MUNOZ J VS RAMIREZ FACTS: Respondent-spouses mortgaged a residential lot (which the wife inherited) to the GSIS to secure a housing

loan (200k). Thereafter, they used the money loaned to construct a residential house on said lot. It is alleged that MUNOZ granted the spouses a 600k loan, which the latter used to pay the debt to GSIS. The balance of the loan (400k) will be delivered by MUNOS upon surrender of the title over the property and an affidavit of waiver of rights (over the property) to be executed by the husband. While the spouses were able to turn over the title, no affidavit was signed by the husband. Consequently, MUNOZ refused to give the 400k balance of the loan and since the spouses could no longer return the 200k (which was already paid to GSIS), MUNOZ kept the title over the property and subsequently, caused the issuance of a new one in his own name. The spouses then filed a case for the annulment of the purported sale of the property in favor of MUNOZ. The RTC ruled that the property was the wifes exclusive paraphernal property (since she inherited it from her father) and as such, the sale is valid even without the husbands consent. The CA reversed and ruled that while the property was originally exclusive paraphernal property of the wife, it became conjugal property when it was used as a collateral for a housing loan that was paid through conjugal funds. Hence, the sale is void. ISSUE (1): Is the property paraphernal or conjugal? RULING: PARAPHERNAL. As a general rule, all property acquired during the marriage is presumed to be conjugal unless the contrary is proved. In this case, clear evidence that the wife inherited the lot from her father has sufficiently rebutted this presumption of conjugal ownership. Consequently, the residential lot is the wifes exclusive paraphernal property (pursuant to Article 92 and 109 of FC). It was error for the CA to apply Article 158 of the CC and the ruling on Calimlim-Canullas. True, respondents were married during the effectivity of the CC and thus its provisions should govern their property relations. With the enactment of the FC however, the provisions of the latter on conjugal partnership of gains superseded those of the CC. Thus, it is the FC that governs the present case and not the CC. And under Article 120 of the FC (which supersedes Article 158 of the CC), when the cost of the improvement and any resulting increase in the value are more than the value of the property at the time of the improvement, the entire property shall belong to the conjugal partnership, subject to reimbursement; otherwise, the property shall be retained in ownership by the owner-spouse, likewise subject to reimbursement for the cost of improvement. In this case, the husband only paid a small portion of the GSIS loan (60k). Thus, it is fairly reasonable to assume that the value of the residential lot is considerably more than the contribution paid by the husband. Thus, the property remained the exclusive paraphernal property of the wife at the time she contracted with MUNOZ; the written consent of the husband was not necessary. ISSUE (2): Was the transaction a sale or equitable mortgage?

RULING: EQUITABLE MORTGAGE. Under Article 1602 of the CC, a contract is presumed an equitable mortgage when: (a) price of sale with right to repurchase is unusually inadequate; (b) vendor remains in possession as lessee or otherwise; (c) upon or after the expiration of the right to repurchase, another instrument extending the period of redemption is executed; (d) purchase retains for himself a part of the purchase price; (e) vendor binds himself to pay the taxes on the thing sold; and, (f) in any other case it may be fairly inferred that the real intention of the parties is for the transaction to secure the payment of a debt. In this case, considering that (a) the spouses remained in possession of the property (albeit as lessees thereof); (b) MUNOZ retained a portion of the purchase price (200k); (c) it was the spouses who paid real property taxes on the property; and, (d) it was the wife who secure the payment of the principal debt with the subject property the parties clearly intended an equitable mortgage and not a contract of sale.