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411 Phil. 788


[ G.R. No. 109197, June 21, 2001 ]




Before us is a petition seeking reversal of the decision of the Court of Appeals dated December 21, 1992 and its resolution dated March 3, 1993 denying reconsideration.  The dispositive portion of the Court of Appeals' decision, which affirmed that of Branch 168 of the Regional Trial Court of the National Capital Region stationed in Pasig rendered in favor of private respondents herein, reads as follows:

WHEREFORE, in view of all the foregoing, the judgment, except for the portion thereof which states "within ninety (90) days from receipt of this decision," which should be changed to "within ninety (90) days from finality of this decision," is hereby AFFIRMED, with costs against the appellants.


The relevant facts are chronicled as follows:

Private respondents Nicanor de Guzman, Jr. and Ester de Guzman were the owners of three lots, covered by Transfer Certificates Title No. 9052, 9053, and 9054, located in Greenhills Subdivision, San Juan, Metro Manila. In 1971, they constructed, at a cost of P3 million, a 1,200 square meter residential house on two of the lots. These lots, covered by TCT Nos. 9052 and 9053, had a combined area of approximately 1,626 square meters. In 1987, the market value of the lots already ranged from P4,000 to P5,000 per square meter while the house was worth about P10 million.

Sometime in 1987, Nicanor de Guzman, Jr. decided to run for the position of Representative of the Fourth District of Nueva Ecija.  Sometime in April 1987, however, de Guzman's campaign fund began to run dry and he was compelled to borrow P2.5 Million from Mario Siochi.  The de Guzman spouses were required to sign, as a sort of collateral, a deed of sale dated April 10, 1987 whereby they purportedly sold the lots covered by TCT No. 9052, 9053, and 9054, along with the improvements thereon, to Siochi.  After the execution of the "deed of sale," de Guzman was able to obtain two more loans of P500,000.00 each from Siochi.  No additional collateral was required, the "deed of sale" being more than sufficient to cover the original P2.5 million loan and the additional P1 million loan. Despite the "deed of sale," however, the de Guzmans remained in possession of the property.

Aside from these loans, de Guzman also owed Siochi several debts, the latter having paid the following, among other debts, of de Guzman:  a debt to Filipinas Bank in the amount of P1,561,460.00; P2 Million in favor of Ricardo Silverio; the levy on execution in favor of Mr. Zuzuareggui in the sum of P245,500; the P100,000 fee of de Guzman's lawyer; and the realty taxes on the property amounting to P97,292.32 and P51,703.12.

To repay these other loans, the de Guzmans agreed with Siochi to have their 1,411 square meter vacant lot, covered by TCT No. 9054 (which had already been "sold" to Siochi under the April 10, 1987 deed of sale), sold. The sale of the same amounted to P4.8 Million, the proceeds of which were all retained by Siochi.

In the meantime, and without the knowledge of the de Guzman spouses, Siochi had TCT No. 9052 and 9053 cancelled, on the basis of the deed of sale executed by the spouses on April 10, 1987, and had new Torrens titles issued in his name. On June 20, 1987, Siochi sold the two lots and the improvements thereon for P2.75 Million to herein petitioners Jayme and Evelyn Uy. Thereafter, petitioners had Siochi's titles over the lots cancelled and had new titles, TCT No. 277-R and 278-R, issued over the property. On July 1, 1988, petitioners entered into a contract of lease with option to buy with Roberto Salapantan.

Salapantan was, however, unable to obtain possession of the lots since the premises were occupied by the de Guzman spouses. Consequently, Salapantan filed a complaint for ejectment on August 1, 1988 against the de Guzman spouses with the Metropolitan Trial Court of San Juan, Metro Manila. It was only at this time that the de Guzmans discovered the sale of their house and lot by Mario Siochi to petitioners and the lease executed by petitioners to Salapantan.

On September 16, 1988, the de Guzmans filed a complaint with the Regional Trial Court of Pasig against Siochi, Salapantan, and herein petitioners, seeking the reformation of the April 10, 1987 Deed of Absolute Sale to the end that the true intention of the parties therein be expressed and to remove the cloud cast over TCT No. 9052, and 9053 caused by the June 20, 1987 deed of sale between Mario Siochi and petitioners and by the issuance of TCT No. 277-R and 278-R obtained by petitioners by virtue of said deed of sale. The complaint also sought the reconveyance of the ownership and titles under TCT No. 277-R and 278-R to the de Guzmans. The complaint, docketed as Civil Case No. 565893, was raffled to Branch 168 of the Regional Trial Court of Pasig.  During the trial of the case, only the de Guzmans and Siochi presented evidence, petitioners having decided to adopt the evidence presented by Siochi.

On December 28, 1990, the trial court rendered its decision in favor of the de Guzmans, disposing as follows:

WHEREFORE, in view of all the foregoing, the Court finds for the plaintiff and judgment is hereby accordingly rendered as follows:

1. Declaring the Deed of Sale dated April 10, 1987, Exhibit "B", executed between plaintiffs and defendants Mario Siochi and Erlinda Siochi, an equitable mortgage and ordering the plaintiffs to pay defendant spouses Mario Siochi and Erlinda Siochi the admitted loan therein in the amount of P2.5 million with legal interest of 12% per annum from April 10, 1987 and the additional admitted loan of P1,000,000.00 also with legal interest of 12% per annum from May 1987 when the same was incurred within ninety (90) days upon receipt of this decision;

2. Declaring as null and void the Deed of sale dated June 20, 1987, Exhibit "C", executed between defendants Mario Siochi and Erlinda Siochi as vendors therein and Jayme O. Uy and Evelyn C. Uy, as vendees therein;

3. Ordering defendant spouses Jayme Uy and Evelyn Uy to reconvey the questioned properties to plaintiffs;

4. Ordering the Register of Deeds of San Juan, Metro Manila, to cancel TCT Nos. 277-R and 278-R issued in favor of the defendant spouses Jayme O. Uy and Evelyn Uy and to issue new titles in the names of the plaintiff spouses Nicanor G. de Guzman, Jr. and Esther de Guzman;

5. Declaring as null and void the Contract of Lease with Option to Buy dated July 1, 1988 executed between defendants Jayme Uy and Evelyn Uy and defendant Roberto Salapantan; and

6. Ordering defendants to pay plaintiffs attorney's fees in the sum of P100,000.00.

Costs against all defendants.

Aggrieved, petitioners interposed an appeal with the Court of Appeals, docketed therein as CA-G.R. CV No. 30935.  On December 21, 1992, the appellate court affirmed with a slight modification as earlier mentioned.  Hence, the instant recourse wherein petitioners do not dispute that the sale by the de Guzmans to Siochi is an equitable mortgage as found by both the trial court and the appellate court.  As incisively stated by the trial court:

Art. 1602 of the New Civil Code provides:

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 fairly be 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.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as a rent or otherwise shall be considered as interest which shall be subject to the usury law.

In view of all the foregoing, the Court is convinced and so finds that the questioned deed of sale, Exhibit "B", is in reality a mere equitable mortgage and not an absolute sale in view of the following circumstances:

First, the consideration of the sale of P2.5 Million is grossly and unusually inadequate. The uncontradicted evidence is that the price alone of plaintiff's residential house in 1987 having a floor area of 1,200 square meters is P10 Million while the two (2) lots having an aggregate area of 1,620 square meters commanded a price of from P4,000.00 to P5,000.00 per square meter in 1987 the year when the deed of sale was executed, (Art. 1602, par. 1 in relation to Art. 1604, New Civil Code; Capulong vs. Court of Appeals, 130 SCRA 245). The vacant lot with an area of 1,411 square meters was sold by Siochi at P4.8 Million.

Second, despite the alleged deed of sale, plaintiffs have remained in actual and physical possession of the litigated property up to the present time (Art. 1602, par. 2, New Civil Code, Labosan vs. Lacuesta, 86 SCRA 1622) which is a badge of an equitable mortgage.

Third, the uncontradicted evidence is that plaintiffs were driven to obtain the emergency loan "due to urgent necessity of obtaining funds", (Labosan vs. Lacuesta, 86 SCRA 1622) and they signed the deed of sale knowing that it did not express their real intention (Art. 1362, New Civil Code). In fact, additional loans in the total sum of P1 million were extended to plaintiffs by Siochi even after the execution of said sale without Siochi demanding for any additional security.

Fourth, the evidence has established that plaintiffs had obtained series of loans from defendants Siochi which is likewise a badge of equitable mortgage (Capulong vs. Court of Appeals, 130 SCRA 245). Defendants Siochi admitted that the sum of P2.5 million, together with the amounts paid as capital gains tax and documentary stamps and the amount of P245,500.00 paid to Antonio Zuzuareggui, was treated as loans.

Fifth, defendants Siochi had retained for themselves the entire proceeds of P4.8 million derived from the sale of plaintiffs' vacant lot covered by TCT No. 9054. The uncontradicted evidence is that defendants Siochi had sought the permission of plaintiffs to sell said lot notwithstanding the questioned deed of sale.

Sixth, the admission of defendants Siochi in having granted series of loans to plaintiffs before and after the execution of the questioned deed of sale apart from circumstances that the emergency loan of P2.5 million was specially treated as loan by defendants Siochi, indubitably show that the deed of sale was in reality an equitable mortgage.

However, while petitioners do not question that the April 10, 1987 Deed of Sale is an equitable mortgage and not a sale, they make much capital out of the fact that when they purchased the property, Mario Siochi already had Torrens titles issued in his name. Petitioners now claim that they are purchasers in good faith who had the right to rely on the Torrens titles issued in Siochi's name. They likewise claim that the appellate court erred in not upholding the indefeasibility and conclusiveness of the titles issued in their names.

Petitioners' appeal must necessarily fail.

Whether petitioners are innocent purchasers in good faith and for value is a factual matter, which cannot be raised in a petition for review on certiorari under Rule 45. Section 2 of Rule 45 (now Section 1 of Rule 45 of the 1997 Rules of Civil Procedure) provides that "[o]nly questions of law may be raised in the petition and must be distinctly set forth." It is a basic rule that only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of Court (Abalos vs. CA, 317 SCRA 14 [1999]).  This Court is not a trier of facts; the resolution of factual issues being the function of lower courts (Valmonte vs. CA, 303 SCRA 278 [1999]).

Moreover, it is a well-settled rule that the factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court -- and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court (Borromeo vs. Sun, 317 SCRA 176 [1999]), as in this case.

As stated by the trial court:

The theory of defendants Uy that TCT Nos. 277-R and 278-R obtained by them are indefeasible, cannot be sustained under the circumstances established by the evidence.  Said defendants acted with culpable negligence amounting to a constructive fraud in having purchased the questioned properties which have been in actual possession of plaintiffs without ascertaining the extent of the titles and ownership of their sellers, the defendants Siochi. If defendants Uy had been influenced to buy the questioned house and lots by the representations of defendants Siochi that they owned the same, defendants Uy were not totally ignorant of the actual circumstances because they cannot claim in conscience that they had not known or did not have the means to know the real facts or state of titles and ownership of defendants Siochi. Plaintiffs have been in actual possession of the house and lots and defendants Uy had they acted diligently, could have easily ascertained from plaintiffs themselves the state of titles and ownership of the questioned properties they had purchased. Defendants Uy are, therefore, prevented under the circumstances to set up their alleged titles, TCT Nos. 277-R and 278-R, against plaintiffs' titles and ownership.

Echoing the trial court, the Court of Appeals held that:

Appellants contend that the spouses Uy "are innocent purchasers in good faith and for value" since they were not aware of any flaw or defect in the tile of Siochi. However, the contrary is true. The titles they obtained could not be an easy scheme for them to defraud and deprive the appellees of their rightful ownership of the litigated property. Appellants Uy were not buyers in good faith simply because they paid the consideration of the sale to appellant Siochi. Rather, they were buyers in bad faith because they were fully aware that that their sellers, the spouses Siochi, were not in possession of the property at the time they purchased it. Appellants Uy deliberately did not look beyond the title of Siochi. Ordinary and simple prudence dictates that they should have verified the nature of ownership of the sellers beyond the deed of sale, considering the amount involved, the extent of the property, and knowing that the sellers were not in possession of the property sold, and thus, could not have delivered the actual and physical possession thereof.

Thus, while it is true, as asserted by petitioners, that a person dealing with registered lands need not go beyond the certificate of title, it is likewise a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man on his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor.  His mere refusal to face up to the fact that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor's or mortgagor's title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with the measure of precaution which may be required of a prudent man in a like situation (Crisostomo vs. CA, 197 SCRA 833 [1991]).

In Torres vs. CA (186 SCRA 672 [1990]), this Court had occasion to state that where there are circumstances in a case which should have put a party on guard and prompted him to investigate the property being mortgaged - such as the value of the property, its principal value being its income potential in the form of monthly rentals being located at the corner of Quezon Boulevard and Raon Street, Manila, and the registered title not yielding any information as to the amount of rentals due from the building, much less on who is collecting them, or who is recognized by the tenants as their landlord -  it was held that any prospective buyer or mortgagee of such a valuable building and land at the center of Manila, if prudent and in good faith, is normally expected to inquire into all these and related facts and circumstances.  For failing to conduct such an investigation, a party would be negligent in protecting his interests and cannot be held as an innocent purchaser for value.

Admittedly, petitioners are engaged in the buying and selling of real estate property. Paraphrasing the Court's statements in Uy vs. CA, (246 SCRA 703 [1995]), we presume petitioners are experienced in their business. Ascertainment of the status and condition of pieces of property offered to them for sale must be a standard and indispensable part of their operations. Surely, they cannot simply rely on an examination of a Torrens certificate to determine what the subject property looks like as its condition is not apparent in the document. The land might be in a depressed area. There might be squatters on it. It might be easily inundated. It might be an interior lot, without convenient access. These and other similar factors determine the value of the property and so should be of practical concern to the petitioners.

Curiously, petitioners now claim that they merely relied on the certificate of title to persuade them that the realty offered was acceptable.  It would have been so easy for them to undertake an ocular inspection of the land which, after all, was not in some remote or forbidding wilderness.

Likewise, the Court finds it unusual that the property was sold to petitioners for only P2.75 Million when, as adverted to earlier, the house alone was already worth P10 Million at that time. This circumstance also militates against petitioners' claim that they are innocent purchasers. Lastly, the burden of proving the status of a purchaser in good faith and for value lies upon him who asserts that standing. In discharging the burden, it is not enough to invoke the ordinary presumption of good faith that everyone is presumed to act in good faith. The good faith that is here essential is integral with the very status that must be proved (Baltazar vs. CA, 168 SCRA 354 [1988]). Petitioners have failed to discharge that burden.

With the conclusion that petitioners are not innocent purchasers in good faith and for value, they could not have acquired ownership over the property in question. As found by both the trial court and appellate court, the April 10, 1987 deed of sale executed by the de Guzmans and Siochi was an equitable mortgage, hence, the titles to the house and lots which were sold by Siochi to petitioners actually remained with the mortgagors, the de Guzmans. The circumstance that the original transaction was subsequently declared to be an equitable mortgage must mean that the title to the subject land which had been transferred to private respondents actually remained or is transferred back to petitioners herein as owners-mortgagors, conformably with the well-established doctrine that the mortgagee does not become the owner of the mortgaged property because the ownership remains with the mortgagor (Montevirgen vs. CA, 112 SCRA 641 [1982]). The issuance of a certificate of title in Siochi's favor did not vest upon him ownership of the property. Neither did it validate the sale made by Siochi to petitioners, which is null and void. Article 2088 of the Civil Code provides that the "the creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them." Being null and void, the sale by Siochi of the questioned property to petitioners, who are not innocent purchasers, produced no legal effects whatsoever. Quod nullum est, nullum producit effectum.

WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit.

No pronouncement as to costs.


Vitug, Panganiban, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

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