341 Phil. 379
DAVIDE, JR., J.:
This is a complaint filed on February 5, 1987 by spouses Ponciano T. Matanguihan and Eustaquia Matanguihan against Herminio Paran to recover possession of a residential house and lot located at Poblacion Mataas na Kahoy with an area of 1,130 square meters covered by Tax Declaration No. 0473.“Na ang kasulatang ito ay tatagal lamang ng hanggang TATLONG (3) buwan na magkakasunod upang ito ay mabiling muli namin sa mag-asawang Ponciano Matanguihan at kung dumating ang takdang panahon at ito ay hindi namin matubos sa nasabing mag-asawang Ponciano Matanguihan at Eustaquia Matanguihan ay ang kasulatang ito ay magiging ganap, lubos at bilihang lampasan.”
The defendant Herminio Paran died on December 11, 1987 during the pendency of the case. The complaint was amended to substitute the heirs of Herminio Paran, namely Reynaldo Paran, Erlinda Paran-Gonzales, Flora Paran-Lescano, Joseph Paran and Ronnie Paran. Reynaldo Paran was named the representative of the heirs for the purpose of this suit.
It is not disputed that on October 13, 1983, spouses Ponciano Matanguihan and Eustaquia Matanguihan and spouses Herminio and Fortunata Paran entered into an agreement denominated as ‘ Kasulatan ng Bilihang Lupang Mabibiling Muli (Pacto de Retro)” covering a residential house and lot owned by spouses Herminio and Fortunata Paran located at poblacion Mataas na Kahoy for the sum of P118,000.00 paid by spouses Ponciano and Eustaquia Matanguihan. Said agreement is a public document having been notarized by Notary Public, Calixto P. Luna. The aforesaid agreement contains a stipulation which reads:
The three-month period stipulated in the agreement lapsed without the defendant being able to repurchase the property. Plaintiffs, upon requests of defendant, granted the latter, not only one but several extensions. Defendants still failed to repurchase the property. Thereafter, plaintiffs demanded from defendant possession of the property which the latter refused. The plaintiff caused the transfer of the Tax Declaration No. 0473 (Exh. B and B-1). The plaintiffs also caused the registration of the said property in the primary entry of the Register of Deeds of Batangas on June 3, 1985. On June 9, 1986, plaintiffs brought the case before the Barangay pursuant to PD No. 1508. There being no amicable settlement reached at the Barangay, the plaintiff filed the case before this court on February 5, 1987.
Plaintiffs now seek to enforce the aforesaid agreement.
The defendant, substituted by his heirs, opposes the complaint and claims that the subject agreement entitled “Kasulatan ng Bilihang Mabibiling Muli (Pacto de Retro)” is intended by the parties to be an equitable mortgage.”( Decision, Records, pp. 149-150 ).[5]
WHEREFORE, judgment is hereby rendered ordering the defendants, the heirs of Herminio Paran, namely Reynaldo Paran, Erlinda Paran-Gonzales; Flora Paran Lescano, Joseph Paran to vacate and deliver possession of subject property (house and lot) to plaintiffs Ponciano Matanguihan and Eustaquia Matanguihan, and to pay plaintiffs damages by way of unearned rentals on subject property from June 3, 1985 (when they registered the property with the Register of Deeds of Batangas) until the defendants shall have vacated the premises. In this connection a monthly rental of P1,000.00 is deemed reasonable.The trial court anchored its judgment on the following findings:
The defendants are likewise ordered to pay the plaintiffs the amount of P25,000.00 as moral damages; P10,000.00 as attorney's fees, and to pay the costs of suit.
SO ORDERED.[6]
The contract entered into by the parties is clear, definite and precise as to its nature and character.
It is entitled "Kasulatan ng Bilihang Lupang Mabibiling Muli (Pacto de Retro)" and it contains the provision that in case the vendor a retro fails to repurchase the property, the sale shall be considered an absolute sale. There is no ambiguity in the contract which can create an occasion for interpretation. The agreement is written in Pilipino language spoken by the parties. Further, Reynaldo Paran, one of the substituted defendants admitted during the trial that he fully understood the agreement to be Pacto de Retro; that he had misgivings about the contract but nonetheless he allowed his parents to sign the agreement. Reynaldo Paran is a law graduate and a real estate broker (TSN pp. 7-8, May 25, 1990; TSN pp. 6-9, Aug. 2, 1990).
The contract having been reduced into writing, the terms of which are clear and unequivocal, it is to be considered as containing all such terms and there can be, between the parties and their successors in interest, no evidence of the terms of the agreement other than the contents of the writing. (Rule 130, Sec. 7, Rules of Court). The circumstances attendant to defendants in this case, which are adverted to in the preceding paragraph, do not allow us to consider the exceptions provided in said Rule 130.[7]
WHEREFORE, the decision of the court a quo is hereby REVERSED and a new one entered declaring the sale with right to repurchase between the parties as an EQUITABLE MORTGAGE and declaring appellants entitled to redeem the mortgaged property which shall be effected upon payment of their mortgage debt to appellees in the amount of P100,000.00 (one hundred thousand pesos) with legal rate of interest from January 7, 1984, the time the loan matured until it is fully paid.SO ORDERED.[10]
The only issue involved herein is whether the contract denominated as “ Kasulatan ng Bilihang Lupang Mabibiling Muli” (Exh. A, Records, p. 110) is an equitable mortgage or a pacto de retro sale.In its resolution of 13 April 1994,[11] respondent Court of Appeals denied petitioners' motion for reconsideration of the decision.
The reason behind the execution of Exhibit A was testified to by appellant Reynaldo Paran that “he needed, the amount of P30,000.00 for my subdivision and I owed Mr. Mariano Gutierrez the amount of P20,000.00 and the remaining amount I used in the renovation of my house, sir.” (TSN, May 25, 1990, p.5). Appellee Ponciano Matanguihan himself admitted on cross-examination that appellant used the money for the latter’s subdivision (TSN, August 24, 1989, p. 10). While it is true that appellant Reynaldo Paran informed his parents that the document was a pacto de retro sale while their intention was merely to mortgage their property (TSN, August 2, 1990, p. 7) and yet his parents signed the document knowing that said document did not express their real intention, they did so due to the urgent necessity of obtaining the funds....
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There are, however, other circumstances which will support the presumption that the transaction between the parties herein was one of equitable mortgage.
Appellees admitted that from the time of the execution of the questioned contract up to the time that appellee Ponciano Matanguihan testified, defendant Herminio Paran and his family and appellant Reynaldo Paran and his family were in possession of the subject property (TSN, June 22, 1989, p. 5; TSN, August 24, 1989, p. 10 and TSN, February 6, 1990, pp. 3-4). The second paragraph of Article 1602 of the New Civil Code provides that when the vendor remains in possession as lessee or otherwise, the contract shall be construed as an equitable mortgage (Labasan vs. Lacuesta, 86 SCRA 16; Bundalian vs. Court of Appeals, supra). Said presumption is bolstered by the fact that appellee Ponciano Matanguihan testified that he has not entered/inspected the house he allegedly bought under a pacto de retro sale (TSN, August 24, 1989, p. 11 and February 6, 1990, p. 3 ).
Appellees did not, after entering into the agreement on October 7, 1983 pay the taxes thereon. It was only on May 7, 1986 or nearly three (3) years thereafter that they started paying the real property tax (See De Bayquen vs. Balaoro, 143 SCRA 412). The fifth paragraph of Article 1602 provides that when the vendor (appellants herein) pays the taxes on the thing sold, the presumption is that the transaction is an equitable mortgage.
We need not dwell on the fact that appellees granted appellants several extensions of the period of redemption which were merely verbal although the third paragraph of Article 1602 requires that it be in another instrument... or built in the same instrument... because the preceding disquisition suffices to sustain Our finding that the transaction is an equitable mortgage and not a pacto de retro sale as it purports to be.
THE RESPONDENT COURT ERRED IN RULING THAT THE “KASULATAN NG BILIHANG MULI (PACTO DE RETRO)” IS AN EQUITABLE MORTGAGE.Petitioners insist that the transaction in question is a contract of sale with right of repurchase as clearly shown in the KASULATAN. In stark contrast, private respondents assert in their comment that the contract is, in reality, an equitable mortgage.
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:1. When the price of the sale with right to repurchase is unusually inadequate;
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.The contract referred to in Article 1602 is a contract of sale with right of repurchase where the conventional redemption provided for in Article 1601 shall take place.
ART. 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.
ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.
First. Sometime in October 1983, Reynaldo Paran, son of the deceased Herminio Paran, was strapped for cash, needing the amount of P100,000.00 to answer for the following: P30,000.00 to be used for his subdivision; P20,000.00 to repay an indebtedness; and P50,000.00 for the renovation of his house erected on his father’s lot covered by Tax Declaration No. 0391. He was advised by his late father to mortgage the lot in order to secure the needed amount. Thus, petitioners extended to Herminio Paran the loan of P100,000.00 payable within three months. Thereafter, on 7 October 1983, a deed of sale covering the lot and residential house erected thereon was executed. The consideration appearing in the deed amounted to P118,000.00 representing the principal of P100,000.00 and the interest of P18,000.00 at the rate of 6% per month. Due to his pressing need to obtain funds, Reynaldo allowed his parents to sign the deed knowing fully well that it did not reflect the real intention of the parties.[18]The Court of Appeals then committed no reversible error in its challenged decision.
Second. It is undisputed that the alleged vendors and their successors-in-interest remained in actual physical possession of the disputed property as if they were still the absolute owners thereof, without an agreement for maintenance expenses, much less, rental payments.
Third. Petitioners declared the property in their names for taxation purposes only on 13 November 1985, as evidenced by Tax Declaration No. 0473,[19] and paid the taxes thereon as evidenced by Realty Tax Receipt No. 157998,[20] only on 7 May 1986.
Fourth. Petitioners allowed various “extensions” of the redemption period. These extensions of the redemption period are indicative of an equitable mortgage, as expressly enumerated in Article 1602(3) of the Civil Code.[21]
Fifth. Petitioners failed to consolidate their title over the disputed property that was allegedly sold even after the expiration of the period to redeem. This further eroded their claim of title over the disputed property.[22]
Sixth. A judicious scrutiny of the circumstances attendant to the execution of the deed of sale readily reveals that respondents’ predecessors-in-interest had no intention to sell and that petitioners themselves had no intention to buy. Most revealing of the want of intention to sell is the fact that the money proceeds of the alleged sale was partly used for the construction of the very house purportedly sold. On the other hand, petitioner Ponciano Matanguihan’s declaration that he never entered the premises of the disputed property in order to inspect it, unequivocally revealed an absence of intent to buy. A buyer of sound mind would not purchase anything without first inspecting the thing to be bought.