SPOUSES LEHNER AND LUDY

MARTIRES, PETITIONERS, VS.

MENELIA CHUA, RESPONDENT. D
ECISION
G.R. No. 174240

THIRD DIVISION
[ G.R. No. 174240, March 20, 2013 ]
PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of

the Rules of Court seeking to reverse and set aside the Amended
Decision,[1] as well as the Resolutions[2] of the Court of Appeals (CA),
dated September 30, 2005, July 5, 2006 and August 28, 2006,
respectively, in CA-G.R. CV No. 76388. The assailed Decision of the
CA reversed and set aside its earlier Decision, dated April 30, 2004, in
favor of petitioners. The July 5, 2006 Resolution denied petitioners'
Motion for Reconsideration, while the August 28, 2006 Resolution
denied petitioners' Second Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

Subject of the instant controversy are twenty-four memorial lots

located at the Holy Cross Memorial Park in Barangay Bagbag,
Novaliches, Quezon City. The property, more particularly described as
"Lot: 24 lots, Block 213, Section: Plaza of Heritage-Reg.," is covered by
Transfer Certificate of Title (TCT) No. 342914. Respondent, together
with her mother, Florencia R. Calagos, own the disputed property.
Their co-ownership is evidenced by a Deed of Sale and Certificate of
Perpetual Care, denominated as Contract No. 31760, which was
executed on June 4, 1992.[3]

On December 18, 1995, respondent borrowed from petitioner spouses

the amount of P150,000.00. The loan was secured by a real estate
mortgage over the abovementioned property. Respondent committed
to pay a monthly interest of 8% and an additional 10% monthly interest
in case of default.[4] Respondent failed to fully settle her obligation.

Subsequently, without foreclosure of the mortgage, ownership of the

subject lots were transferred in the name of petitioners via a Deed of
Transfer.[5]

On June 23, 1997, respondent filed with the Regional Trial Court (RTC)
of Quezon City a Complaint against petitioners, Manila Memorial Park
Inc., the company which owns the Holy Cross Memorial Park, and the
Register of Deeds of Quezon City, praying for the annulment of the
contract of mortgage between her and petitioners on the ground that
the interest rates imposed are unjust and exorbitant. Respondent also
sought accounting to determine her liability under the law. She
likewise prayed that the Register of Deeds of Quezon City and Manila
Memorial Park, Inc. be directed to reconvey the disputed property to
her.[6]

On November 20, 1998, respondent moved for the amendment of her

complaint to include the allegation that she later discovered that
ownership of the subject lots was transferred in the name of
petitioners by virtue of a forged Deed of Transfer and Affidavit of
Warranty. Respondent prayed that the Deed of Transfer and Affidavit
of Warranty be annulled.[7] In their Manifestation dated January 25,
1999, petitioners did not oppose respondent's motion.[8] Trial ensued.

After trial, the RTC of Quezon City rendered a Decision in favor of

petitioners, the dispositive portion of which reads, thus:

Wherefore, premises considered, judgment is hereby rendered

against Menelia R. Chua and in favor of the Sps. Lehner Martires
and Ludy Martires; and Manila Memorial Park Cemetery, Inc. as
follows:

1. The Complaint is denied and dismissed for lack of merit;

2. The counterclaims are granted as follows:

a. Menelia R. Chua is ordered to pay the Sps. Martires the

amount of P100,000.00 as moral damages; the amount of
P50,000.00 as exemplary damages; and the amount of
P30,000.00 as reasonable attorney's fees plus costs of suit.

b. Menelia R. Chua is ordered to pay Manila Memorial Park

Cemetery, Inc. the amount of P30,000.00 as reasonable
attorney's fees plus costs of suit.

SO ORDERED.[9]
On appeal, the CA affirmed, with modification, the judgment of the
RTC, disposing as follows:

WHEREFORE, premises considered, the instant appeal is hereby

DENIED for lack of merit, and the decision of the trial court dated
03 August 2002 is hereby AFFIRMED with MODIFICATION as to
the amount of moral and exemplary damages, and attorney's fees.
Plaintiff-appellant Menelia R. Chua is hereby ordered to pay the
defendant-appellees Spouses Martires the amount of P30,000.00
as moral damages; P20,000.00 as exemplary damages; and
attorney's fees of P10,000.00 plus costs of suit.

Insofar as defendant-appellee Manila Memorial Park Cemetery, Inc.

is concerned, the attorney's fees awarded is reduced to P10,000.00
plus costs of suit.

SO ORDERED.[10]

The CA ruled that respondent voluntarily entered into a contract of

loan and that the execution of the Deed of Transfer is sufficient
evidence of petitioners' acquisition of ownership of the subject
property.

Respondent filed a Motion for Reconsideration.[11] Petitioners opposed

it.[12]

On September 30, 2005, the CA promulgated its assailed Amended

Decision with the following dispositive portion:
WHEREFORE, the Court grants the movant's Motion for
Reconsideration.

Accordingly, the decision of this Court dated April 30, 2004 in CA-
G.R. CV No. 76388, which had affirmed the judgment of the
Regional Trial Court of Quezon City, Branch 221, in Civil Case No.
Q-97-31408, is REVERSED and SET ASIDE, and it is hereby
declared that:

(1) The assailed decision dated August 3, 2002 of the Regional

Trial Court of Quezon City Branch 221 in Civil Case No. Q-97-
31408 is hereby Reversed with the following MODIFICATIONS,
to wit:

(1) The Deed of Transfer dated July 3, 1996, as well as the

Affidavit of Warranty, are hereby declared void ab initio;

(2) The loan of P150,000.00 is hereby subject to an interest

of 12% per annum.

(3) The Manila Memorial Park Cemetery, Inc. and the Register
of Deeds of Quezon City [are] hereby directed to cancel the
registration or annotation of ownership of the spouses
Martires on Lot: 24 lots, Block 213, Section: Plaza Heritage
Regular, Holy Cross Memorial Park, being a portion of
Transfer Certificate of Title No. 342914 issued by the
Register of Deeds of Quezon City, and revert registration of
ownership over the same in the name of appellant Menelia R.
Chua, and Florencia R. Calagos.
 (4) The movant, Menelia R. Chua, is hereby ordered to pay
the spouses Martires the amount of P150,000.00 plus
interest of 12% per annum computed from December 18,
1995 up to the time of full payment thereof and, after
deducting payments made in the total amount of
P80,000.00, the same shall be paid within ninety (90) days
from the finality of this decision. In case of failure to pay the
aforesaid amount and the accrued interests from the period
hereinstated, the property shall be sold at public auction to
satisfy the mortgage debt and costs, and if there is an
excess, the same is to be given to the owner.

No costs.

SO ORDERED.[13]

The CA reconsidered its findings and concluded that the Deed of

Transfer which, on its face, transfers ownership of the subject
property to petitioners, is, in fact, an equitable mortgage. The CA held
that the true intention of respondent was merely to provide security for
her loan and not to transfer ownership of the property to petitioners.
The CA so ruled on the basis of its findings that: (1) the consideration,
amounting to P150,000.00, for the alleged Deed of Transfer is
unusually inadequate, considering that the subject property consists
of 24 memorial lots; (2) the Deed of Transfer was executed by reason
of the same loan extended by petitioners to respondent; (3) the Deed
of Transfer is incomplete and defective; and (4) the lots subject of the
Deed of Transfer are one and the same property used to secure
respondent's P150,000.00 loan from petitioners.
Petitioners filed a Motion for Reconsideration,[14] but the CA denied it
in its Resolution dated July 5, 2006.

On July 26, 2006, petitioners filed a Second Motion for

Reconsideration,[15] but again, the CA denied it via its Resolution dated
August 28, 2006.

Hence, the present petition based on the following grounds:

A. THE COURT OF APPEALS PATENTLY ERRED IN NOT

UPHOLDING THE DEED OF TRANSFER EXECUTED BY THE
RESPONDENT IN FAVOR OF THE PETITIONERS BY RULING THAT:

1. The Deed of Transfer executed by respondent in favor of

petitioners over the subject property was not entered in the
Notarial Book of Atty. Francisco Talampas and reported in the
Notarial Section of the Regional Trial Court of Makati City.

2. The Deed of Transfer was not duly notarized by Atty.

Francisco Talampas inasmuch as there was no convincing proof
that respondent appeared before Notary Public Atty. Talampas.

B. THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT

THE DEED OF TRANSFER EXECUTED BETWEEN THE
RESPONDENT AND THE PETITIONERS CONSTITUTED AN
EQUITABLE MORTGAGE CONSIDERING THAT:
 1. Said issue was not raised in any pleading in the appellate and
trial courts.

2. Respondent herself admitted that a separate mortgage was

executed to secure the loan.[16]

The petition lacks merit.

At the outset, the instant petition should be denied for being filed out
of time. Petitioners admit in the instant petition that: (1) on July 18,
2006, they received a copy of the July 5, 2006 Resolution of the CA
which denied their Motion for Reconsideration of the assailed
Amended Decision; (2) on July 26, 2006, they filed a Motion to Admit
Second Motion for Reconsideration attaching thereto the said Second
Motion for Reconsideration; (3) on September 5, 2006, they received
a copy of the August 28, 2006 Resolution of the CA which denied their
Motion to Admit as well as their Second Motion for Reconsideration;
and (4) they filed the instant petition on October 20, 2006.

Section 2, Rule 45 of the Rules of Court provides that a petition for

review on certiorari under the said Rule "shall be filed within fifteen
(15) days from notice of the judgment or final order or resolution
appealed from or of the denial of the petitioner's motion for new
trial or reconsideration filed in due time after notice of the
judgment." Relative thereto, Section 2, Rule 52 of the same Rules
provides that "[n]o second motion for reconsideration of a
judgment or final resolution by the same party shall be
entertained." Based on the abovementioned dates, the start of the
15-day period for the filing of this petition should have been reckoned
from July 18, 2006, the time of petitioners' receipt of the CA
Resolution denying their Motion for Reconsideration, and not on
September 5, 2006, the date when they received the CA Resolution
denying their Second Motion for Reconsideration. Thus, petitioners
should have filed the instant petition not later than August 2, 2006. It is
wrong for petitioners to reckon the 15-day period for the filing of the
instant petition from the date when they received the copy of the CA
Resolution denying their Second Motion for Reconsideration. Since a
second motion for reconsideration is not allowed, then unavoidably, its
filing did not toll the running of the period to file an appeal by
certiorari.[17] Petitioners made a critical mistake in waiting for the CA to
resolve their second motion for reconsideration before pursuing an
appeal.

Perfection of an appeal within the reglementary period is not only

mandatory but also jurisdictional.[18] For this reason, petitioners' failure
to file this petition within the 15-day period rendered the assailed
Amended CA Decision and Resolutions final and executory, thus,
depriving this Court of jurisdiction to entertain an appeal therefrom.[19]
On this ground alone, the instant petition should be dismissed.

In any case, even granting, arguendo, that the present petition is

timely filed, the Court finds no cogent reason to depart from the
findings and conclusions of the CA in its disputed Amended Decision.

Anent the first assigned error, petitioners are correct in pointing out
that notarized documents carry evidentiary weight conferred upon
them with respect to their due execution and enjoy the presumption of
regularity which may only be rebutted by evidence so clear, strong and
convincing as to exclude all controversy as to falsity.[20] However, the
presumptions that attach to notarized documents can be affirmed only
so long as it is beyond dispute that the notarization was regular.[21] A
defective notarization will strip the document of its public character
and reduce it to a private instrument.[22] Consequently, when there is a
defect in the notarization of a document, the clear and convincing
evidentiary standard normally attached to a duly-notarized document
is dispensed with, and the measure to test the validity of such
document is preponderance of evidence.[23]

In the present case, the CA has clearly pointed out the dubious
circumstances and irregularities attendant in the alleged notarization
of the subject Deed of Transfer, to wit: (1) the Certification[24] issued
by the Clerk of Court of the Notarial Section of the RTC of Makati City
which supposedly attested that a copy of the subject Deed of
Transfer is on file with the said court, was contradicted by the
Certification[25] issued by the Administrative Officer of the Notarial
Section of the same office as well as by the testimony of the court
employee who prepared the Certification issued by the Clerk of Court,
to the effect that the subject Deed of Transfer cannot, in fact, be
found in their files; (2) respondent's categorical denial that she
executed the subject Deed of Transfer; and (3) the subject document
did not state the date of execution and lacks the marital consent of
respondent's husband.

Indeed, petitioners' heavy reliance on the Certification issued by the

notary public who supposedly notarized the said deed, as well as the
Certification issued by the Clerk of Court of the Notarial Section of the
RTC of Makati City, is misplaced for the following reasons: first, the
persons who issued these Certifications were not presented as
witnesses and, as such, they could not be cross-examined with
respect to the truthfulness of the contents of their Certifications;
second, as mentioned above, these Certifications were contradicted
by the Certification issued by the Administrative Officer of the Notarial
Section of the RTC of Makati City as well as by the admission, on
cross-examination, of the clerk who prepared the Certification of the
Clerk of Court, that their office cannot, in fact, find a copy of the
subject Deed of Transfer in their files;[26] and third, the further
admission of the said clerk that the Certification, which was issued by
the clerk of court and relied upon by petitioners, was not based on
documents existing in their files, but was simply based on the
Certification issued by the notary public who allegedly notarized the
said Deed of Transfer.[27]

Assuming further that the notarization of the disputed Deed of

Transfer was regular, the Court, nonetheless, is not persuaded by
petitioners' argument that such Deed is a sufficient evidence of the
validity of the agreement between petitioners and respondent.

While indeed a notarized document enjoys the presumption of

regularity, the fact that a deed is notarized is not a guarantee of the
validity of its contents.[28] The presumption is not absolute and may
be rebutted by clear and convincing evidence to the contrary.[29] In
the present case, the presumption cannot be made to apply, because
aside from the regularity of its notarization, the validity of the contents
and execution of the subject Deed of Transfer was challenged in the
proceedings below where its prima facie validity was subsequently
overthrown by the questionable circumstances attendant in its
supposed execution. These circumstances include: (1) the alleged
agreement between the parties that the ownership of the subject
property be simply assigned to petitioners instead of foreclosure of
the contract of mortgage which was earlier entered into by them; (2)
the Deed of Transfer was executed by reason of the loan extended by
petitioners to respondent, the amount of the latter's outstanding
obligation being the same as the amount of the consideration for the
assignment of ownership over the subject property; (3) the
inadequacy of the consideration; and (4) the claim of respondent that
she had no intention of transferring ownership of the subject property
to petitioners.

Based on the foregoing, the Court finds no cogent reason to depart

from the findings of the CA that the agreement between petitioners
and respondent is, in fact, an equitable mortgage.

An equitable mortgage has been defined as one which, although

lacking in some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the intention of the
parties to charge real property as security for a debt, there being no
impossibility nor anything contrary to law in this intent.[30]

One of the circumstances provided for under Article 1602 of the Civil
Code, where a contract shall be presumed to be an equitable
mortgage, is "where it may be fairly 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 the instant case, it has
been established that the intent of both petitioners and respondent is
that the subject property shall serve as security for the latter's
obligation to the former. As correctly pointed out by the CA, the
circumstances surrounding the execution of the disputed Deed of
Transfer would show that the said document was executed to
circumvent the terms of the original agreement and deprive
respondent of her mortgaged property without the requisite
foreclosure.

With respect to the foregoing discussions, it bears to point out that in

Misena v. Rongavilla,[31] a case which involves a factual background
similar to the present case, this Court arrived at the same ruling. In the
said case, the respondent mortgaged a parcel of land to the petitioner
as security for the loan which the former obtained from the latter.
Subsequently, ownership of the property was conveyed to the
petitioner via a Deed of Absolute Sale. Applying Article 1602 of the
Civil Code, this Court ruled in favor of the respondent holding that the
supposed sale of the property was, in fact, an equitable mortgage as
the real intention of the respondent was to provide security for the
loan and not to transfer ownership over the property.

Since the original transaction between the parties was a mortgage, the
subsequent assignment of ownership of the subject lots to petitioners
without the benefit of foreclosure proceedings, partakes of the nature
of a pactum commissorium, as provided for under Article 2088 of the
Civil Code.

Pactum commissorium is a stipulation empowering the creditor to

appropriate the thing given as guaranty for the fulfillment of the
obligation in the event the obligor fails to live up to his undertakings,
without further formality, such as foreclosure proceedings, and a
public sale.[32]

In the instant case, evidence points to the fact that the sale of the
subject property, as proven by the disputed Deed of Transfer, was
simulated to cover up the automatic transfer of ownership in
petitioners' favor. While there was no stipulation in the mortgage
contract which provides for petitioners' automatic appropriation of the
subject mortgaged property in the event that respondent fails to pay
her obligation, the subsequent acts of the parties and the
circumstances surrounding such acts point to no other conclusion
than that petitioners were empowered to acquire ownership of the
disputed property without need of any foreclosure.

Indeed, the Court agrees with the CA in not giving credence to

petitioners' contention in their Answer filed with the RTC that
respondent offered to transfer ownership of the subject property in
their name as payment for her outstanding obligation. As this Court
has held, all persons in need of money are liable to enter into
contractual relationships whatever the condition if only to alleviate
their financial burden albeit temporarily.[33] Hence, courts are duty-
bound to exercise caution in the interpretation and resolution of
contracts lest the lenders devour the borrowers like vultures do with
their prey.[34] Aside from this aforementioned reason, the Court
cannot fathom why respondent would agree to transfer ownership of
the subject property, whose value is much higher than her outstanding
obligation to petitioners. Considering that the disputed property was
mortgaged to secure the payment of her obligation, the most logical
and practical thing that she could have done, if she is unable to pay
her debt, is to wait for it to be foreclosed. She stands to lose less of
the value of the subject property if the same is foreclosed, rather than
if the title thereto is directly transferred to petitioners. This is so
because in foreclosure, unlike in the present case where ownership of
the property was assigned to petitioners, respondent can still claim
the balance from the proceeds of the foreclosure sale, if there be any.
In such a case, she could still recover a portion of the value of the
subject property rather than losing it completely by assigning its
ownership to petitioners.

As to the second assigned error, the Court is not persuaded by

petitioners' contention that the issue of whether or not the subject
Deed of Transfer is, in fact, an equitable mortgage was not raised by
the latter either in the RTC or the CA.

It is true that, as a rule, no issue may be raised on appeal unless it has

been brought before the lower tribunal for its consideration.[35] Higher
courts are precluded from entertaining matters neither alleged in the
pleadings nor raised during the proceedings below, but ventilated for
the first time only in a motion for reconsideration or on appeal.[36]
However, as with most procedural rules, this maxim is subject to
exceptions.[37] In this regard, the Court's ruling in Mendoza v.
Bautista[38] is instructive, to wit:

x x x Indeed, our rules recognize the broad discretionary power of

an appellate court to waive the lack of proper assignment of errors
and to consider errors not assigned. Section 8 of Rule 51 of the
Rules of Court provides:

SEC. 8 Questions that may be decided. - No error which does

not affect the jurisdiction over the subject matter or the validity
of the judgment appealed from or the proceedings therein will
be considered, unless stated in the assignment of errors, or
closely related to or dependent on an assigned error and
properly argued in the brief, save as the court may pass upon
plain errors and clerical errors.
 Thus, an appellate court is clothed with ample authority to review
rulings even if they are not assigned as errors in the appeal in these
instances: (a) grounds not assigned as errors but affecting
jurisdiction over the subject matter; (b) matters not assigned as
errors on appeal but are evidently plain or clerical errors within
contemplation of law; (c) matters not assigned as errors on
appeal but consideration of which is necessary in arriving at a
just decision and complete resolution of the case or to serve
the interests of justice or to avoid dispensing piecemeal
justice; (d) matters not specifically assigned as errors on appeal
but raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise or
which the lower court ignored; (e) matters not assigned as errors
on appeal but closely related to an error assigned; and (f)
matters not assigned as errors on appeal but upon which the
determination of a question properly assigned, is dependent.[39]

In the present case, petitioners must be reminded that one of the main
issues raised by respondent in her appeal with the CA is the validity
and due execution of the Deed of Transfer which she supposedly
executed in petitioners' favor. The Court agrees with respondent that,
under the factual circumstances obtaining in the instant case, the
determination of the validity of the subject Deed of Transfer would
necessarily entail or involve an examination of the true nature of the
said agreement. In other words, the matter of validity of the disputed
Deed of Transfer and the question of whether the agreement
evidenced by such Deed was, in fact, an equitable mortgage are
issues which are closely related, which can, thus, be resolved jointly
by the CA.
WHEREFORE, the instant petition is DENIED. The assailed Amended
Decision and Resolutions of the Court of Appeals, dated September
30, 2005, July 5, 2006 and August 28, 2006, respectively, in CA-G.R.
CV No. 76388, are AFFIRMED.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin,* Abad, and Leonen, JJ., concur.

*Designated Acting Member, in lieu of Associate Justice Jose Catral

Mendoza, per Raffle dated March 18, 2013.

[1]Penned by Associate Justice Bienvenido L. Reyes (now a member of

this Court), with Associate Justices Ruben T. Reyes (now a retired
member of this Court) and Jose C. Mendoza (now a member of this
Court), concurring; rollo, pp. 32-52.

[2] Annexes "B" and "C" to Petition, rollo, pp. 54-59.

[3] Exhibit "A," records, p. 237.

[4] Exhibit "D"/"7," id. at 241.

[5] Exhibit "B"/"8," id. at 239.

[6] Records, pp. 1-6.

[7] Id. at 170-177.

[8] Id. at 195.

[9] Id. at 365-366.

[10] CA rollo, p. 109. (Emphasis in the original)

[11] Id. at 113-125.

[12] Id. at 135-152.

[13] Id. at 183-184.

[14] Id. at 185-195.

[15] Id. at 260-270.

[16] Rollo, pp. 16-17.

[17]
Tagle v. Equitable PCI Bank, G.R. No. 172299, April 22, 2008, 552
SCRA 424, 445.

[18]Ong v. Philippine Deposit Insurance Corp., G.R. No. 175116, August

18, 2010, 628 SCRA 415, 426.

[19] Id.

[20]
Meneses v. Venturozo, G.R. No. 172196, October 19, 2011, 659
SCRA 577, 586.
[21] Id.

[22] Id.

[23] Id.

[24] Exhibit "20," records, p. 325.

[25] Exhibit "H," id. at 291.

[26] TSN, November 20, 2001, pp. 12-17.

[27] Id. at 7-17.

[28]Lazaro v. Agustin, G.R. No. 152364, April 15, 2010, 618 SCRA 298,
311; San Juan v. Offril, G.R. No. 154609, April 24, 2009, 586 SCRA
439, 445-446.

[29] Id; id. at 446.

[30]Muñoz, Jr. v. Ramirez, G.R. No. 156125, August 25, 2010, 629
SCRA 38, 51; Rockville Excel International Exim Corporation v. Culla,
G.R. No. 155716, October 2, 2009, 602 SCRA 128, 136.

[31] 363 Phil. 361 (1999).

[32]Edralin v. Philippine Veterans Bank, G.R. No. 168523, March 9,

2011, 645 SCRA 75, 89.
[33] Bustamante v. Rosel, 377 Phil. 436, 445 (1999).

[34] Id.

[35]
Ang v. Associated Bank, G.R. No. 146511, September 5, 2007, 532
SCRA 244, 267.

[36] Id.

[37] Id.

[38] 493 Phil. 804 (2005).

[39] Id. at 813-814. (Emphasis supplied)