s Suggestion: They argued that the deed was made to appear as a sale subject to repurchase at the suggestion of Nazario P. de Mesa, the defendants’ attorney, who told them that as it was a question between brothers, there was no objection to drawing up the deed in that form, whereas if the agreement were evidenced as a loan, the defendants might appear in a bad light if the transaction were not dissimulated.
• Security for Debts: They maintained that the conveyances were only to secure P1,000 received by Alejandro de Ocampo and P2,000 furnished by the defendants to pay Alejandro’s National Bank debt and funeral expenses.
• Area Conveyed: They showed that the portions conveyed by Alejandro and by the plaintiffs comprised only land planted with 700 coconut trees.
• Mistake in the Writing: They put in issue a mistake in Exhibit A and its failure to express the true intent and agreement of the parties.

• Nature of Exhibit A: Whether Exhibit A expresses the true agreement of the parties or is in reality a mortgage rather than a sale subject to repurchase.
• Mistake in the Writing: Whether plaintiffs may put in issue mistake in Exhibit A and its failure to express the true intent and agreement of the parties, notwithstanding its apparent terms.
• Certificate of Transfer Over Entire Lot: Whether the certificate of transfer, Exhibit 1, may be given legal effect over the entire Lot No. 4210, including the portion planted with 1,300 coconut trees not conveyed under Exhibit A.
• Redemption by Administrator: Whether the administrator of the estate of Alejandro de Ocampo must redeem the two parcels described in Exhibit A by paying P3,000 within ninety days from finality, failing which ownership consolidates in the defendants.

• Nature of Exhibit A: No. Exhibit A did not express the true contract; it was a mortgage rather than a sale subject to repurchase. The evidence showed the conveyances were intended only to secure P1,000 and P2,000 debts.
• Mistake in the Writing: Yes. Plaintiffs could put mistake in issue; the presumption under section 285 of the Code of Civil Procedure depended on the evidence, which supported their claim.
• Certificate of Transfer Over Entire Lot: No. Exhibit 1 cannot be given legal effect as to the portion planted with 1,300 coconut trees; defendants hold that portion in trust for plaintiffs and must execute a deed transferring it.
• Redemption by Administrator: Yes. The administrator must redeem the two parcels within ninety days from finality by paying P3,000; if he fails, ownership consolidates in defendants.

• Nature of Exhibit A: The deed apparently evidenced a sale subject to repurchase, but plaintiffs put in issue mistake and failure to express true intent. The presumption under section 285 of the Code of Civil Procedure depended on the evidence. Plaintiffs’ evidence showed only 700 coconut trees were conveyed and that the conveyances by Alejandro and plaintiffs were only to secure P1,000 and P2,000, the latter for the National Bank debt of P1,604.44 and funeral expenses of P400. Witnesses Agripino and Gregorio de Ocampo testified that the contract was in reality a simple mortgage disguised as a sale subject to repurchase at the suggestion of defendants’ attorney Nazario P. de Mesa, who said that as it was between brothers, there was no objection to that form; if it were a loan, defendants might appear in a bad light. The account was supported by the evidence. Thus Exhibit A did not express the true contract.
• Mistake in the Writing: Since plaintiffs put in issue mistake of the writing and its failure to express true intent, the presumption under section 285 did not conclusively favor the written terms; it depended on the evidence. The evidence established the true agreement was a mortgage, so Exhibit A did not express the true contract entered into by the parties.
• Certificate of Transfer Over Entire Lot: At execution of Exhibit A, the decree adjudicating Lot No. 4210 had not yet been issued. It was later amended on defendants’ motion to include the lien of a sale subject to repurchase for P3,000 for three years from March 4, 1924. The original certificate was issued on June 18, 1926, and certificate of transfer Exhibit 1 was issued in defendants’ favor on September 14, 1927. But Exhibit 1 included all of Lot No. 4210, containing 2,000 coconut trees, although Exhibit A covered only two parcels planted with 700 coconut trees. Defendants were not entitled to the portion planted with 1,300 coconut trees, especially because Exhibit 1 was obtained during the pendency of the action. Even assuming Exhibit 1 valid, because defendants obtained the amendment of the decree by means of Exhibit A and obtained the certificate of transfer knowing that only two parcels had been transferred to them, the doctrines in Uy Aloc vs. Cho Jan Ling, Camacho vs. Municipality of Baliuag, and Severino vs. Severino applied: defendants hold the certificate of transfer in trust for plaintiffs as to the portion planted with 1,300 coconut trees and are bound to execute a deed transferring that portion.
• Redemption by Administrator: As to the two portions described in Exhibit A, the judgment appealed from was affirmed. The administrator of the estate of the deceased Alejandro de Ocampo must redeem the land within ninety days from finality by paying P3,000 to the defendants, who shall restore the land to the administrator. If the administrator fails to exercise this right within the period fixed, ownership of the land described in Exhibit A shall consolidate in the defendants.

• Mistake in Written Instrument — A written instrument that appears to be a sale subject to repurchase may be shown not to express the true agreement of the parties where mistake or failure to express true intent is put in issue. The presumption under section 285 of the Code of Civil Procedure that the writing expresses the true agreement depends on the evidence. Here, the evidence established that the conveyances were only security for debts, so Exhibit A was a mortgage.
• Trust Over Excess Land in Certificate of Transfer — Where a certificate of transfer is issued in favor of a party during the pendency of litigation and includes land beyond what was actually conveyed, the registered owner holds the excess in trust for the rightful owner and must execute a deed transferring it. The Court applied this to the 1,300-coconut-tree portion of Lot No. 4210 included in Exhibit 1 but not covered by Exhibit A.
• True Nature of Contract Determined by Intent — The apparent form or title of an instrument does not control; the true agreement of the parties governs. Here, although Exhibit A appeared to be a sale subject to repurchase, it was held to be in reality a mortgage.

• "It is true that the deed in question apparently evidences an agreement of a sale subject to repurchase; but as the plaintiffs-appellees have put in issue a mistake of said writing, and its failure to express the true intent and agreement of the parties, the presumption established in section 285 of the Code of Civil Procedure depends on the evidence in the case." — States the controlling rule on mistake in a written instrument and explains why the presumption favoring the writing did not resolve the case.
• "The plaintiffs' evidence shows: (1) That the portion of land conveyed to the defendants by the plaintiffs, added to that conveyed to them by the deceased Alejandro de Ocampo, only comprises an area of land planted with 700 coconut trees; and (2) that the conveyance by Alejandro de Ocampo, and that subsequently made by the plaintiffs, were only to secure the amount of P1,000 received by the former, and the amount of P2,000 furnished by the same defendant to pay a debt of the deceased to the National Bank (P1,604.44), and funeral expenses, (P400)." — Summarizes the evidence that established the conveyances were security for debts rather than a sale.
• "In view of the foregoing, we are of opinion, and so hold, that the instrument Exhibit A does not express the true contract entered into by the parties, and taking for granted that Exhibit 1 is valid, we hold, nevertheless, that as the defendants obtained the amendment of the decree of adjudication by means of said instrument, and having, furthermore, obtained the certificate of transfer of title knowing that only two parcels of lot No. 4210 had been transferred to them, application must here be made of the doctrines upheld in the cases of Uy Aloc vs. Cho Jan Ling (19 Phil., 202); Camacho vs. Municipality of Baliuag (28 Phil., 466); Severino vs. Severino (44 Phil., 343), to the effect that the defendants only hold the certificate of transfer in trust for the plaintiffs with respect to the portion of the lot planted with 1,300 coconut trees; and they are therefore bound to execute a deed in favor of the plaintiff, transferring to them said portion planted with 1,300 coconut trees." — States the ratio decidendi on the nature of Exhibit A and the trust obligation over the excess portion.
• "With regards to the two portions described in the instrument Exhibit A, we affirm the judgment appealed from, ruling that within ninety days from the date this decision becomes final, the administrator of the estate of the deceased Alejandro de Ocampo must redeem the land which is the subject mater of the contract, paying the sum of P3,000 to the defendants, who shall restore said land to the administrator, provided that if the administrator fails to exercise this right within the period fixed, the ownership of the land described in the deed Exhibit A shall be consolidated in the defendants." — Sets out the redemption period and the consequence of failure to redeem.

• Uy Aloc vs. Cho Jan Ling, 19 Phil. 202 — Cited by the Court, together with Camacho and Severino, for the doctrine that defendants hold the certificate of transfer in trust for plaintiffs as to the portion planted with 1,300 coconut trees.
• Camacho vs. Municipality of Baliuag, 28 Phil. 466 — Cited for the same trust doctrine over the excess portion of the registered land.
• Severino vs. Severino, 44 Phil. 343 — Cited for the same trust doctrine over the excess portion of the registered land.

• Section 285, Code of Civil Procedure — The Court cited this provision on the presumption arising from a written instrument. Because plaintiffs put in issue mistake and failure to express true intent, the presumption depended on the evidence, which showed Exhibit A was a mortgage rather than a sale subject to repurchase.

Avanceña, C.J.; Johnson, J.; Street, J.; Johns, J.; Romualdez, J.; Villa-Real, J.