G.R. No.

102557 July 30, 1996 Plaintiff failed to pay the loan within the
stipulated period of one (1) year. But no
ALFONSO D. ZAMORA, petitioner, foreclosure took place because plaintiff
vs. asked for and was extended more
COURT OF APPEALS and MA. JACINTA D. DE loans on five different occasions,
GUZMAN, respondents. evidenced by temporary receipts
marked Exhs. 8 to 12 inclusive. These
additional loans, upon agreement of
plaintiff and defendant, were made
subject to the security provided by the
PANGANIBAN, J.:p
same real estate mortgage. Plaintiff
In dispute is the nature of the contract entered into by the parties in 1988 —
failed to pay the loans which now
whether the same is an absolute sale or an equitable mortgage. totalled P272,356.00 (including
interest). On march 1, 1988 plaintiff as
Challenged in this petitioner under Rule 45 is the vendor executed a document know as
Decision1 of the Court of Appeals2 in CA-G.R. CV No. "Absolute Sale of Undivided Share of
27319 promulgated on August 19, 1991, affirming the land" in favor of defendant, for a total
judgment of the trial court which ruled that the contract consideration of P450,000.00. This
in question was an equitable mortgage and not a deed Deed of Conveyance (Exh. E or Exh. 5)
of absolute sale, and respondent Court's subsequent which appears to be unilaterally
Resolution 3promulgated on October 25, 1991, denying executed covered plaintiff's individual
reconsideration. share and interest consisting of
approximately 300 square meters
The Facts undivided share and participation in the
same property described in and
covered by TCT No. 81503. The
Some material facts are not disputed. The
balance of P177,644.00 (P450,000
petition4 itself reproduced the respondent Court's
minus the loan) was duly paid by
narration thereof as follows:5
defendant to the plaintiff within one
week after plaintiff signed the
Plaintiff is one of five (5) brothers and document of sale in the presence of
sisters who own in common a parcel of Celia Zamora, defendant's spouse.
land together with improvements
thereon located at E. Rodriguez
Defendant caused the registration of
Avenue, Quezon City. The property
the "Absolute Sale of Undivided Share
with an area of 1,539 square meters,
of Land" with the Register of Deeds and
more or less, is covered by TCT No.
obtained a new title TCT No. 378689
81503 issued by the Register of Deeds
(Exh. 6 or Exh. G), wherein defendant
of Quezon City.
is now named as one of the registered
owners of the property together with
Starting January 8, 1973, the property the brothers and sister of plaintiff. Soon
in question had been leased to and after defendant obtained a copy of TCT
occupied by the defendant for a period No. 378689, his wife, Celia, delivered
of fifteen (15) years at a monthly rental the same to plaintiff.
of P5,000.00.
Subsequently, the Office of the
On January 16, 1987, plaintiff executed Register of Deeds of Quezon City was
a real estate mortgage over her share gutted by fire. When Celia Zamora
and interest in the subject property in asked plaintiff as to who would work for
favor of the defendant as a security for the reconstitution of the title, the letter
her loan of indebtedness to the latter in indicated that the defendant should do
the sum of P140,000.00. This contract it and the title was given by plaintiff to
(Exh. A or Exh. 7) provided inter Celia for the purpose of reconstitution.
alia that the loan was payable within On August 2, 1988 defendant applied
one (1) year with the interest at for administrative reconstitution of the
18% per annum, and constituted the title on August 22, 1988 (sic). After the
defendant (mortgagee) as plaintiff's same was accomplished, the title was
attorney-in-fact to choose the sheriff in again returned to the plaintiff.
case of extrajudicial foreclosure.
 Plaintiff, well-known by her nickname March 2, 1988 MPSB
Maja, has been regarded and looked MC
up to as the head of the family No. 007247
consisting of two sisters and three 117,644.00
brothers. She is a graduate of Fine Arts March 2, 1988 BO MC
from the College of the Holy Spirit in No. 002635 25,000.00
Quezon City. ————
Total P177,644.00
The foregoing are the facts admitted by both parties.
Petitioner alleges that the "following are other Received by:
important facts which have substantial bearing to (Sgd.)
instant controversy but which are conspicuously Maria Jacinta de Guzman
absent in the foregoing summary by the Court of (Emphasis ours)
Appeals":
3. The Absolute Sale of Undivided
2. When the petitioner paid the balance Share of Land (Exh. "5") was notarized
of P177,644.00 to private respondent on March 9, 1988 and a new title (TCT
within one (1) week after execution of No. 378689) was issued to petitioner as
the Absolute Sale of Undivided Share co-owner on March 22, 1988 (Exh. "6")
of Land (Exh. "5"), the latter (private (p. 7. Court of Appeals' Decision);
respondent) signed a receipt dated
March 3, 1988 (Exh. "3") wherein she
4. Notwithstanding the execution of
stated:
such deed of absolute sale of undivided
share of land (Exh. "5") on March 9,
March 3, 1988 1988 petitioner still paid the full
P5,000.00 rental, at P1,000.00 per co-
Received from Alfonso owner/lessor for the whole month of
D. Zamora the amount March thru a bank deposit as a gesture
of ONE HUNDRED of goodwill as gleaned from his letter
SEVENTY (Exh. "I") addressed to private
THOUSAND SIX respondent and her brothers as (sic)
HUNDRED FORTY sisters dated March 29, 1988;
FOUR PESOS
(P177,644.00). 5. Beginning the month of April 1988,
Philippine currency, petitioner started to deduct the amount
as the final payment, of P1,000.00 from his monthly rental of
making the total P5,000.00 as said amount (P1,000.00)
amount of P450,000.00 corresponded to the one-fifth (1/5)
as embodied in the undivided share now owned by him in
Absolute Sale of the property by virtue of the cited deed
Undivided Share of of absolute sale (Exh. "5");
Land, of the sale of
share and rights and 6. On May 1, 1988, petitioner wrote
interest as executed in private respondent a letter (Exh. "F")
the said Sale of giving the latter the option to
Undivided Share of repurchase her share, which option
Land. was however verbally withdrawn by
petitioner on the very next day
Payment breakdown as (May 2). The verbal withdrawal was
follows: subsequently confirmed by petitioner's
written notice (Exh. "1") dated May 3,
March 1, 1988 MPSB 1988 wherein petitioner informed
MC private respondent that he had
No. 007246 P "reconsidered" his offer (p. 8, Decision
30,000.00 of the Court of Appeals; p. 6, Decision
March 1, 1988 SBTC of the Regional Trial of Court);
Check
No. 048207 5,000.00
 7. On May 5, 1988, private respondent, Placido de Guzman III, Joseph Gerald
through counsel, sent a latter (Exh. "H" de Guzman, represented by their
) to petitioner informing the latter of her guardian, Esmeraldo Dimatulac, upon
desire to repurchase her share. The proof of compliance by the plaintiff of
aforesaid letter (Exh. "H") was received the above undertaking within 30 days
by petitioner on May 6, 1988 (ibid.); from receipt hereof.

8. On May 9, 1988, petitioner wrote a The prayers for damages and

letter-reply (Exh. "2") to private attorney's fees are hereby DENIED.
respondent's counsel intimating that
petitioner's reason for The defendant's counterclaim is
withdrawing/reconsidering his earlier DISMISSED.
offer (for the repurchase of the one-fifth
(1/5) share) was due to "certain new SO ORDERED.
developments" (ibid);
In affirming the trial court, the Court of Appeals
9. On September 12, 1988, private summarized "the extant factors in the case at bar that
respondent instituted the instant action preponderantly justify the consideration of the
below to decide as null, void and questioned 'Absolute Sale' as an equitable mortgage",
ineffectual the Absolute Sale of as follows: 7
Undivided Share of Land (Exh. "5") and
to cancel TCT No. 378689. In addition,
1. Plaintiff obtained a series of loans
private respondent asked for
from the defendant in a long period of
reconveyance of her one-fifth (1/5)
time with interest at 18%per annum;
share in the subject property and
prayed for damages;
2. Time come (sic) when the loans
reached an aggregate amount of
10. On May 22, 1990, the trial court
P272,356.00, and plaintiff was unable
rendered judgment in favor of private
to pay the same, plaintiff finding herself
respondent declaring the contract of
in a really bad fix acceded to sign a
absolute conveyance between the
contract prepared by defendant for the
parties as instead one of equitable
sale of her one-fifth (1/5) share and
mortgage and directing inter alia the
interest in the property for the price of
reconveyance of the subject one-fifth
P450,000.00;
(1/5) undivided share unto private
respondent;
3. As agreed upon, the document of
sale was not intended to be registered,
The decretal portion6 of the trial court's decision dated
let alone the issuance of a new title
May 22, 1990 which respondent Court affirmed in toto,
thereto wherein defendant would be
is as follows:
named as one of the co-owners of the
property, but the registration and titling
WHEREFORE, the contract between were accomplished by defendant
the parties is hereby declared to be one contrary to their mutual understanding;
of equitable mortgage and the
defendant is ordered to reconvey the
4. Defendant in a letter assured plaintiff
plaintiff the latter's undivided 1/5
that she could repurchase the property
interest in the subject property, upon
for the same amount of P450,000.00
the latter's payment of the sum of
but when the latter decided to exercise
P450,000.00 plus interest at 18% per
her right, defendant refused;
annum from March 14, 1988, the date
of the instrument, up to the date of such
payment. 5. Copy of the title was in the
possession of plaintiff even after a new
one was issued wherein defendant was
The Register of Deeds of this City is
already named as one of the co-
directed to cancel TCT No. 378689 and
owners;
re-issue a new one in the names of the
plaintiff as well as Francisco de
Guzman, Bernardina de Guzman, 6. After the conflagration that destroyed
the records of the Register of Deeds of
 Quezon City, the title to the subject The Court's Ruling
property was reconstituted at the
instance of defendant but thereafter the In determining the nature of a contract, courts are not
title was again returned to plaintiff for bound by the title or name given by the parties. The
safekeeping; decisive factor in evaluating such agreement is the
intention of the parties, as shown not necessarily by the
7. The court a quo considered the price terminology used in the contract but by their conduct,
of P450,000.00 for the share of plaintiff words, actions and deeds prior to, during and
consisting of 300 square meters of immediately after executing the agreement. As such
prime land located at E. Rodriguez therefore, documentary and parol evidence may be
Avenue, Quezon City, as grossly submitted and admitted to prove such intention.9
inadequate and inequitous (sic). We
agree with this finding, having in mind Art. 1602 of the Civil Code enumerates the instances
that in 1988 business was already when a contract, regardless of its nomenclature, may
booming and the prices of real estate in be presumed to be an equitable mortgage, as follows:
the metropolis were on the gallop.
Business abruptly came to a standstill Art. 1602. The contract shall be
and the price indices only fell after the presumed to be an equitable mortgage,
aborted coup in December, 1989. in any of the following cases:

The Issues (1) When the price of a sale with right

to repurchase is unusually inadequate;
Petitioner now assigns the following errors 8 allegedly
committed by the appellate court: (2) When the vendor remains in
possession as lessee or otherwise;
I
(3) When upon or after the expiration of
The Court of Appeals gravely erred and the right to repurchase another
abused its discretion in ruling that the instrument extending the period of
absolute sale of undivided share of redemption or granting a new period is
land (Exh. "5") is in reality an equitable executed;
mortgage notwithstanding the
presence of incontrovertible (4) When the purchaser retains for
circumstances in the case at bar clearly himself a part of the purchase price;
showing that the real intention of the
parties was to enter into a contract of
(5) When the vendor binds himself to
absolute conveyance.
pay the taxes on the thing sold;
II
(6) In any other case where it may be
fairly inferred that the real intention of
The Court of Appeals gravely erred and the parties is that the transaction shall
abused its discretion in ruling that the secure the payment of a debt or the
purchase price of P1,500.00 per sq. performance of any other obligation.
meter of the subject property in 1988 is
grossly inadequate.
In any of the foregoing cases, any
money, fruits or other benefit to be
III received by the vendee as rent or
otherwise shall be considered as
The Court of Appeals gravely erred and interest which shall be subject to the
abused its discretion in affirming the usury laws.
judgment of the trial court which
dismissed petitioner's counterclaim By the terms of Art. 1604, the foregoing provisions
against private respondent. "shall also apply to a contract purporting to be an
absolute sale." And in case of doubt, a contract
In fine, the threshold issue in this case may simply be purporting to be a sale with right to repurchase shall be
stated thus: Is the contract entered into between the construed as an equitable mortgage.10
parties one of absolute sale or equitable mortgage?
Applying the foregoing principles and legal provisions, lot under my lease and every month
we hold that the contract intended by the parties was thereon, I shall deposit P5,000.00 until
an equitable mortgage, for the following reasons: the expiration of my new lease. Please
come and get your passbook.
(1) For this appeal to succeed, this Court would have
to reverse the findings of fact of both the respondent Be guided accordingly.
Court and the trial court, which both ruled convincingly
that the parties intended to enter into a mortgage and Sincerely yours,
not a sale. It is doctrinal that the appellate jurisdiction (sgd.) ALFONSO D. ZAMORA
of this Court is limited only to a review of errors of law, Lessee
and not of facts. 11We realize there are exceptions 12 to
this rule, but our examination of the factual The foregoing letter (Exh. "I") was formally "admitted"
environment of this case belies the presence of any. In by the petitioner during the pre-trial conference and
fact, such examination only confirms the application of was included without any objection or exception by the
the general rule, as the records of the case disclose the petitioner as item 8 of the pre-trial order dated January
utmost care and attention that both lower courts 4, 1989 issued by the trial court.
exercised in arriving at their findings. The "extant
factors" summarized by the respondent Court 13 are
Petitioner's contention that "beginning the month of
findings of facts that clearly demonstrate the true
April 1988, petitioner started to deduct the amount of
intention of the parties to have been merely to provide
P1,000.00 from his monthly rental of P5,000.00 as said
security for a debt and not to transfer ownership over
amount corresponded to the one fifth (1/5) undivided
the property. In fine, the trial court's evaluation of the
share now owned by him in the property . . ." is
credibility of the witnesses leaned in favor of private
obviously an after-thought concocted to bolster his
respondent, whose testimony was consistent, straight-
claim of sale. Exh. "I" was unsolicited and is clearly
forward and guileless.
consistent with private respondent's contention that the
contract was really intended only as a mortgage and
(2) While the purported deed of sale was dated March the amount of P450,000.00 was received only by way
1, 1988,14 the petitioner still unquestionably recognized of a loan. For if petitioner believed himself to be truly
the private respondent, along with her brothers and an OWNER, why would he open a new savings
sisters, as owners of the property and considered account to which he volunteered to "deposit P5,000.00
himself still a lessee. This is shown by Exh. "I", which (monthly) until the expiration of my new lease"?
is quoted in full as follows: Petitioner's testimony that he paid the P5,000.00 for
the month of March, even while he was already the
1872 E. Rodriguez St. alleged owner of the disputed share, only as a "gesture
Quezon City of goodwill and generosity" is totally unbelievable. As
March 29, 1988 the trial court aptly noted, "he had no explanation why
he wrote . . . 'and every month thereon, I shall deposit
P5,000.00 until the expiration of my new lease . . . .'"
Mr. Francisco de Guzman
Ms. Ma. Jacinta D. de Guzman
(3) On May 1, 1988, petitioner again wrote private
Ms. Bernardita D. de Guzman
Mr. Placido D. De Guzman respondent a letter (Exh. "F") giving her the right to
Mr. Joseph Gerald D. De Guzman repurchase the property subject of the deed. This letter
bears private respondent's conformity. Again, as
c/o Ms. Ma. Jacinta D. De Guzman
172 P. Paterno Street correctly pointed out by the trial court, "(i)f the parties
really intended the contract to be an absolute sale,
San Juan, Metro Manila
there was no reason for the (petitioner) to give the
(private respondent) any chance to repurchase her
Dear Maja: share." Petitioner contends that he wrote Exh. "F" only
to accommodate private respondent's alleged request
Please be informed that for your supposedly to save her from humiliation and
convenience and ease of collection, I embarrassment in selling her share. Again, this is
have opened a (sic) Saving (sic) unworthy of credence because, other than petitioner's
Account No. 6220-0084-94 in Security bare assertion itself, there is no evidence to support the
Bank and Trust Company, under your same. On the contrary, his letter dated May 3, 1988
name, your brothers and sister's name withdrawing said offer made no mention of any such
(sic), located at 677 Aurora Boulevard "accommodation"; instead, it lamely stated that he
Exh., Quezon City (near your store), I merely "reconsidered" his offer.
have deposited the amount of
P5,000.00 as my rental payment for the
(4) Upon the other hand, private respondent's counsel wife . . . she gave me
wrote a letter dated May 5, 1988 (Exh. "H"), which was the assurance that
received by petitioner the following day, clearly there is nothing to be
showing her desire to repurchase the property. This worried about and she
letter, the genuineness and receipt of which are not told me that is just for
disputed, corroborates the consistent testimony of said us to be . . . .
respondent that indeed the contract was intended only
as security for the loan extended to her. The question may be asked, why is it that a lettered
and intelligent person like respondent de Guzman
(5) It is not contested that during all the time material to agreed to sign a document which by its terms is a
this controversy when private respondent received contract of sale when the intention was only a
money from petitioner, she was in dire financial need. mortgage? Should she not have demanded a re-writing
She explained in her testimony 15 that Mrs. Zamora, (reformation) of the agreement to reflect the parties
petitioner's wife, assured her that the deed was merely true intention? In hindsight, it is clinically easy to heap
for security and that she signed it in order to satisfy her blame on respondent de Guzman but as we observed
extreme financial need, thus: in an earlier case: 16

Q Let me show to you . . . In Jayme, et al. v. Salvador, et al.,

Ms. de Guzman a copy 1930, this Court upheld a judgment of
of a document. This the Court of First Instance of Iloilo
consists of two pages which found the transaction between
document styled the parties to be a loan instead of a sale
Absolute Sale of of real property notwithstanding the
Undivided Share of terminology used in the document,
Land earlier marked as after taking into account the
plaintiff's Exhibit "E" the surrounding circumstances of the
genuineness of which transaction. The Court through Justice
is admitted by the Norberto Romualdez stated that while
defendant. Please go it was true that plaintiffs were aware of
over the same and tell the contents of the contracts, the
us whether this is the preponderance of the evidence
Deed of Sale which showed however that they signed
according to you the knowing that said contracts did not
wife of the defendant express their real intention, and if they
brought to you for your did so notwithstanding this, it was due
signature? to the urgent necessity of obtaining
funds. "Necessitous men are not, truly
A Yes, this is exactly speaking, free men; but to answer a
what I signed. The wife present emergency, will submit to any
assuring me that these terms that the crafty may impose upon
were just a formality for them."
them to have security.
That I have not to be (6) Considering that the property is commercial in
worried because this is nature and located along a busy thoroughfare (E.
just for formality sake Rodrigues Avenue) in Quezon City, the alleged
that I have to sign this purchase price of P450,000.00 is unusually inadequate
so that it was a large as it translates to only P1,500.00 per square meter.
amount of money for Agreeing with the trial court, the respondent appellate
them to be securing tribunal noted that at the time the transaction took
themselves. We have place, "in 1988, business was already booming and
been dealing with them prices of real estate in the metropolis were on the
for several years. In my gallop." In his memorandum, petitioner vigorously
case even as they say assailed this finding of fact, arguing that the zonal
the same goes if you're valuation of the Bureau of Internal Revenue for the
down below "kahit sa area where the property is located was P1,500.00 per
patalim kakapit ka. So I square meter. We are not prepared to disturb the
signed this. The contrary finding of the trial court, for as private
assurance and the respondent avers, "there simply is nothing in the
understanding that the records of the trial that decisively proves one way or
another the true valuation of the property in
question". 17 Besides, it is common knowledge borne
out by experience that in nearly all cases, the Bureau's
zonal valuations hardly approximate the fair market
values of real property.

At any rate, even disregarding the valuation of the

property in question, we are fully convinced and so hold
that the Court of Appeals made no reversible error in
treating the contract as an equitable mortgage.

Petitioner's unequivocal recognition of the private

respondent as owner and lessor of the latter's share of
the property, even after the alleged sale had been
executed, and his clear offer to sell back the property
to her thereafter, plus the consistent and credible
testimony of respondent de Guzman [who was then
admittedly in grave financial crisis, which petitioner
took undue advantage of] are more than enough indicia
of the true intentions of the parties. The lower courts
were undoubtedly correct in invoking the Civil
Code 18 and ordering a reformation of the assailed
document.

WHEREFORE, the instant petitioner is hereby

DENIED, no reversible error having been committed by
respondent Court. The assailed Decision is
AFFIRMED. Costs against petitioner.

Narvasa, C.J., Davide, Jr., Melo and Francisco,

JJ, concur.