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FIRST DIVISION

[ G.R. No. 238714. August 30, 2023 ]

ANNALIZA C. SINGSON,* PETITIONER, VS. SPOUSES NAR

CHRISTIAN CARPIO AND CECILIA CAO CARPIO, RESPONDENTS.

DECISION

GESMUNDO, C.J.:
Before the Court is a Petition for Review on Certiorari[1] under Rule
45 of the Rules of Court, seeking to modify the October 26, 2017
Decision[2] and the April 12, 2018 Resolution[3] of the Court of Appeals
(CA) in CA-G.R. CV No. 104327 which affirmed the November 4, 2014
Decision[4] of the Regional Trial Court of Manila, Branch 47 (RTC) in
Civil Case No. 10-124055, granting the Complaint[5] for Recovery of
Possession and Ownership of Real Property with Damages filed by
spouses Nar Christian Carpio (Nar) and Cecilia Cao Carpio
(collectively, respondents) against Enriquito C. Caamic (Enriquito)
and Annaliza C. Singson (petitioner).

The Antecedents

Respondents claim ownership over a 51.24-square meter land,

including the two-storey residential house erected thereon situated at
No. 22-E Block 5, De los Santos Street, Magsaysay Village, Tondo,
Manila (subject property), and covered by Transfer Certificate of Title
(TCT) No. 286305.[6] They acquired the said property from Primitiva
Cayanan Vda. De Caamic (Primitiva) on February 16, 2007, and
averred that since then, they had been religiously paying the realty
taxes, as shown by official receipts for the years 2007, 2008, 2009,
and 2010.[7]

It appears that prior to and after the sale, petitioner and Primitiva
had been occupying the subject property. However, after Primitiva
died on July 21, 2007,[8] Enriquito, claiming to be her son and heir,
suddenly surfaced and asserted his interest over the subject property.
When petitioner and Enriquito refused to vacate the subject property
despite repeated demands, respondents filed a complaint before
their barangay for possible conciliation. Unfortunately, no amicable
settlement was reached based on the certification to file action issued
by the Lupong Tagapamayapa.[9]

Thus, on August 6, 2010, respondents filed a Complaint for Recovery

of Possession and Ownership of Real Property with Damages and
prayed that they be declared as lawful owners of the subject property
and that Enriquito and petitioner be ordered to vacate the same.
Respondents also urged the RTC to order Enriquito and petitioner to
pay the following amounts: (1) monthly rental in the amount of
P1,500.00 from July 2007 up to the time they actually vacate the
premises; (2) P50,000.00 as moral damages; (3) P50,000.00 as
exemplary damages; (4) P30,000.00 as attorney's fees, plus
P3,000.00 appearance fee per hearing; and (5) costs of suit.[10]

In her Answer,[11] petitioner claimed to be the grandniece of Primitiva

and her husband, who took care of Primitiva during her lifetime. She
also helped Primitiva secure a loan from respondents who were their
neighbors, in the amount of P135,000.00 which Primitiva used to
redeem the subject property from a certain Lordita Piamonte
(Piamonte). While respondents agreed to loan the said amount, they
made Primitiva and petitioner sign a notarized document entitled
"Bilihan ng Lupa"[12] for assurance.[13]

Several months after Primitiva died, petitioner received through mail

a document entitled "Kasunduan"[14] dated February 16, 2007 which
indicated that Primitiva had sold the property to respondents for the
amount of P450,000.00. Since it was the first time that petitioner
saw the document, she informed her uncle, Enriquito, about it.[15]

When Enriquito arrived from the province, petitioner accompanied

him to Atty. Richard Anolin (Atty. Anolin) who supposedly notarized
the document. However, Atty. Anolin issued a
Certification[16] indicating that he did not notarize a document
entitled "Deed of Sale"[17] dated February 18, 2007 which appeared to
have been executed by Primitiva and petitioner. This prompted
petitioner and Enriquito to file a case for falsification against
respondents before the City Prosecutor of Manila. While the case was
in its preliminary investigation, respondents attempted to register the
subject property under their names, but petitioner opposed the move.
However, for unknown reasons, respondents had been successful in
registering the subject property under their names on their third
attempt.[18]

As part of her affirmative defense, petitioner asserted that Primitiva

had no intention of relinquishing the subject property. She insisted
that with the existence of the document Bilihan ng Lupa, respondents
have no cause of action and that the transfer of the registration of the
contested subject property to their names was done fraudulently.[19]

In their Reply,[20] respondents alleged that petitioner herself was a

witness to the signing of the Bilihan ng Lupa. They were able to
transfer the title to their names by going through the proper channels
and government authorities, hence, there is no basis for petitioner's
claim of fraud. On the other hand, petitioner had not shown her
entitlement to the property either as an heir, donee, vendee, or owner
by prescription. Moreover, petitioner, in effect, was collaterally
attacking the validity of their title, which she cannot do since Torrens
titles are indefeasible and binding upon the whole world unless
nullified by a court of competent jurisdiction.[21]

During trial, respondents presented only one witness, Nar, and

submitted the following documentary evidence, namely: a certified
true copy of TCT No. 286305 of the Register of Deeds of Manila; the
declarations of real property value (land and building) in
respondents' names; the real estate tax receipt and real estate tax
statement of account for the year 2013; the notice to vacate addressed
to Enriquito and petitioner; the certification by the post office that the
registered mail was duly received; and the certificate to file action
issued by the Lupong Tagapamayapa.[22]

On the other hand, petitioner testified to support her claims and

presented the following documents: a copy of the Bilihan ng Lupa;
the death certificate of Primitiva; the certification of Atty. Anolin to
the effect that the Deed of Sale allegedly executed by Primitiva and
petitioner was a forgery; and her judicial affidavit.[23]

Meanwhile, on July 22, 2011, respondents filed a Manifestation and

Motion to Drop Enriquito C. Caamic as Defendant,[24] averring that he
had already vacated the subject property. On November 8, 2011, the
RTC granted the motion and dropped Enriquito as party-defendant.
[25]

Ruling of the RTC

In its November 4, 2014 Decision, the RTC decreed:

WHEREFORE, premises considered, judgment is hereby rendered

ordering defendant:

1. To vacate and voluntarily surrender possession of the subject house

and lot located at No. 22-E Block 5, [D]e los Santos Street, Magsaysay
Village, Tonda, Manila and covered by TCT No. 286305 upon
[respondents];

2. To pay [respondents] the monthly rental of [P]1,500.00 due [to]

her occupation of the premises and starting July 2007 until she has
actually vacated the premises; and

3. To pay [respondents'] Attorney's [f]ees m the amount of

[P]30,000.00.

SO ORDERED.[26]
The RTC ruled that based on the evidence presented by both parties,
particularly the document Bilihan ng Lupa, the transaction between
them was a contract of sale with conventional redemption. It noted
that the bone of contention between them is the provisions of such
document on the vendor's right to redeem or buyback the property
within five years from the date of the instrument.[27]

Taking into account the terms and conditions of the

document Bilihan ng Lupa and Articles 1601[28] and 1616[29] of the
Civil Code, the RTC held that there was a valid transfer of ownership
from the previous owner/vendor, Primitiva, to respondents. As such,
respondents were not prohibited from registering the title in their
names, but without prejudice to the right of Primitiva to redeem it
within the agreed period. The RTC held that when Primitiva died in
July of 2007, her right to redeem had also ended. Thus, when
petitioner and Enriquito tried to redeem the subject property, they
were already barred from doing so.[30]

Aggrieved, petitioner filed an Appeal,[31] assigning the lone error that

the RTC gravely erred in holding that the Bilihan ng Lupa was a
perfected contract of sale with conventional redemption.[32] She
insisted that since the contract between Primitiva and respondents
was an equitable mortgage, respondents' remedy was either to
recover the loaned amount by filing an action for sum of money or
foreclosing the property.[33]

Ruling of the CA

On October 26, 2017, the CA rendered a Decision affirming the RTC.

It ruled that the Bilihan ng Lupa, is an equitable mortgage because:
(1) Primitiva and petitioner remained in possession of the subject
property despite the purchase; and (2) Primitiva was in dire need of
money to redeem the subject property at the time of the transaction.
[34]

The CA, however, held that regardless of the finding that the
transaction was an equitable mortgage, petitioner cannot insist on the
same because nobody had the right to redeem the contested realty.
When Primitiva died, she had no known heirs to whom her rights and
obligations could have been passed on. Even if petitioner may have
been treated by Primitiva as her own daughter, she was only a distant
relative and not a legal heir. Thus, the right of redemption did not
pass unto her. Having failed to establish her legal personality to
redeem the property, she is likewise found to have no personality to
insist on the equitable mortgage.[35]

Furthermore, Enriquito, as the supposed heir of Primitiva, failed to

present any convincing evidence to corroborate his claim other than
his belated registration of birth certificate. He likewise failed to prove
his right as an heir when he voluntarily did not participate during the
proceedings of the case.[36]

The dispositive portion of the CA Decision reads:

WHEREFORE, premises considered, the assailed 4 November 2014

Decision of the RTC is AFFIRMED.

SO ORDERED.[37]
Dissatisfied with the CA Decision, petitioner filed a Motion for Partial
Reconsideration.[38] In its Resolution dated April 12, 2018, the CA
denied the motion. Hence, this Petition for Review on Certiorari.

Issue

Petitioner raises the sole issue of whether the CA gravely erred in

affirming the RTC despite proof that the Bilihan ng Lupa is in the
nature of a pactum commissorium.[39] Petitioner contends that the CA
accorded respondents with the power to automatically appropriate
the mortgaged property in the event of nonpayment. She insists that
the ruling in Spouses Solitarios v. Spouses Jaque[40] squarely applies
in the case at bench where the Court, despite finding that the deed of
sale was an equitable mortgage, ruled that the transfer of ownership
to the mortgagee was void for being in the nature of a pactum
commissorium.[41]

According to petitioner, respondents cannot automatically

appropriate the mortgaged property in the event of nonpayment,
since the proper procedure is that of foreclosing the mortgage and,
thereafter, buying the same in the auction sale. Instead of foreclosing
the contested property, respondents appropriated it for themselves
after the death of Primitiva. Being a pactum commissorium, the
contract and the subsequent registration of the property in the names
of respondents, must be declared void. She submits that TCT No.
286305 under respondents' names must be declared null and void,
and the Register of Deeds of Manila must issue a new title in the
name of Primitiva or her estate.[42]
Finally, petitioner asserts that respondents' claims for rentals have no
basis in law and jurisprudence. They are likewise not entitled to
attorney's fees because although they were compelled to litigate, she
did not violate any of their rights which could have produced a cause
of action. Conversely, they are liable to pay her attorney's fees for
trying to eject her without right to do so, and moral damages because
she suffered anxiety, sleepless nights, headaches, and hypertension.
[43]

In their Comment,[44] respondents maintain that petitioner has not

established any right to remain in the subject property. The Torrens
title issued to them which covered the said subject property, is
indefeasible and binding upon the whole world unless and until
nullified by a court of competent jurisdiction in a direct proceeding
for cancellation of title. Moreover, the issue on the validity of
title, i.e., whether it was fraudulently issued, can only be raised in an
action expressly instituted for that purpose. On the other hand, the
question on whether the Bilihan ng Lupa is an equitable mortgage or
a contract of sale with equitable redemption, is irrelevant, as the same
cannot prevail over the Torrens title, which is conclusive evidence
with respect to their ownership of the land described therein.[45]

In her Reply,[46] petitioner argues that the principle of indefeasibility

of the Torrens title shall not apply if it is used to perpetrate fraud
against a rightful owner. Since respondents acquired the contested
property by way of a transaction which is pactum commissorium, the
Torrens system cannot be used to countenance a prohibited practice.
As such, the Court can invalidate the title issued to respondents since
its transmission was made contrary to law and public policy. [47]

Ruling of the Court

The petition is meritorious.

Respondents failed
to prove by
preponderant
evidence that they
are entitled to be
declared owners of
the property and to
have possession of
the same.

It is well-settled that the party who alleges the affirmative of the issue
has the burden of proof, and that with the plaintiff in a civil case, the
burden of proof never parts. Once the plaintiff makes out a prima
facie case in his or her favor in the course of the trial, however, the
duty or the burden of evidence shifts to the defendant to controvert
the plaintiff's prima facie case, otherwise, a verdict must be returned
in favor of the plaintiff.[48]

In civil cases, the party having the burden of proof must establish
his/her case by preponderance of evidence.[49] "Preponderance of
evidence means that the evidence adduced by one side is, as a whole,
superior to or has greater weight than that of the other or that which
is more convincing to the court as worthy of belief than that which is
offered in opposition thereto. Bare allegations, unsubstantiated by
evidence, are not equivalent to proof."[50]

To support their prayer to be declared lawful owners and to recover

possession of the subject property, respondents formally offered in
evidence TCT No. 286305 issued under their names, the Declarations
of Real Property Value (land and building),[51] the Real Estate Tax
receipts, and the Statement of Account for the year 2013.[52] While
these pieces of documentary evidence make out a prima facie case in
their favor, petitioner successfully controverted respondents' claim of
ownership and discharged the burden of evidence when she proffered
the Bilihan ng Lupa and the certification of Atty. Anolin to the effect
that the Deed of Sale allegedly executed by Primitiva and petitioner
on February 18, 2007 was a forgery.

To stress, the CA ruled correctly that the Bilihan ng Lupa is an

equitable mortgage, and not a contract of sale with conventional
redemption as held by the RTC. As duly noted by the CA, the Bilihan
ng Lupa can be presumed as an equitable mortgage in view of the
existence of two circumstances under Art. 1602[53] of the New Civil
Code, namely: (1) Primitiva and petitioner were allowed to remain in
possession of the property for five years despite the purchase thereof
by respondents; and (2) Primitiva was shown to be in dire need of
money at the time of the transaction in order to redeem the same
property from Piamonte.

At any rate, whenever it is clearly shown that a deed of sale

with pacto de retro, regular on its face is given as a security for a loan,
it must be regarded as an equitable mortgage inasmuch as a sale with
right to repurchase is not favored.[54] In case of doubt, a contract
purporting to be a sale with right to repurchase shall be construed as
an equitable mortgage,[55] because this involves a smaller
transmission of rights and interests.[56]

Significantly, respondents did not present any evidence to prove their

allegation that they purchased the property from Primitiva on
February 16, 2007, or that they had foreclosed the mortgage and
acquired the property in a public auction. They even failed to dispute
the authenticity and due execution of the Bilihan ng Lupa which the
CA found to be an equitable mortgage and not a contract of sale with
conventional redemption. Notably, in the Reply they filed before the
RTC, they even averred that they bought the property from Primitiva
and noted that petitioner herself was witness to the transaction by
signing the Bilihan ng Lupa. Having failed to specifically deny under
oath the existence of the Bilihan ng Lupa which is the basis of
petitioner's affirmative defense, they are deemed to have admitted its
authenticity and due execution.

Apart from the Bilihan ng Lupa dated February 18, 2007 which
indicated a consideration of P135,000.00 plus the right to repurchase
within five years from its effectivity, there are two other contracts
submitted by petitioner as evidence purportedly executed by
Primitiva which conveyed ownership over the same subject property
to respondents for various considerations: (1) Kasunduan dated
February 16, 2007 for P450,000.00; and (2) Deed of Sale[57] dated
February 18, 2007 for P70,000.00 which was denounced as a forgery
by the same notary public who notarized the Bilihan ng Lupa.
Respondents neither denied their existence nor explained, at the very
least, how they were able to validly acquire the property from
Primitiva and transfer its registration under their names.

Instead, respondents stake their claim of absolute and indefeasible

title by presenting TCT No. 286305, tax declarations, and receipts of
realty tax payments. They posit that due to the indefeasibility of a
Torrens title, the same should prevail and render immaterial the
claim that the Bilihan ng Lupa is an equitable mortgage.[58]

Respondents' claim fails to persuade.

Tax declarations and tax receipts may only become the basis of a
claim for ownership when they are coupled with proof of actual
possession of the property.[59] Unfortunately, respondents cannot rely
on this rule in light of their admission that they were not in
possession of the property after having bought the same from
Primitiva. Moreover, the Bilihan ng Lupa expressly allowed Primitiva
and petitioner to continue living in the property for five years starting
on February 18, 2007.

On the other hand, while a certificate of title serves as evidence of an

indefeasible and incontrovertible title to the property in favor of the
person whose name appears therein, it is not a conclusive proof of
ownership, but merely confirms or records title already existing and
vested.[60] In Spouses Yu Hwa Ping and Gaw v. Ayala Land, Inc.,
[61]
the Court explained the principle as follows:

It is a well-settled rule that ownership is different from a certificate of

title. The fact that a person was able to secure a title in his name does
not operate to vest ownership upon him of the subject land.
Registration of a piece of land under the Torrens System does not
create or vest title, because it is not a mode of acquiring ownership. A
certificate of title is merely an evidence of ownership or title over the
particular property described therein. It cannot be used to protect a
usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at
the expense of others. Its issuance in favor of a particular person does
not foreclose the possibility that the real property may be co-owned
with persons not named in the certificate, or that it may be held in
trust for another person by the registered owner.[62]
Considering that respondents' pieces of evidence, consisting of a
certificate of title, tax declarations, and tax receipts, are insufficient to
prove how they acquired the subject property from Primitiva, their
claim of ownership and prayer for its recovery must be rejected.
Conversely, since the Bilihan ng Lupa proffered by petitioner is the
only evidence that was formally offered and admitted by the RTC to
establish how they acquired the subject property, respondents should
have further proven that they transferred ownership thereof under
their names by foreclosing on the equitable mortgage and thereafter,
purchasing the property in a public auction. Inasmuch as mere
allegation is not evidence and is not equivalent to proof,[63] their bare
and unsubstantiated allegation that they secured a transfer certificate
of title over the property by going through the proper channels and
government authorities deserves no credence.

In a reivindicatory
suit, the issue of
direct or collateral
attack on plaintiff's
title is irrelevant, as
the court can rule
definitively on the
issue of ownership
and pass upon the
validity of the
certificate of title.

To be sure, respondents cannot claim that the defense raised by

petitioner is a collateral attack on their title.

In Heirs of Cullado v. Gutierrez[64] (Cullado), the Court ruled that if

the plaintiff's claim of ownership is based on a Torrens title and the
defendant disputes the validity of such title, then the issue of whether
there is a direct or collateral attack on the plaintiff's title is irrelevant.
This is because the court where the reivindicatory or reconveyance
suit is filed has the requisite jurisdiction to rule definitively or with
finality on the issue of ownership—it can pass upon the validity of the
plaintiff's certificate of title.[65]
Here, respondents' Complaint is for recovery of possession and
declaration of ownership of the property on the basis of TCT No.
286305 registered in their names. In her Answer, petitioner sought
for the dismissal of the Complaint anchored on the affirmative
defense that based on the Bilihan ng Lupa, Primitiva "never had the
intention of relinquishing her property,"[66] and that respondents'
"action of transferring the registration to their name[s] should be
declared null and void considering that the issuance of title in the
name[s] of [respondents] was done fraudulently."[67] In consonance
with the ruling in Cullado, respondents cannot raise that petitioner's
counterclaim is a collateral attack on their title, as the trial court has
jurisdiction to rule definitively on the issue of ownership and validity
of the certificate of title of the property.

Registration of the
property under
respondents' names
facilitated in a
prohibited pactum
commissorium
manner was void;
Respondents' title
should be cancelled
and Primitiva's
title, as owner-
mortgagor should
be reinstated.

On the issue of the validity of respondents' acquisition of ownership

of the subject property, Art. 2088[68] of the New Civil Code provides
that a creditor cannot appropriate or consolidate ownership over a
mortgaged property merely upon failure of the mortgagor to pay a
debt obligation. The essence of pactum commissorium is that
ownership of the security will pass to the creditor by the mere default
of the debtor.[69] Incidentally, the only right of a mortgagee in case of
nonpayment of debt secured by mortgage would be to foreclose the
mortgage and have the encumbered property sold to satisfy the
outstanding indebtedness.[70] The mortgagor's default does not
operate to automatically vest on the mortgagee the ownership of the
encumbered property, for any such effect is against public policy.[71]

In view of the undisputed existence of the Bilihan ng Lupa, and in the

absence of proof that the said mortgage was foreclosed and the
property was acquired in a public auction, the Court rules that the
registration of the property under respondents' names was void. Such
transfer constituted a pactum commissorium which is prohibited by
existing laws for being contrary to morals and public policy.
Consequently, the CA erred in upholding the RTC ruling that
respondents had established themselves as the duly registered owner
of the subject property who have the consequent right to possession.
Perforce, respondents' Complaint should be dismissed for lack of
merit.

Meanwhile, the CA also erred in ruling that (I) it is ineffective to insist

on the mortgage since no one has the right to redeem the subject
property; and (2) Primitiva had no known heirs to whom the rights
and obligations would have passed on after her death.[72]

Nowhere in the records can it be gathered that petitioner is insisting

on redeeming the subject property as an heir or assign of Primitiva.
Instead, she asserts in her Answer that Primitiva never had the
intention to relinquish the property, and that respondents' action of
transferring the registration to their names should be declared null
and void, because the issuance of the title in their names was done
fraudulently. She did not pray to be declared owner of the subject
property, but rather seeks for the dismissal of respondents'
Complaint. Through a Judicial Affidavit,[73] she testified that the
property subject of the Bilihan ng Lupa was meant to secure the
payment of an obligation, and not to be sold to respondents, thus:

17. QUESTION: Nasabi mo kanina na isa rin sa dahilan kung bakit ka

narito ay upang ipakita ang iyong tunay na kasunduan, at ito ay ang
"Bilihan ng Lupa", maaari mo bang sabihin sa hukumang ito ang
dahilan bakit nabuo ang kasunduang ito?
ANSWER: Ako po ay nangailangan ng pera sapagkat ang titulo na
nasa pangalan ng aking ina[-]inahan ay unang nakasanla kay Lordita
Piamonte. Sa kagustuhan naming ito [ay] matubos, lumapit ako kay
Cecilia Carpio at nakiusap ako na kung maaari ay sila muna ang
tumubos sa lupa sa halagang ONE HUNDRED THIRTY[-]FIVE
THOUSAND PESOS (P135,000.00).

18. QUESTION: Ano naman ang reaksyon ni Cecilia Carpio?

ANSWER: Sumang[-]ayon po siya na kaniyang tutubusin ang titulo
kay Lordita Piamonte at pagkatapos po ay gumawa siya ng
Kasunduan na ang title ay "Bilihan ng Lupa".

19. QUESTION: Ang sinasabi mo bang "Bilihan ng Lupa" ay ang

kasunduang iniabot mo sa akin kanina lamang?
ANSWER: Opo.

20. QUESTION: Sino ang mga taong bumubuo sa kasunduang ito?

ANSWER: Si Primitiva Caamic po, ang mag-asawang Carpio at ako
bilang testigo.

21. QUESTION: Bilang testigo sa Kasunduan na "Bilihan ng Lupa,"

ano ang importanteng bahagi ng kasunduang ito, kung mayroon
man?
ANSWER: Iyon pong sinasabi na pwede naming tubusin ang lupa sa
loob ng limang taon simula sa pagkasanla noong February 18, 2007
hanggang February 18, 2012.[74]
However, petitioner's contention that the CA erred in sustaining the
transfer of title of the subject property despite the explicit prohibition
on stipulation of pactum commissorium, is misplaced.

To be sure, there is no stipulation in the Bilihan ng Lupa which

amounts to pactum commissorium whereby ownership of the
property will pass to the creditor by the mere default of the debtor.
For ready reference, the contract reads:

BILIHAN NG LUPA

Sa kaalaman ng lahat, kami sina PRIMITIV A CAYANAN CAAMIC at

ANNALIZA CAAMIC SINGSON, mag-ina, pawang mga nasa hustong
gulang at nakatira sa 22 E. Delos Santos St., Block 5, Magsaysay
Village, Tondo, Manila, ay nagpapatunay sa mga sumusunod:

1. Na ako si PRIMITIVA CAYANAN CAAMIC ay nagmamayari ng

isang piraso ng lote tulad ng pinatutunayan ng SN No. 1877679
at Transfer Certificate of Title (TCT) No. 267017 ng Register of
Deeds ng Maynila;

2. Na si ANNALIZA CAAMIC SINGSON ay tinuturing kong anak

at ako ay kasalukuyang naninirahan sa nasabing lote;

3. Na dahil sa pangangailangan namin ng salapi, ipinagbili ko kay

CECILIA CAO CARPIO, nasa hustong gulang, may-asawa at
naninirahan sa 103 D. Del Pilar St., Block 5, Magsaysay Village,
Tondo, Manila ang nasabing lote sa halagang Isang Daan at
Tatlumpu't-Limang Libong Piso (Php 135,000.00) kuwarta ng
Pilipinas, sa kasunduang kami ay patuloy na maninirahan sa
loob ng limang (5) taon simula ngayong ika-18 ng Pebrero taong
2007. Gayon din ang karapatang bilhin muli ang nasabing pag-
aari mula kay CECILIA CAO CARPIO sa halagang Isang Daan at
Tatlumpu't-Limang Libong Piso (Php 135,000.00) kuwarta ng
Pilipinas na may interest na 3% kada buwan. Nagkakahalaga ito
ng Tatlung Daan at Walumpu't-Pitong Libong Piso (Php
387,000.00) kuwarta ng Pilipinas sa loob ng Limang (5) taon;

4. Pagkatapos ng Limang (5) taong kontrata simula ngayong ika-

18 ng Pebrero 2007, kami ay obligadong aalis sa nasabing lote
at ang kasulatan na pwede naming bilhin muli ay
mababalewala. Matatapos ang kasulatang ito sa petsang ika-18
ng Pebrero taong 2012.[75] (Emphasis omitted)

Pertinent portions of the contract indicate the following tenns and

conditions: (1) that Primitiva is the owner of the subject property
covered by TCT No. 267107; (2) that Primitiva and petitioner, were
currently occupying the subject property; (3) that since they need
money, Primitiva is selling the subject property to respondent Cecilia
Cao Carpio for P135,000.00; (4) that Primitiva and petitioner will
continue to live in the subject property for five years starting on
February 18, 2007; (5) that Primitiva reserves the right to repurchase
the subject property within five years for P135,000.00 plus interest of
3% per month, or for a total amount of P387,000.00; (6) that after
five years from the start of the contract on February 18, 2007, or until
February 18, 2012, they are obliged to leave the subject property and
that the provision on the repurchase thereof will become ineffective.
Clearly, there is nothing in the terms and conditions of the Bilihan ng
Lupa that provides for the automatic appropriation of the subject
property by respondents upon failure to redeem the same.

Nonetheless, when a document appears on its face to be a sale

with pacto de retro, the owner of the property may prove that the
contract is really a loan with mortgage, by raising as an issue the fact
that the document does not express the true intent and agreement of
the contracting parties.[76] Upon proof of the truth of the allegations
that the instrument was merely given as a security for the repayment
of a loan, the courts will enforce the agreement or understanding, in
accord with the true intent of the parties at the time the contract was
executed, even if the conveyance was accompanied by registration in
the name of the transferee and the issuance of a new certificate of title
in the latter's name.[77]

Applying the principle of pactum commissorium to equitable

mortgages, the Court ruled in Montevirgen v. Court of
Appeals[78] that the consolidation of ownership in the person of the
mortgagee in equity, merely upon failure of the mortgagor in equity to
pay the obligation, would amount to a pactum commissorium. If a
mortgagee in equity desires to obtain title to a mortgaged property,
the mortgagee's proper remedy is to cause the foreclosure of the
mortgage in equity and buy it in a foreclosure sale.[79]

In Cruz v. Court of Appeals,[80] the Court again reiterated that, in an

equitable mortgage, perfect title over the mortgaged property may not
be secured in a pactum commissorium fashion, but only by causing
the foreclosure of the mortgage and buying the same in an auction
sale.[81]

In Spouses Solitarios v. Spouses Jaque,[82] a case involving a

complaint for ownership and recovery of possession where the subject
property was transferred to the mortgagee in a prohibited pactum
commissorium manner, the Court voided the transaction and the
registration of the deeds of sale by virtue of which the mortgagee was
able to obtain the impugned TCT.[83]

In Dacquel v. Spouses Sotelo,[84] the Court noted that the transaction

between the parties was demonstrated to be one of equitable
mortgage. It then ruled that therein petitioner did not become the
owner of the subject property involved but a mere mortgagee thereof.
Thus, therein petitioner was bound by the prohibition
against pactum commissorium. Having found that said petitioner
proceeded to cause the cancellation of therein respondents' title to the
mortgaged property and its transfer to therein petitioner's name
without availing of the remedy of foreclosure, the Court concluded
that said petitioner dabbled in the prohibited practice of pactum
commissorium and that the transaction is consequently rendered
void, and title to therein subject property should be reverted to
therein respondents.

To reiterate, respondents failed to present preponderant evidence to

prove that they foreclosed the equitable mortgage denominated
as Bilihan ng Lupa and acquired the subject property in a public
auction. For failure to present any evidence on how they acquired the
subject property from Primitiva, the Court can reasonably conclude
that respondents' acquisition thereof by virtue of the Bilihan ng
Lupa amounts to pactum commissorium.

Since respondents' acquisition of the subject property by virtue of

the Bilihan ng Lupa amounts to the prohibited practice of pactum
commissorium, the CA erred in affirming the RTC when it sustained
the transfer of title thereto under their names. Thus, the title issued
under respondents' names should be nullified and reinstated in the
name of Primitiva. After all, in an equitable mortgage, title to the
property in issue which has been transferred to the mortgagee
actually remains or is transferred back to the owner-mortgagor,
conformably to the settled doctrine that the mortgagee does not
become the owner of the mortgaged property because ownership
thereof remains with the mortgagor pursuant to Art. 2088 of the New
Civil Code.[85]

Respondents failed
to prove their right
over the property,
possession of the
same cannot be
awarded in their
favor

The Court is aware of its ruling in Muñoz v. Ramirez,[86] where it was

established that the reciprocal obligations of the parties were under
an equitable mortgage. In the said case, the Court ordered the
reconveyance of the property to the mortgagor upon the payment of
the loan within 90 days from finality of the decision.[87] A similar
ruling cannot be rendered in the instant case in view of Primitiva's
death, and the fact that respondents had not been in possession of the
subject property. It also bears noting that the records do not reveal
any information on Primitiva's estate.

At any rate, in an accion reivindicatoria, like the complaint filed by

respondents, the plaintiff alleges ownership over a parcel of land and
seeks recovery of its full possession.[88] It is an action to recover
possession of a parcel of land as an element of ownership. In such an
action, the basic question is whether the plaintiff has presented
sufficient evidence to prove his/her ownership of the property in
question. Like in all civil cases, the burden of proof is on the plaintiff
to establish his/her case by preponderance of evidence, which, in the
final analysis, means probability of the truth. It is evidence which is
more convincing to the court as worthy of belief than that which is
offered in opposition thereto. The plaintiff must rely on the strength
of his/her own evidence and not upon the weakness of that of his/her
opponent.[89]

Here, respondents failed to present evidence that they had acquired

ownership of the subject property through foreclosure of the
equitable mortgage and purchase at a public auction. As such, they
cannot validly demand upon petitioner to vacate and surrender
possession of the subject property and to pay rentals thereon, given
that the right to use or enjoy the property and its fruits is one of the
attributes of ownership.

No basis to award
moral damages and
attorney's fees

Anent the award of moral damages and attorney's fees, such civil
liability cannot be granted in petitioner's favor.

Moral damages are recoverable only if the party from whom it is

claimed has acted fraudulently or in bad faith or in wanton disregard
of his/her contractual obligations.[90] Bad faith, on the other hand,
does not simply connote bad judgment or negligence, but imports a
dishonest purpose or some moral obliquity and conscious doing of a
wrong, a breach of known duty through some motive or interest or ill
will that partakes of the nature of fraud.[91]

As to fraud, on the other hand, the rule is that he/she who alleges the
same affecting a transaction must substantiate such allegation, since
it is presumed that a person takes ordinary care of concerns and that
private transactions have been fair and regular.[92] Fraud is never
presumed but must be proved by clear and convincing evidence, mere
preponderance of evidence not even being adequate.[93] Contentions
must be proved by competent evidence and reliance must be had on
the strength of the party's evidence and not upon the weakness of the
opponent's defense.[94] Mere allegation is definitely not evidence.[95]
The Court is not convinced that respondents acted fraudulently or in
bad faith in transferring the title of the subject property under their
names. Petitioner failed to formally offer in evidence the contracts
purportedly conveying the subject property to respondents, namely:
(1) the Kasunduan dated February 16, 2007; and (2) the Deed of Sale
dated February 18, 2007 which was certified as a forgery by the same
notary public who notarized the Bilihan ng Lupa. Petitioner only
presented the Bilihan ng Lupa which the Court confirmed to be an
equitable mortgage that must first be foreclosed before respondents
can acquire ownership thereof in a public auction. What was only
established in this case is that the subject property was transferred
under respondents' names in a prohibited pactum
commissorium manner, but not through fraudulent means or in bad
faith.

Besides, the award of moral damages must be anchored on a clear

showing that mental anguish, besmirched reputation, sleepless
nights, wounded feelings, or similar injury was actually experienced.
[96]
There is no better witness to this experience than petitioner
herself, but she failed to testify thereon, even in her judicial affidavit.
Hence, there is no basis for the award of moral damages.

As for the award of attorney's fees, Art. 2208 of the New Civil Code
provides that in the absence of stipulation, attorney's fees cannot be
recovered, except:

(1) When exemplary damages are awarded;

When the defendant's act or omission has compelled the plaintiff
(2) to litigate with third persons or to incur expenses to protect his
interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
In case of a clearly unfounded civil action or proceeding against
(4)
the plaintiff;
Where the defendant acted in gross and evident bad faith in
(5) refusing to satisfy the plaintiff's plainly valid, just and
demandable claim;
(6) In actions for legal support;
In actions for the recovery of wages of household helpers,
(7)
laborers and skilled workers;
In actions for indemnity under workmen's compensation and
(8)
employer's liability laws;
In a separate civil action to recover civil liability arising from a
(9)
crime;
(10
When at least double judicial costs are awarded;
)
In any other case where the court deems it just and equitable that
(11)
attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be
reasonable.
The general rule is that attorney's fees cannot be recovered as part of
damages because of the policy that no premium should be placed on
the right to litigate.[97] Being the exception rather than the rule, an
award of such fees requires compelling reason before it may be
granted. Even when a claimant is compelled to bring his/her cause to
court or incur expenses to protect his/her rights, attorney's fees still
may not be awarded as part of damages where no sufficient showing
of bad faith could be reflected in a party's persistence in a case other
than an erroneous conviction of the righteousness of its cause.[98]

In this case, petitioner neither proven bad faith on the part of

respondents nor the existence of an agreement between them as to
warrant the award of attorney's fees. In fine, there is no basis to grant
attorney's fees pursuant to Art. 2208 of the New Civil Code.

WHEREFORE, the Petition for Review

on Certiorari is GRANTED. The October 26, 2017 Decision and the
April 12, 2018 Resolution of the Court of Appeals in CA-G.R. CV No.
104327 are REVERSED and SET ASIDE.

The Complaint for Recovery of Possession and Ownership of Real

Property with Damages docketed as Civil Case No. 10-124055
is DISMISSED for lack of merit.

Transfer Certificate Title No. 286305 in the name of respondents Nar

Christian D. Carpio and Cecilia Cao Carpio, is
declared VOID and CANCELLED. The Register of Deeds of Manila
City is further ORDERED to REINSTATE Transfer Certificate of
Title No. 267017 in the name of Primitiva Cayanan Caamic, subject to
the equitable mortgage right of respondents to foreclose the same
subject property.

SO ORDERED.

Hernando, Zalameda, Rosario, and Marquez, JJ., concur.

*
Also referred to as "Anna Liza C. Singson" in some parts of
the rollo (see rollo, p. 110).
[1]
Rollo, pp. 14-39.
[2]
Id. at 40-50; penned by Associate Justice Renato C. Francisco and
concurred in by Associate Justices Sesinando E. Villon and Manuel
M. Barrios.
[3]
Id. at 52-54.
[4]
Id. at 110-116; penned by Presiding Judge Paulino Q. Gallegos.
[5]
Id. at 64-70.
[6]
Id. at 71.
[7]
Id. at 41 and 65.
[8]
Id. at 87.
[9]
Id. at 41 and 67.
[10]
Id. at 68-69.
[11]
Id. at 81-85.
[12]
Id. at 86.
[13]
Id. at 42.
[14]
Id. at 106-109.
[15]
Id. at 43.
[16]
Id. at 90.
[17]
Id. at 102.
[18]
Records, p. 95.
[19]
Id. at 96.
[20]
Id. at 112-114.
[21]
Id. at 112-113.
[22]
Rollo, pp. 112-113.
[23]
Id. at 114.
[24]
Records, pp. 118-120.
[25]
Id. at 130.
[26]
Rollo, p. 116.
[27]
Id. at 115.
[28]
Article 1601. Conventional redemption shall take place when the
vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of article 1616 and other
stipulations which may have been agreed upon.
[29]
Article 1616. The vendor cannot avail himself of the right of
repurchase without returning to the vendee the price of the sale, and
in addition:

(1) The expenses of the contract, and any other legitimate payments
made by reason of the sale; (2) The necessary and useful expenses
made on the thing sold.
[30]
Rollo, pp. 115-116.
[31]
Records, p. 338.
[32]
CA rollo, p. 37.
[33]
Id. at 43-44.
[34]
Rollo, p. 47.
[35]
Id. at 48-49.
[36]
Id. at 49.
[37]
Id.
[38]
CA rollo, pp. 114-122.
[39]
Rollo, p. 20.
[40]
746 Phil. 852 (2014).
[41]
Rollo, pp. 22-26.
[42]
Id. at 26-31.
[43]
Id. at 31-32.
[44]
Id. at 163-167.
[45]
Id. at 163-164.
[46]
Id. at 177-188.
[47]
Id. at 178-180.
[48]
Department of Education v. Tuliao, 735 Phil. 703, 711 (2014).
[49]
RULES OF COURT, Rule 133, Sec. 1.
[50]
Tabuzo v. Gomos, 836 Phil. 297, 316-317 (2018).
[51]
Rollo, pp. 75-76.
[52]
Id. at 72-74.
[53]
Article 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:

When the price of a sale with right to repurchase is unusually

(1)
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
When upon or after the expiration of the right to repurchase
(3) another instrument extending the period of redemption or
granting a new period is executed;
When the purchaser retains for himself a part of the purchase
(4)
price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
In any other case where it may be fairly inferred that the real
(6) intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
[54]
Tolentino, A. M. (1992), Commentaries and Jurisprudence on the
Civil Code of the Philippines, Vol. V, Central Books, p. 157,
citing Gloria-Diaz v. Court of Appeals, 173 Phil. 621
(1978); Balatero v. Intermediate Appellate Court, 238 Phil. 531
(1987); Buce v. Court of Appeals, 241 Phil. 336 (1988); Ramos v.
Court of Appeals, 259 Phil. 1122 (1989).
[55]
NEW CIVIL CODE, Art. 1603.
[56]
Olino v. Medina, 13 Phil. 379, 382 (1909).
[57]
Records, p. 230.
[58]
Rollo, pp. 163-164.
[59]
Heirs of Delfin v. Rabadon, 715 Phil. 569, 577 (2013).
[60]
Spouses Yu Hwa Ping and Gaw v. Ayala Land, Inc., 851
Phil. 421, 442 (2019).
[61]
Supra.
[62]
Id. at 430.
[63]
ECE Realty and Development, Inc. v. Mandap, 742 Phil.
164, 171 (2014).
[64]
858 Phil. 580 (2019).
[65]
Id. at 596.
[66]
Records, p. 96.
[67]
Id.
[68]
Article 2088. The creditor cannot appropriate the things given by
way of pledge or mortgage. or dispose of them. Any stipulation to the
contrary is null and void.
[69]
Dacquel v. Spouses Sotelo, G.R. No. 203946, August 4,
2021.
[70]
Spouses Solitarios v. Spouses Jaque, supra note 40, at 877.
[71]
Id. at 877-878.
[72]
Rollo, p. 48.
[73]
Records, pp. 220-226.
[74]
Id. at 222-223.
[75]
Rollo, p. 86.
[76]
Tolentino, A. M. (1992), Commentaries and Jurisprudence on the
Civil Code of the Philippines, Vol. V, Central Books, p. 157, citing De
Ocampo v. Zaporteza, 53 Phil. 442 (1929); Aquino v. Deala, 63
Phil. 582 (1936); Ignacio v. Chua Hong, 52 Phil. 940 (1929).
[77]
Commentaries and Jurisprudence on the Civil Code of the
Philippines, id. at 157, citing Macapinlac v. Gutierrez, 43 Phil. 770
(1922).
[78]
198 Phil. 338 (1982).
[79]
Id. at 346-347.
[80]
459 Phil. 264 (2003).
[81]
Id. at 279.
[82]
Supra note 40.
[83]
Id. at 879.
[84]
Supra note 69.
[85]
Repuela v. Larawan, 802 Phil. 821, 834-835 (2016); see
also Montevirgen v. Court of Appeals, supra note 78, at 348.
[86]
643 Phil. 267, 280-282 (2010).
[87]
Id. at 282.
[88]
Amoroso v. Alegre, 552 Phil. 22, 33-34 (2007).
[89]
Id. at 34.
[90]
Reyes v. Jebsens Maritime, Inc., G.R. No. 230502,
February 15, 2022.
[91]
Adriano v. Lasala, 719 Phil. 408, 419 (2013).
[92]
Spouses Ramos v. Obispo, 705 Phil. 221, 230 (2013).
[93]
Alonzo v. Cebu Country Club, Inc., 462 Phil. 546, 562 (2003).
[94]
Saguid v. Court of Appeals, 451 Phil. 825, 837 (2003).
[95]
Spouses Ramos v. Obispo, supra.
[96]
Mahinay v. Velasquez, 464 Phil. 146, 150 (2004).
[97]
Daquel v. Spouses Sotelo, supra note 69.
[98]
Id.

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