ROBERTO R.

DAVID, Petitioner, Thus, Eduardo initiated this replevin suit against

vs. Roberto, alleging that he was exercising the right
EDUARDO C. DAVID, Respondent. to repurchase under the deed of sale; and that he
was entitled to the possession of the other motor
FACTS: vehicle and trailer.

Respondent Eduardo C. David (Eduardo) In his answer, Roberto denied that Eduardo could
initiated this replevin suit against Roberto R. repurchase the properties in question; and
David (Roberto), his first cousin and former insisted that the MOA had extinguished their
business partner, to recover the possession of deed of sale by novation.
one unit of International CO 9670 Truck Tractor
and Mi-Bed Trailer. ISSUE:

It appears that on July 7, 1995, Eduardo and his Whether there was a valid exercise of the right
brother Edwin C. David (Edwin), acting on their to repurchase the property. YES
own and in behalf of their co-heirs, sold their
inherited properties to Roberto, specifically: RULE:

(a) a parcel of land with an area of 1,231 square A sale with right to repurchase is governed by
meters, together with all the improvements Article 1601 of the Civil Code, which provides
existing thereon, located in Baguio City and that: "Conventional redemption shall take place
covered by Transfer Certificate of Title No. T- when the vendor reserves the right to repurchase
22983 of the Registry of Deeds of Baguio City the thing sold, with the obligation to comply with
(Baguio City lot); and the provisions of Article 1616 and other
stipulations which may have been agreed upon."
(b) two units International CO 9670 Truck Tractor
with two Mi-Bed Trailers.3 Conformably with Article 1616,14 the seller given
the right to repurchase may exercise his right of
A deed of sale with assumption of mortgage redemption by paying the buyer:
(deed of sale)4 embodied the terms of their
agreement, stipulating that the consideration for (a) the price of the sale,
the sale was ₱6,000,000.00, of which ₱2,000,000
was to be paid to Eduardo and Edwin, and the
(b) the expenses of the contract,
remaining ₱4,000,000.00 to be paid to
Development Bank of the Philippines (DBP) in
Baguio City to settle the outstanding obligation (c) legitimate payments made by reason of the
secured by a mortgage on such properties. sale, and

The parties further agreed to give Eduardo and (d) the necessary and useful expenses made on
Edwin the right to repurchase the properties the thing sold.
within a period of three years from the execution
of the deed of sale based on the purchase price The deed of sale entered into by Eduardo and
agreed upon, plus 12% interest per annum. Roberto contained the following stipulation on the
right to repurchase, to wit:
In April 1997, Roberto and Edwin executed a
memorandum of agreement (MOA)5 with the x x x the Vendors are given the right to
Spouses Marquez and Soledad Go (Spouses repurchase the aforesaid described real
Go), by which they agreed to sell the Baguio City property, together with the improvements
lot to the latter for a consideration of thereon, and the two (2) motor vehicles, together
₱10,000,000.00. The MOA stipulated that "in with their respective trailers from the Vendee
order to save payment of high and multiple taxes within a period of three (3) years from the
considering that the x x x subject matter of this execution of this document on the purchase price
sale is mortgaged with DBP, Baguio City, and agreed upon by the parties after considering the
sold [to Roberto], Edwin will execute the amount previously paid to the Vendors in the
necessary Deed of Absolute Sale in favor of [the amount of TWO MILLION PESOS
Spouses Go], in lieu of [Roberto]."6 The Spouses (₱2,000,000.00), Philippine Currency, with an
Go then deposited the amount of ₱10,000,000.00 interest of twelve percent (12%) per annum and
to Roberto’s account.7 the amount paid with the Development Bank of
the Philippines with an interest of twelve percent
After the execution of the MOA, Roberto gave (12%) per annum.15
Eduardo ₱2,800,000.00 and returned to him one
of the truck tractors and trailers subject of the The CA and the RTC both found and held that
deed of sale. Eduardo demanded for the return of Eduardo had complied with the conditions
the other truck tractor and trailer, but Roberto stipulated in the deed of sale and prescribed by
refused to heed the demand. Article 1616 of the Civil Code. Pertinently, the CA
stated:
It should be noted that the alleged repurchase redemption price within the period. Verily, the
was exercised within the stipulated period of tender of payment is the seller’s manifestation of
three (3) years from the time the Deed of Sale his desire to repurchase the property with the
with Assumption of Mortgage was executed. offer of immediate performance.20 As we stated in
Legaspi v. Court of Appeals,21 a sincere tender of
The only question now, therefore, which remains payment is sufficient to show the exercise of the
to be resolved is whether or not the conditions set right to repurchase. Here, Eduardo paid the
forth in the Deed of Sale with Assumption of repurchase price to Roberto by depositing the
Mortgage, i.e. the tender of the purchase price proceeds of the sale of the Baguio City lot in the
previously agreed upon, which is Php2.0 Million, latter’s account. Such payment was an effective
plus 12% interest per annum, and the amount exercise of the right to repurchase.
paid by the defendant to DBP, had been satisfied.
On the other hand, the Court dismisses as
From the testimony of the defendant himself, devoid of merit Roberto’s insistence that the
these preconditions for the exercise of plaintiff's MOA had extinguished the obligations
right to repurchase were adequately satisfied by established under the deed of sale by
the latter. Thus, as stated, from the Php10 Million novation.
purchase price which was directly paid to the
defendant, the latter deducted his expenses plus The issue of novation involves a question of fact,
interests and the loan, and the remaining amount as it necessarily requires the factual
he turned over to the plaintiff. This testimony is an determination of the existence of the various
unequivocal acknowledgement from defendant requisites of novation, namely: (a) there must be
that plaintiff and his co-heirs exercised their right a previous valid obligation; (b) the parties
to repurchase the property within the agreed concerned must agree to a new contract; (c) the
period by satisfying all the conditions stipulated in old contract must be extinguished; and (d) there
the Deed of Sale with Assumption of Mortgage. must be a valid new contract.22 With both the RTC
Moreover, defendant returned to plaintiff the and the CA concluding that the MOA was
amount of Php2.8 Million from the total purchase consistent with the deed of sale, novation
price of Php10.0 Million. This only means that this whereby the deed of sale was extinguished did
is the excess amount pertaining to plaintiff and not occur. In that regard, it is worth repeating that
co-heirs after the defendant deducted the the factual findings of the lower courts are binding
repurchase price of Php2.0 Million plus interests on the Court.
and his expenses. Add to that is the fact that
defendant returned one of the trucks and trailers In sales with the right to repurchase, the title and
subject of the Deed of Sale with Assumption of ownership of the property sold are immediately
Mortgage to the plaintiff. vested in the vendee, subject to the resolutory
condition of repurchase by the vendor within the
This is, at best, a tacit acknowledgement of the stipulated period.23 Accordingly, the ownership of
defendant that plaintiff and his co-heirs had in fact the affected properties reverted to Eduardo once
exercised their right to repurchase.16 x x x he complied with the condition for the repurchase,
thereby entitling him to the possession of the
Considering that the factual findings of the trial other motor vehicle with trailer.
court, when affirmed by the CA, are binding on
the Court,17 the Court affirms the judgment of the WHEREFORE, the Court AFFIRMS the decision
CA upholding Eduardo’s exercise of the right of promulgated on October 10, 2003; and ORDERS
repurchase. Roberto could no longer assail the the petitioner to pay the costs of suit.
factual findings because his petition for review on
certiorari was limited to the review and SO ORDERED.
determination of questions of law only. A question
of law exists when the doubt centers on what the LUCAS P. BERSAMIN
law is on a certain set of undisputed facts, while
Associate Justice
a question of fact exists when the doubt centers
on the truth or falsity of the alleged facts.18
Whether the conditions for the right to repurchase
were complied with, or whether there was a
tender of payment, is a question of fact. With both
the RTC and the CA finding and holding that
Eduardo had fulfilled the conditions for the
exercise of the right to repurchase, therefore, we
conclude that Eduardo had effectively
repurchased the properties subject of the deed of
sale.

In Metropolitan Bank and Trust Company v.

Tan,19 the Court ruled that a redemption within
the period allowed by law is not a matter of intent
but of payment or valid tender of the full
G.R. No. 72873 May 28, 1987 they alleged, that the area occupied by the
petitioners had merely been mortgaged by
CARLOS ALONZO and CASIMIRA ALONZO, Celestino and Eustaquia. In the circumstances
petitioners, just narrated, it was impossible for Tecla not to
vs. know that the area occupied by the petitioners
INTERMEDIATE APPELLATE COURT and had been purchased by them from the other. co-
TECLA PADUA, respondents. heirs. Especially significant was the erection
thereon of the permanent semi-concrete
structure by the petitioners' son, which was done
without objection on her part or of any of the other
co-heirs.
FACTS:
The only real question in this case, therefore, is
Five brothers and sisters inherited in equal pro the correct interpretation and application of the
indiviso shares a parcel of land registered in 'the pertinent law as invoked, interestingly enough, by
name of their deceased parents under OCT No. both the petitioners and the private respondents.
10977 of the Registry of Deeds of Tarlac. 1 This is Article 1088 of the Civil Code, providing as
follows:
On March 15, 1963, one of them, Celestino
Padua, transferred his undivided share of the Art. 1088. Should any of
herein petitioners for the sum of P550.00 by way the heirs sell his
of absolute sale. 2 One year later, on April 22, hereditary rights to a
1964, Eustaquia Padua, his sister, sold her own stranger before the
share to the same vendees, in an instrument partition, any or all of the
denominated "Con Pacto de Retro Sale," for the co-heirs may be
sum of P 440.00. 3 subrogated to the rights
of the purchaser by
By virtue of such agreements, the petitioners reimbursing him for the
occupied, after the said sales, an area price of the sale,
corresponding to two-fifths of the said lot, provided they do so
representing the portions sold to them. The within the period of one
vendees subsequently enclosed the same with a month from the time they
fence. In 1975, with their consent, their son were notified in writing of
Eduardo Alonzo and his wife built a semi- the sale by the vendor.
concrete house on a part of the enclosed area.4
In reversing the trial court, the respondent court
On February 25, 1976, Mariano Padua, one of the ** declared that the notice required by the said
five coheirs, sought to redeem the area sold to article was written notice and that actual notice
the spouses Alonzo, but his complaint was would not suffice as a substitute. Citing the same
dismissed when it appeared that he was an case of De Conejero v. Court of Appeals 11
American citizen .5 On May 27, 1977, however, applied by the trial court, the respondent court
Tecla Padua, another co-heir, filed her own held that that decision, interpreting a like rule in
complaint invoking the same right of redemption Article 1623, stressed the need for written notice
claimed by her brother. 6 although no particular form was required.

The trial court * also dismiss this complaint, now Thus, according to Justice J.B.L. Reyes, who was
on the ground that the right had lapsed, not the ponente of the Court, furnishing the co-heirs
having been exercised within thirty days from with a copy of the deed of sale of the property
notice of the sales in 1963 and 1964. Although subject to redemption would satisfy the
there was no written notice, it was held that actual requirement for written notice. "So long,
knowledge of the sales by the co-heirs satisfied therefore, as the latter (i.e., the redemptioner) is
the requirement of the law. 7 informed in writing of the sale and the particulars
thereof," he declared, "the thirty days for
In truth, such actual notice as acquired by the co- redemption start running. "
heirs cannot be plausibly denied. The other co-
heirs, including Tecla Padua, lived on the same In the earlier decision of Butte v. UY, 12 " the
lot, which consisted of only 604 square meters, Court, speaking through the same learned jurist,
including the portions sold to the petitioners . 8 emphasized that the written notice should be
Eustaquia herself, who had sold her portion, was given by the vendor and not the vendees,
staying in the same house with her sister Tecla, conformably to a similar requirement under
who later claimed redemption petition. 9 Article 1623, reading as follows:
Moreover, the petitioners and the private
respondents were close friends and neighbors Art. 1623. The right of
whose children went to school together. 10 legal pre-emption or
redemption shall not be
It is highly improbable that the other co-heirs were exercised except within
unaware of the sales and that they thought, as thirty days from the
 notice in writing by the law," so we are warned, by Justice Holmes again,
prospective vendor, or "where these words import a policy that goes
by the vendors, as the beyond them." 13 While we admittedly may not
case may be. The deed legislate, we nevertheless have the power to
of sale shall not be interpret the law in such a way as to reflect the
recorded in the Registry will of the legislature. While we may not read into
of Property, unless the law a purpose that is not there, we
accompanied by an nevertheless have the right to read out of it the
affidavit of the vendor reason for its enactment. In doing so, we defer
that he has given written not to "the letter that killeth" but to "the spirit that
notice thereof to all vivifieth," to give effect to the law maker's will.
possible redemptioners.
The spirit, rather than
The right of redemption the letter of a statute
of co-owners excludes determines its
that of the adjoining construction, hence, a
owners. statute must be read
according to its spirit or
As "it is thus apparent that the Philippine intent. For what is within
legislature in Article 1623 deliberately selected a the spirit is within the
particular method of giving notice, and that notice letter but although it is
must be deemed exclusive," the Court held that not within the letter
notice given by the vendees and not the vendor thereof, and that which
would not toll the running of the 30-day period. is within the letter but not
within the spirit is not
within the statute. Stated
The petition before us appears to be an
differently, a thing which
illustration of the Holmes dictum that "hard cases
is within the intent of the
make bad laws" as the petitioners obviously
lawmaker is as much
cannot argue against the fact that there was really
no written notice given by the vendors to their co- within the statute as if
heirs. Strictly applied and interpreted, Article within the letter; and a
thing which is within the
1088 can lead to only one conclusion, to wit, that
letter of the statute is not
in view of such deficiency, the 30 day period for
within the statute unless
redemption had not begun to run, much less
within the intent of the
expired in 1977.
lawmakers. 14
But as has also been aptly observed, we test a
In requiring written
law by its results; and likewise, we may add, by
notice, Article 1088
its purposes. It is a cardinal rule that, in seeking
seeks to ensure that the
the meaning of the law, the first concern of the
judge should be to discover in its provisions the redemptioner is properly
in tent of the lawmaker. Unquestionably, the law notified of the sale and
to indicate the date of
should never be interpreted in such a way as to
such notice as the
cause injustice as this is never within the
starting time of the 30-
legislative intent. An indispensable part of that
intent, in fact, for we presume the good motives day period of
of the legislature, is to render justice. redemption.
Considering the
shortness of the period,
Thus, we interpret and apply the law not it is really necessary, as
independently of but in consonance with justice. a general rule, to
Law and justice are inseparable, and we must pinpoint the precise date
keep them so. To be sure, there are some laws it is supposed to begin,
that, while generally valid, may seem arbitrary to obviate any problem
when applied in a particular case because of its of alleged delays,
peculiar circumstances. In such a situation, we sometimes consisting of
are not bound, because only of our nature and only a day or two.
functions, to apply them just the same, in slavish
obedience to their language. What we do instead
The instant case presents no such problem
is find a balance between the word and the will,
because the right of redemption was invoked not
that justice may be done even as the law is
days but years after the sales were made in 1963
obeyed.
and 1964. The complaint was filed by Tecla
Padua in 1977, thirteen years after the first sale
As judges, we are not automatons. We do not and and fourteen years after the second sale. The
must not unfeelingly apply the law as it is worded, delay invoked by the petitioners extends to more
yielding like robots to the literal command without than a decade, assuming of course that there was
regard to its cause and consequence. "Courts are a valid notice that tolled the running of the period
apt to err by sticking too closely to the words of a of redemption.
Was there a valid notice? Granting that the law among them, should enclose a portion of the
requires the notice to be written, would such inherited lot and build thereon a house of strong
notice be necessary in this case? Assuming there materials. This definitely was not the act of a
was a valid notice although it was not in writing. temporary possessor or a mere mortgagee. This
would there be any question that the 30-day certainly looked like an act of ownership. Yet,
period for redemption had expired long before the given this unseemly situation, none of the co-
complaint was filed in 1977? heirs saw fit to object or at least inquire, to
ascertain the facts, which were readily available.
In the face of the established facts, we cannot It took all of thirteen years before one of them
accept the private respondents' pretense that chose to claim the right of redemption, but then it
they were unaware of the sales made by their was already too late.
brother and sister in 1963 and 1964. By requiring
written proof of such notice, we would be closing We realize that in arriving at our conclusion today,
our eyes to the obvious truth in favor of their we are deviating from the strict letter of the law,
palpably false claim of ignorance, thus exalting which the respondent court understandably
the letter of the law over its purpose. The purpose applied pursuant to existing jurisprudence. The
is clear enough: to make sure that the said court acted properly as it had no competence
redemptioners are duly notified. We are satisfied to reverse the doctrines laid down by this Court in
that in this case the other brothers and sisters the above-cited cases. In fact, and this should be
were actually informed, although not in writing, of clearly stressed, we ourselves are not
the sales made in 1963 and 1964, and that such abandoning the De Conejero and Buttle
notice was sufficient. doctrines. What we are doing simply is adopting
an exception to the general rule, in view of the
Now, when did the 30-day period of redemption peculiar circumstances of this case.
begin?
The co-heirs in this case were undeniably
While we do not here declare that this period informed of the sales although no notice in writing
started from the dates of such sales in 1963 and was given them. And there is no doubt either that
1964, we do say that sometime between those the 30-day period began and ended during the 14
years and 1976, when the first complaint for years between the sales in question and the filing
redemption was filed, the other co-heirs were of the complaint for redemption in 1977, without
actually informed of the sale and that thereafter the co-heirs exercising their right of redemption.
the 30-day period started running and ultimately These are the justifications for this exception.
expired. This could have happened any time
during the interval of thirteen years, when none of More than twenty centuries ago, Justinian defined
the co-heirs made a move to redeem the justice "as the constant and perpetual wish to
properties sold. By 1977, in other words, when render every one his due." 16 That wish
Tecla Padua filed her complaint, the right of continues to motivate this Court when it assesses
redemption had already been extinguished the facts and the law in every case brought to it
because the period for its exercise had already for decision. Justice is always an essential
expired. ingredient of its decisions. Thus when the facts
warrants, we interpret the law in a way that will
The following doctrine is also worth noting: render justice, presuming that it was the intention
of the lawmaker, to begin with, that the law be
dispensed with justice. So we have done in this
While the general rule is,
that to charge a party case.
with laches in the
assertion of an alleged WHEREFORE, the petition is granted. The
right it is essential that decision of the respondent court is REVERSED
he should have and that of the trial court is reinstated, without any
knowledge of the facts pronouncement as to costs. It is so ordered.
upon which he bases his
claim, yet if the
circumstances were
such as should have
induced inquiry, and the
means of ascertaining
the truth were readily
available upon inquiry,
but the party neglects to
make it, he will be
chargeable with laches,
the same as if he had
known the facts. 15

It was the perfectly natural thing for the co-heirs

to wonder why the spouses Alonzo, who were not
MARCELINO REPUELA AND CIPRIANO In October 2002, as recalled by Cipriano's
REPUELA, SUBSTITUTED BY CARMELA daughter, Cristina Repuela Ramos
REPUELA, MERLINDA R. VILLARUEL, (Cristina), she went to the City Treasurer's
WILLIAM REPUELA, ROSITA P. Office of Talisay City, upon the request of
REPUELA, CRISTINA R. RAMOS, her father, to verify whether Spouses
ORLANDO REPUELA, JUNNE REPUELA, Larawan were paying the realty taxes on
AND OSCAR the mortgaged property. She learned that
REPUELA, Petitioners, v. ESTATE OF THE Spouses Larawan did not pay the taxes and
SPOUSES OTILLO LARAWAN AND the tax declaration on the subject property
JULIANA BACUS, REPRESENTED BY was already in their names as early as
NANCY LARAWAN MANCAO, GALILEO 1964; that in the Registry of Deeds of
LARAWAN AND SOCRATES Cebu, TCT No. 5154 was already cancelled
LARAWAN, Respondents. and a new certificate of title, TCT No.
10506, had been issued to Otillo; that
DECISION Spouses Larawan were able to transfer the
certificate of title to their names by virtue
MENDOZA, J.: of the Extajudicial Declaration of Heirs and
Sale bearing the signature of her father
Cipriano and the thumb mark of her uncle
This Petition for Review on Certiorari under
Marcelino; and that her father and uncle
Rule 45 of the Rules of Court assails the
remembered that they were made to sign
May 29, 2014 Decision1 and the June 10,
a blank document.
2015 Resolution2 of the Court of Appeals
(CA) in CA-G.R. CV No. 03976, which
reversed and set aside the February 23, On January 17, 2003, Cipriano and
2011 Decision3 of the Regional Trial Court Marcelino, on account of this predicament,
(RTC), Seventh Judicial Region, Branch 7, were compelled to file a complaint before
Cebu City, in Civil Case No. CEB-28524, a the RTC for the annulment of the
case for Annulment of Documents, Quieting Extrajudicial Declaration of Heirs and Sale
of Title, Redemption, Damages, and and the cancellation of TCT No. 10506.
Attorney's Fees. During the trial, Catalina Burlas (Burlas),
who lived next to the subject property, and
Alma Abellanosa (Abellanosa), City
The Antecedents
Assessor of Talisay City, were also
presented as witnesses for the Repuela
Spouses Lorenzo and Magdalena Repuela brothers.6
owned Lot No. 3357 (subject property),
situated in Lawaan III, Talisay City, Cebu,
Burlas testified that the Repuela brothers
and covered by Transfer Certificate of Title
confided in her about Marcelino's desire to
(TCT) No. 5154. After they had passed
go to Iligan City but they had no money for
away, their children Marcelino Repuela
his fare; that another neighbor referred the
(Marcelino) and Cipriano Repuela
Repuela brothers to Otillo, who could lend
(Cipriano) succeeded them as owners of
them P200.00 but only upon the signing of
the subject property.4
a deed of mortgage and the surrender of
the certificate of title as collateral; that
Cipriano and Marcelino (Repuela brothers) Marcelino was able to leave for Iligan but
claimed that sometime in July 1963, after he came back after three months to help
the death of their parents, they went to the Cipriano in cultivating the land; that she
house of Otillo Larawan (Otillo) to borrow did not see any other person till the land
P200.00 for Marcelino's fare to Iligan City; except the Repuela brothers; and that she
that to secure the loan, the spouses Otillo could not recall a time when Otillo, whom
and Juliana Larawan (Spouses Larawan) she personally knew, ever visited or
required them to turn over the certificate cultivated the subject property.7
of title for Lot No. 3357; that they were
made to sign a purported mortgage
Abellanosa, as City Assessor, stated that
contract but they were not given a copy of
based on the records of her office, Lot No.
the said document; that Cipriano affixed
3357 was declared for taxation purposes
his signature while Marcelino, being
for the first time in 1961 when Tax
illiterate, just placed his thumb mark on the
Declaration No. 12543 was issued in the
document; that they remained in
name of Lorenzo Repuela; that in 1964,
possession of the land despite the
Tax Declaration No. 24112 was issued in
mortgage and had been planting bamboos,
the name of Spouses Larawan on the basis
corn, bananas, and papayas thereon and
of a deed of sale; and that the subsequent
sharing the produce between them; and
tax declarations had Spouses Larawan as
that they also paid the taxes due on the
the owners.8
property.5
For the Estate of Spouses Larawan, on the credence to the claim of possession of the
other hand, the transaction between the Repuela brothers because the same was
Repuela brothers and Otillo was a sale and affirmed by a disinterested person, Burlas,
not a mortgage of a parcel of land. The who had been living in the area since she
Estate also invoked laches on the part of was small and whose lot adjoined the
the Repuela brothers for failing to file a subject property. According to her, only
complaint during the lifetime of Spouses Cipriano and Marcelino cultivated the land
Larawan. Galileo Larawan (Galileo), son of and she never saw anyone, not even Otillo,
Spouses Larawan and the sole witness for work on the land.11
the Estate, testified that he knew of the
transaction between his father and the Moreover, it was the trial court's opinion
Repuela brothers because his father that the evidence of possession weighed
brought him along to the office of Atty. more on the side of the Repuela brothers
Celestino Bacalso (Atty. Bacalso), where than that of the Estate of Spouses Larawan.
the document entitled Extrajudicial Their assertion of possession was bolstered
Declaration of Heirs and Sale was by the fact that they too paid taxes on the
prepared; that the said document was property, an indication that they were still
signed by Cipriano and thumbmarked by in possession of the subject property.
Marcelino which was witnessed by Hilario Considering that they still possessed the
Bacalso and Fernando Abellanosa; that he subject property even after the execution
witnessed the Repuela brothers affix their of the sale, in the concept of an owner and
signature and thumbmark after Atty. continued paying the land taxes thereon,
Bacalso read and explained to them the the RTC was of the view that the contract,
contents of the document in the Cebuano entered into by the Repuela brothers and
dialect; that after the document was Otillo, was an equitable mortgage under
notarized, his father handed P2,000.00 to Article 1602 of the Civil Code.12 Thus, the
the Repuela brothers as consideration for RTC disposed: chanRoblesvirtualLawlibrary
the sale; and that he was only six (6) years
old when these all happened.9 Hence, the
Court: ChanRoblesVirtualawlibrary
Galileo also pointed out that the new
certificate of title, TCT No. 10506, in the 1. Declares the sale in the document,
name of Spouses Larawan, was issued by "Extrajudicial Declaration of Heirs and
the Register of Deeds on August 20, 1963; Sale," signed by Cipriano and Marcelino
that his mother paid the real estate taxes Repuela in favor of Otillo Larawan and
during her lifetime and, after her death, he spouse on July 1, 1963, as in effect an
himself made the payments; that he equitable mortgage;
secured the tax declaration for the subject
property from the office of the Talisay City
2. Gives Cipriano and Marcelino Repuela
Assessor; that their family had been in
thirty (30) days from the finality of this
possession of the subject property and they
decision to redeem the property in the
had harvested and enjoyed the produce of
amount of Two Thousand Pesos
the land such as bamboos, jackfruit and
(P2,000.00), with interest at the legal rate
100 coconut trees; and that there were no
computed from the date of the filing of the
other persons claiming ownership over the
Complaint; and
land, as the Repuela brothers never offered
to redeem the subject property from their
family.10 3. Directs defendants to pay
plaintiffs: ChanRoblesVirtualawlibrary
The Ruling of the RTC
a. P20,000.00, as attorney's fees, and
b. P20,000.00, as litigation
After the trial, the RTC decided in favor of
expenses.chanroblesvirtuallawlibrary
the Repuela brothers. It held that the
transaction between the parties was not a
sale but an equitable mortgage. The Costs are assessed against the defendants.
testimony of Galileo for the respondent,
who was admittedly just six (6) years old SO ORDERED.13
then, was "likely colored by the lens of
adult perspective and self-interest." It Not in conformity, the Estate of Spouses
believed the claim of Cipriano, who only Larawan appealed the case to the CA.
had the benefit of a Grade One education,
and the illiterate Marcelino, that they The Ruling of the CA
merely signed a document without knowing
its nature. The trial court gave more
On May 29, 2014, the CA reversed and set Petitioners explain that the Repuela
aside the February 23, 2011 Decision of the brothers only filed the case in 2003
RTC for the following because they found no urgency to file it as
reasons: ChanRoblesVirtualawlibrary there were no indications that their title
and possession over the subject property
1. The Repuela brothers failed to present were threatened. They claim that their
any direct and positive proof to rebut the predecessors-in-interest were in peaceful,
presumption of the document's due open, continuous, and public possession as
execution. They failed to prove any factual owners of the subject property from the
circumstance to point that the transaction time of the transaction in 1963 until the
covered therein was one of mortgage, or at time when they decided to partition their
the least, that such was their intention; property and learned, in the process, that
the tax declaration and title of their lot
2. The Repuela brothers had not proven were already transferred in the name of
continued possession of the subject Spouses Larawan. They argue that
property which would have given the considering that they, who were claiming
impression that it was not sold but merely to be the owners thereof, were in actual
mortgaged; possession of the property, their right to
seek reconveyance, which in effect sought
to quiet the title to the property, never
3. None of the enumerated circumstances
prescribed.16
in Article 1602 of the Civil Code was
present in order for the presumption of
equitable mortgage to apply. Contrary to Petitioners further argue that the existence
the factual finding of the trial court, the of the Extrajudicial Declaration of Heirs and
evidence did not show that they were still Sale was not enough proof that the
in possession of the property even after the Repuela brothers really intended to sell the
execution of the document and that they property, and that the stipulations in the
continued paying the taxes on the property contract should be construed together with
immediately after the execution of the the parties' contemporaneous and
deed; and, subsequent acts as regards the execution
of the contract. The same was true with the
issuance of a new owner's TCT in favor of
4. Granting arguendo that the transaction
Spouses Larawan. It neither imports
was a mortgage, their cause of action was
conclusive evidence of ownership nor
already barred by laches as 39 years had
proves that the agreement between the
already elapsed before they asserted their
parties was one of sale. A conveyance by
rights over the subject property.14
registration in the name of the transferee
and the issuance of a new certificate is not
The decretal portion of the CA decision secured from the operation of the equitable
reads: ChanRoblesVirtualawlibrary doctrine, to the effect that any conveyance
intended as security for a debt would be
WHEREFORE, premises considered, the held in effect to be a mortgage, than most
instant appeal is GRANTED. The February informal conveyance that could be
23, 2011 Decision of the RTC Branch 7 of devised.17
Cebu City in Civil Case No. CEB-28524
is REVERSED and SET ASIDE and the The CA, according to petitioners, should
complaint for Annulment of Documents, have given more credence to the
Quieting of Title, Redemption, Damages testimonies of the Repuela brothers, as
and Attorney's Fees is DISMISSED. corroborated and affirmed by the
disinterested witness, Burlas, over that of
SO ORDERED. cralawlawlibrary15 Galileo, the lone witness for the
respondent. As correctly observed by the
After their motion for reconsideration was trial court, Galileo was just six (6) years old
denied by the CA in its Resolution, dated when he supposedly witnessed the alleged
June 10, 2015, the heirs of the Repuela transaction in the office of Atty. Bacalso,
brothers (petitioners) filed the subject and so he could not have possibly known
petition. the nature of the executed contract.
Echoing the RTC, they pointed out that a
Issue six-year old boy's curiosity and concerns
could not have extended to things of this
Whether the Extrajudicial Declaration nature and that his recollection of events
of Heirs was likely colored by the lens of adult
and Sale amounted to an equitable perspective and self-interest, as Galileo
mortgage.
himself admitted that he did not read the The Court's Ruling
document.18
The Court finds merit in the petition.
Finally, they stress that the Repuela
brothers remained in possession of the An equitable mortgage is one which,
subject property even after the transaction although lacking in some formality, or
and they also paid the taxes thereon for the form, or words, or other requisites
years 1985 to 2002 on December 18, 2002. demanded by a statute, reveals the
These circumstances surrounding the intention of the parties to charge real
transaction entered into by and between property as security for a debt, and
the Repuela brothers and Otillo would contains nothing impossible or contrary to
naturally lead anyone to infer that this law.22
instance was espoused in Article 1602 of
the Civil Code. This is in line with For a presumption of an equitable
jurisprudence consistently holding that the mortgage to arise, two requisites must first
presence of one, and not the confluence of be satisfied, namely: that the parties
several circumstances, is sufficient to entered into a contract denominated as a
prove that a contract of sale is one of an contract of sale and that their intention was
equitable mortgage.19 to secure an existing debt by way of
mortgage.23 There is no single conclusive
The Position of Respondent test to determine whether a deed of sale,
absolute on its face, is really a simple loan
In its Comment,20 dated December 28, accommodation secured by a mortgage.
2015, respondent Estate of Spouses Article 1602, in relation to Article 1604 of
Larawan (respondent) averred that the the Civil Code, however, enumerates
extrajudicial settlement and sale executed several instances when a contract,
by the parties could not be presumed as an purporting to be, and in fact styled as, an
equitable mortgage. First, the said contract absolute sale, is presumed to be an
was "not a sale with right to repurchase" equitable mortgage.
and the price of the sale was not unusually Thus: ChanRoblesVirtualawlibrary
inadequate. Second, there is no
documentary evidence that would support ART. 1602. The contract shall be presumed
the claim of possession by the Repuela to be an equitable mortgage, in any of the
brothers, as lessee or otherwise, following
continuously from the execution of the cases: chanRoblesvirtualLawlibrary
document of sale until the filing of the case.
Third, the third situation (when upon or (1) When the price of a sale with right to
after the expiration of the right to repurchase is unusually inadequate;
repurchase, another instrument extending
the period of redemption or granting a new
(2) When the vendor remains in
period was executed) wherein a contract
possession as lessee or otherwise;
shall be presumed to be an equitable
mortgage is not applicable in the instant
case. The Extrajudicial Declaration of Heirs (3) When upon or after the expiration of
and Sale did not provide for a right to the right to repurchase another instrument
repurchase. As such, there was no period extending the period of redemption or
of redemption to be extended or a new granting a new period is executed;
period to be executed. Fourth, there was
no showing that Otillo, as purchaser, (4) When the purchaser retains for himself
retained for himself a part of the purchase a part of the purchase price;
price. He paid the amount of P2,000.00 as
sale consideration to the Repuela (5) When the vendor binds himself to pay
brothers.21 Fifth, there was no agreement the taxes on the thing sold;
in the contract of sale that the Repuela
brothers, as vendors, bound themselves to (6) In any other case where it may be
pay the taxes on the thing sold. And finally, fairly inferred that the real intention of
the Extrajudicial Declaration of Heirs and the parties is that the transaction shall
Sale was quite clear and specific that what secure the payment of a debt or the
was involved was a sale of the subject performance of any other obligation.
property. From the terms of the contract,
no inference could be made that the real In any of the foregoing case, any money,
intention of the parties was to secure the fruits, or other benefit to be received by the
payment of a debt or the performance of vendee as rent or otherwise shall be
any other obligation.
considered as interest which shall be documents do not prove actual possession.
subject to the usury laws. They do not rebut the overwhelming
evidence of the Repuela brothers that they
xxx were in actual possession. The fact of
registration in the name of Spouses
ART. 1604. The provisions of Article Larawan does not change the picture. A
1602 shall also apply to a contract conveyance of land, accompanied by
purporting to be an absolute registration in the name of the transferee
sale. [Emphases and underscoring and the issuance of a new certificate, is no
supplied] more secured from the operation of this
equitable doctrine than the most informal
conveyance that could be devised. In an
Evident from Article 1602, the presence of
equitable mortgage, title to the property in
any of the circumstances set forth therein
issue, which has been transferred to the
suffices for a contract to be deemed an
respondents actually remains or is
equitable mortgage. No concurrence or an
transferred back to the petitioner as
overwhelming number is needed.24 In
owner-mortgagor, conformably to the well-
other words, the fact that some or most of
established doctrine that the mortgagee
the circumstances mentioned are absent in
does not become the owner of the
a case will not negate the existence of an
mortgaged property because the
equitable mortgage.
ownership remains with the mortgagor
pursuant to Article 2088, of the Civil
In this case, it appears that two (2) Code.26
instances enumerated in Article 1602 —
possession of the subject property and
Inference can be made
inference that the transaction was in fact a
that the transaction was
mortgage attended the assailed
an equitable mortgage
transaction.

From the attending circumstances of the

Possession as Lessee or
case, it can be inferred that the real
otherwise
intention of the Repuela brothers was to
secure their indebtedness from Spouses
Article 1602 (2) of the Civil Code provides Larawan. They needed money for
that when the supposed vendor remains in Marcelino's fare so they went to the house
possession of the property even after the of Otillo to borrow P200.00. Considering
conclusion of the transaction, the that Spouses Larawan would only agree to
purported contract of sale is presumed to extend the loan if they would surrender
be an equitable mortgage. In general their certificate of title over the subject
terms, possession is the holding of a thing property, they obliged in the belief that its
or the enjoyment of a right, whether by purpose was only to secure their loan. In
material occupation or by the fact that the other words, they surrendered the title to
right is subjected to the will of the claimant. Spouses Larawan as security to obtain the
The gathering of the products of and the much needed loan. It was never their
act of planting on the land constitute intention to sell the subject property.
occupation, possession and
cultivation.25cralawred
As held in Banga v. Sps. Bello,27 in
determining whether a deed, absolute in
In this case, petitioners insist that the form, is a mortgage, the court is not limited
Repuela brothers remained in possession of to the written memorials of the transaction.
the subject property after the transaction, "The decisive factor in evaluating such
as was corroborated by a disinterested agreement is the intention of the parties,
person, Burlas, who lived in the adjoining as shown not necessarily by the
lot from the time she was a child. According terminology used in the contract but by all
to her, it was only the Repuela brothers the surrounding circumstances, such as the
who tilled the land and planted corn, relative situation of the parties at that time,
bananas and camote. She never saw Otillo, the attitude, acts, conduct, declarations of
whom she also knew, till or work on the the parties, the negotiations between them
land. leading to the deed, and generally, all
pertinent facts having a tendency to fix and
The respondent's claim of possession, as determine the real nature of their design
supported by a transfer certificate of title and understanding."28
and tax declaration of the subject property,
both in the name of Spouses Larawan is, to There is a presumption of
the Court's mind, not persuasive. These mistake
Granting that indeed Cipriano and affix their conformity after Atty. Bacalso
Marcelino, signed and thumbmarked, read and explained to them the contents of
respectively, the Extrajudicial Declaration the document in the Cebuano dialect, fails
of Heirs and Sale, there is still reason to to convince this Court. As keenly observed
believe that they did so without by the RTC, Galileo was just six (6) years
understanding the real nature, effects and old when he witnessed the transaction in
consequences of what they did as they the office of Atty. Bacalso. To the Court's
were never explained to them. Cipriano, mind, Galileo could not have possibly
who only finished Grade One, and known the nature of the purported
Marcelino, an illiterate, were in dire need of contract, much less, perceived with
money. As such, the possibility that they certainty if the Repuela brothers were
affixed their conformity to the onerous indeed apprised of the true nature of the
contract to their detriment just to get the said contract before they were made to
loan was not remote. In dire need as they sign and thumbmark it. For this reason, the
were, they signed a document despite presumption of mistake, if not fraud, shall
knowing that it did not express their real remain.
intention. "Necessitous men are not, truly
speaking, free men; but to answer a Furthermore, it must be pointed out that
present emergency, will submit to any the law accords the equitable mortgage
terms that the crafty may impose upon presumption in situations when doubt
them." 29 For this reason, the Repuela exists as to the true intent of the parties to
brothers should be given the protection the contract,33 as in this case. Courts are
afforded by the Civil Code provisions on generally inclined to construe one
equitable mortgage. purporting to be a sale as an equitable
mortgage, which involves a lesser
As aptly explained in Cruz v. Court of transmission of rights and interests over
Appeals,30 the Court the property in controversy.34
held: ChanRoblesVirtualawlibrary
There was no prescription
Vendors covered by Art. 1602 usually find or laches
themselves in an unequal position when
bargaining with the vendees, and will Contrary to the findings of the CA that
readily sign onerous contracts to get the petitioners' cause of action was already
money they need. Necessitous men are not barred by laches because of the 39 years
really free men in the sense that to answer that had already lapsed before they
a pressing emergency they will submit to asserted their rights over the property, the
any terms that the crafty may impose on Court holds otherwise. In Inamarga v.
them. This is precisely the evil that Art. Alano,35 the Court considered the deed of
1602 seeks to guard against. The evident sale as equitable mortgage and
intent of the provision is to give the wrote: ChanRoblesVirtualawlibrary
supposed vendor maximum safeguards for
the protection of his legal rights under the xxx Where there is no consent given by one
true agreement of the parties.31 party in a purported contract, such contract
was not perfected; therefore, there is no
Besides, where a party is unable to read or contract to speak of. The deed of sale relied
when the contract is in a language not upon by petitioner is deemed a void
understood by a party and mistake or fraud contract. This being so, the action based on
is alleged, the obligation to show that the said deed of sale shall not prescribe in
terms of the contract had been fully accordance with Article 1410 of the Civil
explained to the said party who is unable Code.36 [Emphasis supplied]
to read or understand the language of the
contract devolves on the party seeking to Legal Interest
enforce it. Indeed, that burden to show
that the other party fully understood the
In the case of Muñoz v. Ramirez,37 the
contents of the document rests upon the
Court stated that where it was established
party who seeks to enforce the contract. If
that the reciprocal obligations of the parties
he fails to discharge this burden, the
were under an equitable mortgage,
presumption of mistake, if not, fraud,
reconveyance of the property should be
stands unrebutted and
ordered to the rightful owner therein upon
controlling.32 Respondent failed to
the payment of the loan within 90 days
overcome this burden.
from the finality of that decision.38

In the case at bench, Galileo's testimony

In the case at bench, the RTC ordered the
that he had witnessed the Repuela brothers
Repuela brothers to pay their loan
amounting to P2,000.00 with interest at
the legal rate computed from the date of
the filing of the complaint in order for them
to repair the property.

In determining the legal rate applicable in

this case, Circular No. 799, series of 2013,
issued by the Office of the Governor of the
Bangko Sentral ng Pilipinas on June 21,
2013, which was the basis of the Court
in Nacar v. Gallery Frames,39 provides that
effective July 1, 2013, the rate of interest
for the loan or forbearance of any money,
goods or credits and the rate allowed in
judgments, in the absence of an express
contract as to such rate of interest, shall be
six percent (6%) per annum. Applying the
foregoing, the rate of interest of 12% per
annum on the obligation of the Repuela
brothers shall apply from the date of the
filing of the complaint on January 17, 2003
until June 30, 2013 only. From July 1, 2013
until fully paid, the legal rate of 6% per
annum shall be applied to their unpaid
obligation.

WHEREFORE, the petition is GRANTED.

The assailed May 29, 2014 Decision and the
June 10, 2015 Resolution of the Court of
Appeals in CA-G.R. CV No. 03976 are SET
ASIDE. The February 23, 2011 Decision of
the Regional Trial Court, Cebu City,
Seventh Judicial Region, Branch 7 in Civil
Case No. CEB-28524
is REINSTATED with MODIFACATION in
that the 12% interest per annum shall only
apply from January 17, 2003 until June 30,
2013 only, after which date and until fully
paid, the mortgage indebtedness of
Cipriano Repuela and Marcelino Repuela
shall earn interest at 6% per annum.

SO ORDERED. cralawlawlibrary