ANICETO BANGIS substituted by his heirs, namely:

RODOLFO B. BANGIS, RONNIE B. BANGIS, ROGELIO

B. BANGIS, RAQUEL B. QUILLO, ROMULO B. BANGIS,
ROSALINA B. PARAN, ROSARIO B. REDDY, REYNALDO
B. BANGIS, and REMEDIOS B. LASTRE, Petitioners,
versus HEIRS OF SERA
Details
Parent Category: 2012
Category: June
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DECISION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court is the March 30,
2009 Decision[1] of the Court of Appeals Mindanao Station (CA) and its December 2, 2009
Resolution[2] in CA-G.R. CV No. 00722-MIN which declared that the transaction between the parties
was a mortgage, not a sale, and ordered petitioners to surrender the possession of the disputed lot
upon respondents' full payment of their indebtedness.

THE ANTECEDENT FACTS

The spouses Serafin, Sr. and Saludada[3] Adolfo were the original registered owners of a 126,622
square meter lot covered by Original Certificate of Title (OCT) No. P-489 issued on December 15,
1954 (derived from Homestead Patent No. V-34974), located in Valencia, Malaybalay, Bukidnon. This
property was mortgaged to the then Rehabilitation Finance Corporation (now Development Bank of the
Philippines or DBP) on August 18, 1955,[4] and upon default in the payment of the loan obligation, was
foreclosed and ownership was consolidated in DBP's name under Transfer Certificate of Title (TCT)
No. T-1152.[5] Serafin Adolfo, Sr., however, repurchased the same and was issued TCT No. 6313[6]
on December 1, 1971, a year after his wife died in 1970.

Sometime in 1975, Serafin Adolfo, Sr. (Adolfo) allegedly mortgaged the subject property for the sum of
P12,500.00 to Aniceto Bangis (Bangis) who immediately took possession of the land.[7] The said
transaction was, however, not reduced into writing.[8]

When Adolfo died, his heirs, namely, Luz Adolfo Bannister, Serafin Adolfo, Jr. and Eleuterio Adolfo
(Heirs of Adolfo), executed a Deed of Extrajudicial Partition dated December 24, 1997 covering the
subject property and TCT No. T-65152[9] was issued to them. On May 26, 1998, the said property was
subdivided and separate titles were issued in names of the Heirs of Adolfo, as follows: TCT Nos. T66562 and T-66563 for Luz Adolfo Banester[10]; TCT Nos. T-66560 and T-66561 in the name of
Serafin Adolfo, Jr.; and TCT Nos. T-66564 and T-66565 in favor of Eleuterio Adolfo.[11]

In June 1998, the Heirs of Adolfo expressed their intention to redeem the mortgaged property from
Bangis but the latter refused, claiming that the transaction between him and Adolfo was one of sale.
During the conciliation meetings in the barangay, Bangis' son, Rudy Bangis, showed them a copy of a
deed of sale and a certificate of title to the disputed lot.[12] The parties having failed to amicably settle
their differences, a certificate to file action[13] was issued by the barangay.

THE PROCEEDINGS BEFORE THE RTC

On July 26, 2000, the Heirs of Adolfo filed a complaint[14] before the Regional Trial Court (RTC) for
annulment of deed of sale and declaration of the purported contract of sale as antichresis, accounting
and redemption of property and damages against Bangis, docketed as Civil Case No. 2993-00. The
complaint was amended on September 11, 2001 to include a prayer for the cancellation of TCT No. T10567 and the tax declarations in the name of Bangis in view of the manifestation[15] filed by ExOfficio Register of Deeds, Atty. Phoebe Loyola Toribio of the Registry of Deeds, Malaybalay City which
states that the said title was of "dubious" origin since there was no deed of conveyance upon which the
said transfer certificate of title was based and that its derivative title, TCT No. T-10566, does not exist
in the files of the Registry of Deeds.[16] On November 12, 2001, the complaint was again amended to
reflect the other certificates of titles issued in the names of the Heirs of Adolfo and the amount of
P12,500.00 representing the mortgage debt,[17] followed by another amendment on October 13, 2003
to include the allegation that they have partitioned the subject lot on December 24, 1997 and that no
copy of the supposed deed of sale in favor of Bangis can be found in the records of the Provincial
Assessor's Office and the Registrar of Deeds. They further prayed, in the alternative, to be allowed to
redeem the subject lot under the Homestead Law and that Bangis be ordered to indemnify them: (a)
P50,000.00 each as moral damages; (b) 20% of the value of the property as attorney's fees; and (c)
P50,000.00 as litigation expenses as well as the costs of suit.[18]

In his Answer with Counterclaim,[19] Bangis claimed to have bought the subject property from Adolfo
for which TCT No. T-10567[20] was issued. He also alleged to have been in open and adverse
possession of the property since 1972 and that the cause of action of the Heirs of Adolfo has
prescribed. On November 11, 2001, Bangis died and was substituted in this suit by his heirs, namely,
Rodolfo B. Bangis, Ronie B. Bangis, Rogelio B. Bangis, Raquel B. Quillo, Romulo B. Bangis, Rosalina
B. Paran, Rosario B. Reddy, Reynaldo B. Bangis and Remedios B. Lastre (Heirs of Bangis).[21]

During the trial, one of the Heirs of Bangis, Rodolfo Bangis, presented a photocopy of an ExtraJudicial Settlement with Absolute Deed of Sale dated December 30, 1971[22] for the purpose of
proving the sale of the subject lot by Adolfo and his heirs in favor of his predecessors-in-interest,
Aniceto Bangis and Segundino Cortel, for the sum of P13,000.00. He also presented a Promissory
Note[23] of even date purportedly executed by Bangis and Segundino Cortel undertaking to pay the
balance of the purchase price in the amount of P1,050.00.[24] Both documents were notarized by Atty.
Valentin Murillo who testified to the fact of their execution.[25] Rodolfo Bangis likewise testified that
they have been paying the taxes due on the property and had even used the same as collateral for a
loan with a bank.[26]

On rebuttal, one of the Heirs of Adolfo, Luz Adolfo Bannister, denied the due execution and
genuineness of the foregoing Extra-Judicial Settlement with Absolute Deed of Sale alleging forgery.
[27]

On December 29, 2005, the RTC rendered a Decision[28] in favor of the Heirs of Adolfo, the dispositive
portion of which reads:

WHEREFORE, the preponderance of evidence being strongly in favor of the plaintiffs and against the
defendants, decision is hereby rendered:

1. Declaring the contract between the plaintiffs and defendants as a mere mortgage or antichresis and
since the defendants have been in the possession of the property in 1975 up to the present time
enjoying all its fruits or income, the mortgaged loan of P12,000.00 is deemed fully paid;

2. Ordering the defendants to deliver the possession of the property in question and all the
improvements thereon to the plaintiffs peacefully;

3. Declaring TCT No. 10567 in the name of Aniceto Bangis as NULL AND VOID AB INITIO and
directing the Office of the Register of Deeds to cause its cancellation from its record to avoid confusion
regarding the ownership thereof; and

4. Declaring all the transfer certificates of title issued in favor of the plaintiffs namely, Luz AdolfoBannister, Serafin Adolfo, Jr. and Eleuterio Adolfo, as above-mentioned as the ones valid and issued in
accordance with PD 1529.

SO ORDERED.

Aggrieved, the Heirs of Bangis appealed the foregoing disquisition to the Court of Appeals (CA).

THE CA RULING

In its assailed Decision, the CA affirmed the RTC finding that the contract between the parties was a
mortgage, not a sale. It noted that while Bangis was given possession of the subject property, the
certificate of title remained in the custody of Adolfo and was never cancelled. The CA also ordered the
Heirs of Adolfo to pay the Heirs of Bangis the mortgage debt of P12,500.00[29] with twelve (12%)
percent interest reckoned from 1975 until 1998 and to deliver to them the possession of the property
upon full payment.[30] It, however, deleted the RTC order directing the Register of Deeds to cancel
TCT No. T-10567 in the name of Bangis for being a collateral attack proscribed under PD 1529.[31]

Dissatisfied, the Heirs of Bangis filed a Motion for Reconsideration[32] arguing that the CA erred in
disregarding their testimonial and documentary evidence, particularly, the Extra-Judicial Settlement
with Absolute Deed of Sale (Exh. 2) which purportedly established the sale in favor of their
predecessor-in-interest, Aniceto Bangis. The said motion was, however, denied in the Resolution[33]
dated December 2, 2009.

THE ISSUE BEFORE THE COURT

Hence, the instant petition for review on certiorari based on the lone assignment of error[34] that the
transaction between the parties was one of sale and not a mortgage or antichresis. In support,
petitioner Heirs of Bangis maintain that the CA erred in not giving probative weight to the Extra-Judicial
Settlement with Absolute Deed of Sale[35] which supposedly bolsters their claim that their father,
Aniceto Bangis, bought the subject parcel of land from Adolfo. Hence, the corresponding title, TCT No.
T-10567, issued as a consequence should be respected.

On their part, respondent Heirs of Adolfo averred that no reversible error was committed by the CA in
upholding that no sale transpired between the parties' predecessors-in-interest. Moreover, petitioners'
TCT No. T-10567 was not offered in evidence and worse, certified as of dubious origin per the
Manifestation of the Registrar of Deeds.[36]

THE COURT'S RULING

The petition must fail.

At the outset, it should be emphasized that a petition for review on certiorari under Rule 45 of the
Rules of Court involves only questions of law and not of facts. A question of law exists when there is
doubt as to what the law is on a given set of facts while a question of fact arises when there is doubt as
to the truth or falsity of the alleged facts.[37]

The Heirs of Bangis, in insisting that both the RTC and the CA erroneously disregarded the evidence of
sale they presented, are effectively asking the Court to re-evaluate factual issues which is proscribed
under Rule 45. "Such questions as to whether certain items of evidence should be accorded probative
value or weight, or rejected as feeble or spurious, or whether or not the proofs on one side or the other
are clear and convincing and adequate to establish a proposition in issue, are without doubt questions
of fact."[38]

Nonetheless, the Court perused the records and found substantial evidence supporting the factual
findings of the RTC, as affirmed by the CA, that the nature of the transaction between the parties'
predecessors-in-interest was a mortgage and not a sale. Thus, the maxim that factual findings of the
trial court when affirmed by the CA are final and conclusive on the Court[39] obtains in this case.

THERE WAS NEITHER AN ANTICHRESIS NOR SALE

For the contract of antichresis to be valid, Article 2134 of the Civil Code requires that "the amount of
the principal and of the interest shall be specified in writing; otherwise the contract of antichresis shall
be void." In this case, the Heirs of Adolfo were indisputably unable to produce any document in support
of their claim that the contract between Adolfo and Bangis was an antichresis, hence, the CA properly
held that no such relationship existed between the parties. [40]

On the other hand, the Heirs of Bangis presented an Extra-Judicial Settlement with Absolute Deed of
Sale dated December 30, 1971[41] to justify their claimed ownership and possession of the subject
land. However, notwithstanding that the subject of inquiry is the very contents of the said document,
only its photocopy[42] was presented at the trial without providing sufficient justification for the
production of secondary evidence, in violation of the best evidence rule embodied under Section 3 in
relation to Section 5 of Rule 130 of the Rules of Court, to wit:

SEC. 3. Original document must be produced; exceptions. - When the subject of inquiry is the contents
of a document, no evidence shall be admissible other than the original document itself, except in the
following cases:

(1) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on
the part of the offeror;

(2) When the original is in the custody or under the control of the party against whom the evidence is
offered, and the latter fails to produce it after reasonable notice;

(3) When the original consists of numerous accounts or other documents which cannot be examined in
court without great loss of time and the fact sought to be established from them is only the general
result of the whole; and

(4) When the original is a public record in the custody of a public officer or is recorded in a public office.

SEC. 5. When original document is unavailable. - When the original document has been lost or
destroyed, or cannot be produced in court, the offeror, upon proof of its execution or existence and the
cause of its unavailability without bad faith on his part, may prove its contents by a copy, or by a recital
of its content in some authentic document, or by the testimony of witnesses in the order stated.

The bare testimony of one of the Heirs of Bangis, Rodolfo Bangis, that the subject document was only
handed[43] to him by his father, Aniceto, with the information that the original thereof "could not be
found"[44] was insufficient to justify its admissibility. Moreover, the identification made by Notary Public
Atty. Valentin Murillo[45] that he notarized such document cannot be given credence as his conclusion
was not verified against his own notarial records.[46] Besides, the Heirs of Bangis could have secured
a certified copy of the deed of sale from the Assessor's Office[47] that purportedly had its custody in
compliance with Section 7, Rule 130[48] of the Rules of Court.

In sum, the Heirs of Bangis failed to establish the existence and due execution of the subject deed on
which their claim of ownership was founded. Consequently, the RTC and CA were correct in affording
no probative value to the said document.[49]

TCT NO. T-10567 IN THE NAME OF ANICETO BANGIS CANNOT PREVAIL OVER THE TITLES
OF THE HEIRS OF ADOLFO

Records reveal that TCT No. T-10567 purportedly secured as a consequence of the deed of sale
executed by Adolfo and his heirs in favor of Bangis was not offered in evidence. A perusal of its copy,
however, shows that it was a transfer from TCT No. T-10566,[50] which title the Heirs of Bangis
unfortunately failed to account for, and bore no relation at all to either OCT No. P-489 (the original title
of the Spouses Adolfo) or TCT No. T-6313 (issued to Adolfo when he repurchased the same property

from DBP). The Manifestation[51] of the Register of Deeds of Malaybalay City regarding the doubtful
origin of TCT No. T-10567 and the regularity of the titles of the Heirs of Adolfo are insightful, thus:

That the verification from the office of the original copy of Transfer Certificate of Title No. T-10567 in
the name of Anecito Bangis is existing in the office. Machine copy of the said title is hereto attached as
annex "A" but nothing in the title whether annotated or attached, any Deed of Conveyance or other
Documents by which said title was issued or transferred in the name of Anecito Bangis.

That for the information and guidance of the court attached herewith is a machine copies [sic] Original
Certificate of Title No. P-489 in the name of Serafin Adolfo, marked as annex "B" which supposedly the
mother title of Transfer Certificate of Title No. T-10567 as to how this title was transferred in the name
of Anecito Bangis. Nothing will show which will validly supports [sic] the said transfer, in other words
the said title is dubious.

This Original Certificate of Title No. P-489 in the name of Serafin Adolfo was mortgage to the
Development Bank of the Philippines and then it was consolidated and Transfer Certificate of Title No.
T-1152 was issued in the name of Development Bank of the Philippines. From the Development Bank
of the Philippines a Deed of Sale was executed by the Development Bank of the Philippines in favor of
Serafin Adolfo and Transfer Certificate of Title No. T-6313 marked annex "B-1" was issued in the name
of Serafin Adolfo.

An Extrajudicial Settlement was now [sic] by the Heirs of Serafin Adolfo and Transfer Certificate of Title
Nos. T-65152 annex "B-2", T-66560 annex "B-3", T-66561 annex "B-4", T-66562 annex "B-5", T-66563
annex "B-6", T-66564 annex "B-7", and T-66565 annex "B-8" were issued to the Heirs.

The titles issued to the Heirs of Serafin Adolfo were legitimately issued by this office after all its [sic]
requirements and supporting documents were submitted and proper annotations were reflected at the
back of the title of Serafin Adolfo.

Transfer Certificate of Title No. T-10567 as shown on the title was derived from Transfer Certificate of
Title No. T-10566 but [sic] title is not existing in this office.

As held in the case of Top Management Programs Corporation v. Luis Fajardo and the Register of
Deeds of Las Pias City:[52] "if two certificates of title purport to include the same land, whether wholly
or partly, the better approach is to trace the original certificates from which the certificates of titles were
derived."

Having, thus, traced the roots of the parties' respective titles supported by the records of the Register
of Deeds of Malaybalay City, the courts a quo[53] were correct in upholding the title of the Heirs of
Adolfo as against TCT No. T-10567 of Bangis, notwithstanding its earlier issuance on August 18,
1976[54] or long before the Heirs of Adolfo secured their own titles on May 26, 1998. To paraphrase
the Court's ruling in Mathay v. Court of Appeals:[55] where two (2) transfer certificates of title have
been issued on different dates, the one who holds the earlier title may prevail only in the absence of
any anomaly or irregularity in the process of its registration, which circumstance does not obtain in this
case.

CANCELLATION OF TCT NO. T-10567

The Court cannot sustain the CA's ruling[56] that TCT No. T-10567 cannot be invalidated because it
constitutes as a collateral attack which is contrary to the principle of indefeasibility of titles.

It must be noted that Bangis interposed a counterclaim in his Answer seeking to be declared as the
true and lawful owner of the disputed property and that his TCT No. T-10567 be declared as superior
over the titles of the Heirs of Adolfo.[57] Since a counterclaim is essentially a complaint[58] then, a
determination of the validity of TCT No. T-10567 vis-a-vis the titles of the Heirs of Adolfo can be
considered as a direct, not collateral, attack on the subject titles.[59]

In Pasio v. Monterroyo, the Court has ruled, thus:

It is already settled that a counterclaim is considered an original complaint and as such, the attack on
the title in a case originally for recovery of possession cannot be considered as a collateral attack on
the title. Development Bank of the Philippines v. Court of Appeals is similar to the case before us
insofar as petitioner in that case filed an action for recovery of possession against respondent who, in
turn, filed a counterclaim claiming ownership of the land. In that case, the Court ruled:

Nor is there any obstacle to the determination of the validity of TCT No. 10101. It is true that the
indefeasibility of torrens title cannot be collaterally attacked. In the instant case, the original complaint
is for recovery of possession filed by petitioner against private respondent, not an original action filed
by the latter to question the validity of TCT No. 10101 on which petitioner bases its right. To rule on the
issue of validity in a case for recovery of possession is tantamount to a collateral attack. However, it
should not [b]e overlooked that private respondent filed a counterclaim against petitioner, claiming
ownership over the land and seeking damages. Hence, we could rule on the question of the validity of
TCT No. 10101 for the counterclaim can be considered a direct attack on the same. A counterclaim is
considered a complaint, only this time, it is the original defendant who becomes the plaintiff... It stands
on the same footing and is to be tested by the same rules as if it were an independent action. x x x
(Citations omitted) [60]

Besides, the prohibition against collateral attack does not apply to spurious or non-existent titles, which
are not accorded indefeasibility,[61] as in this case.

THE PRESENT ACTION HAS NOT PRESCRIBED

The claim of the Heirs of Bangis that since they have been in possession of the subject land since
1972 or for 28 years reckoned from the filing of the complaint in 2000 then, the present action has
prescribed is untenable. It bears to note that while Bangis indeed took possession of the land upon its
alleged mortgage, the certificate of title (TCT No. 6313) remained with Adolfo and upon his demise,
transferred to his heirs, thereby negating any contemplated transfer of ownership. Settled is the rule
that no title in derogation of that of the registered owner can be acquired by prescription or adverse
possession.[62] Moreover, even if acquisitive prescription can be appreciated in this case, the Heirs of
Bangis' possession being in bad faith is two years shy of the requisite 30-year uninterrupted adverse
possession required under Article 1137 of the Civil Code.

Consequently, the Heirs of Bangis cannot validly claim the rights of a builder in good faith as provided
for under Article 449 in relation to Article 448 of the Civil Code. Thus, the order for them to surrender
the possession of the disputed land together with all its improvements was properly made.

LIABILITY FOR THE PAYMENT OF INTEREST

Finally, it is undisputed that the Heirs of Bangis made no judicial or extrajudicial demand on the Heirs
of Adolfo to pay the mortgage debt. Instead, it was the latter who signified their intent to pay their
father's loan obligation, admittedly in the amount of P12,500.00,[63] which was refused. The mortgage
contract therefore continued to subsist despite the lapse of a considerable number of years from the
time it was constituted in 1975 because the mortgage debt has not been satisfied.

Following the Court's ruling in the iconic case of Eastern Shipping Lines, Inc. v. Court of Appeals,[64]
the foregoing liability, which is based on a loan or forbearance of money, shall be subject to legal
interest of 12% per annum from the date it was judicially determined by the CA on March 30, 2009 until
the finality of this Decision, and not from 1975 (the date of the constitution of the mortgage); nor from
1998 (when an attempt to pay was made) or in 2000 at the time the complaint was filed, because it
was the Heirs of Adolfo and not Bangis who filed the instant suit[65] to collect the indebtedness.
Thereafter, the judgment award inclusive of interest shall bear interest at 12% per annum until its full
satisfaction.[66]

WHEREFORE, premises considered, the instant petition for review on certiorari is DENIED and the
assailed Decision dated March 30, 2009 of the Court of Appeals Mindanao Station (CA) and its
Resolution dated December 2, 2009 in CA-G.R. CV No. 00722-MIN are AFFIRMED with
MODIFICATION: (1) cancelling TCT No. T-10567; and (2) ordering respondent Heirs of Adolfo to pay
petitioner Heirs of Bangis the sum of P12,500.00 with legal interest of 12% per annum reckoned from
March 30, 2009 until the finality of this Decision and thereafter, 12% annual interest until its full
satisfaction.

The rest of the Decision stands.

SO ORDERED.
[G.R. No. L-6752. April 29, 1955.]
NAZARIO TRILLANA, Petitioner, v. FAUSTINO MANANSALA, MARIA LOPEZ, MAXIMA MANANSALA
and THE COURT OF APPEALS, Respondents.
Delgado, Flores & Macapagal for Petitioner.
M. G. Bustos & Remedios D. Garcia for Respondents.
SYLLABUS
1. ANTICHERESIS; MORTGAGE COUPLED WITH DELIVERY OF POSSESSION OF LAND TO CREDITOR IS
ANTICHRESIS. A mortgage, coupled with delivery of possession of the land to the creditor, is antichresis.
2. ID.; ANTICHRETIC CREDITOR CANNOT ACQUIRE LAND BY PRESCRIPTION. The antichretic creditor
cannot ordinarily acquire by prescription the land surrendered to him by the debtor. (Barretto v. Barretto, 37
Phil., 234; Valencia v. Alcala, 42 Phil., 177.)
DECISION
BENGZON, J.:
To a revindicatory complaint filed in 1950 in the Court of First Instance by Nazario Trillana over a parcel of
land in Hagonoy, Bulacan, the defendants Faustino Manansala Et. Al., set up title through sale and
prescription.
Both parties allegedly deriving ownership from the registered owner Marcos Bernardo, presented at the
hearing:
chanrob1es virtual 1aw library

(a) Plaintiff the contract of absolute sale (Exhibit A) executed in his favor in June 1948 by Vicenta
Bernardo, daughter and the only surviving heir of Marcos Bernardo;
(b) Defendants the document Exhibit 1, in tagalog, which is translated as follows:

jgc:chanrobles.com .ph

"Julio 20, 1934-1944

I Marcos Bernardo married of legal age and residing at barrio S. Sebastian, Hagonoy, Bulacan, P, I. now I
own a land (latian) . . . now my above mentioned property I mortgage to Mr. Faustino Manansala and Maria
Lopez husband and wife in the amount of P1,070 beginning today July 20, 1934 until April 1944 and if I

cannot pay said amount come April 1944 the property I mortgaged is hereby paid to Mr. Faustino Manansala
and Maria Lopez husband and wife . . ."
cralaw virtua1aw library

The judge found Exhibit 1 to be a forgery, and rendered judgment for plaintiff, saying as to prescription, that
even if defendants had possessed the land since 1934, they could not acquire by prescription because they
had no just title, inasmuch as they knew Exhibit 1 was false.
On appeal, the Court of Appeals saw differently. It was not convinced of the documents (Exhibit 1) falsity,
and held that since defendants admittedly took possession of the realty in July 1934 pursuant to such
document and retained it thereafter, the action filed in 1950 was late, inasmuch as more than 15 years of
adverse possession forfeited the plaintiffs right to recover, if any.
Doubting the legal feasibility of acquiring, thru prescription, land obtained under Exhibit 1, we gave due
course to the petition for review on certiorari, being impressed with counsels contention that said written
document represented a contract of antichresis, which may not give rise to acquisitive prescription.
Upon a fuller examination of the matter, we are now persuaded that our preliminary impressions were
justified. The document Exhibit 1, having used the words "Isinangla", "sinangla" and "matubos obviously
indicated a mortgage, which, coupled with delivery of possession of the land to the creditor, amounted to
antichresis.
And several decisions of this court consistently hold that the antichretic creditor cannot ordinarily acquire by
prescription the land surrendered to him by the debtor. 1
The most that defendants could contend under Exhibit 1 is that it was a sale with pacto de retro. Yet no
argument is needed to show that, even under such contract, prescription does not run during the period of
redemption (1934-1944).
In this connection we notice the Court of Appeals did not regard the contract as a pacto de retro sale. The
Court of Appeals declared the agreement was a "kaliwaan" or exchange, which according to defendants
meant, "after the execution of the document we delivered the money, and plaintiff delivers possession of the
land." The arrangement however contemplated a subsequent "re-exchange" when the owner redeems
(matubos) on or before April 1944. Such exchange and re-exchange agreed in Exhibit 1, dovetail with an
antichretic relationship, which we think was the true agreement of the parties.
It has not escaped our notice that the document says "if I cannot redeem come April 1944, the property I
mortgage is hereby paid to Mr. Faustino Manansala." But that in our opinion merely authorized Manansala to
get the property for payment, thru the proceedings prescribed for mortgages. Otherwise the stipulation
would be open to attack, either as pactum commissorium or as against the law. (Arts. 1859 and 1884 Civil
Code.)
Now as the contract Exhibit 1 did not divest Marcos Bernardo of ownership of the property, his heir Vicenta
Bernardo could, and she did, validly convey such ownership to Nazario Trillana in 1948, by Exhibit A. Subject
of course to the rights of the antichretic creditors, they defendants Manansala Et. Al.
Wherefore, the judgment of the Court of Appeals is reversed, and one will be promulgated requiring
defendants to deliver the lot to the plaintiff (substituted by Candida Cruz, Juana Trillana and Francisco
Trillana) upon payment by the latter of the amount of P1,070.2 No interest is to be satisfied, because the
fruits gathered by the Manansalas are considered as interest; no special damages too. Costs against
defendants. So ordered.

CIPRIANO E. SAMONTE, FROILAN E. SAMONTE, LORENZO

E. SAMONTE, TEODULA E. SAMONTE, CONSTANCIA E.
SAMONTE, and the late MIGUEL SAMONTE as represented

by his heirs REMEDIOS B. SAMONTE, NENITA E.

SAMONTE, DIONICIO B. SAMONTE, and ANTONIO
SAMONTE, petitioners,
DECISION

MELENCIO-HERRERA, J:

This Petition for Review on Certiorari seeks the reversal of the Decision of respondent Appellate Court
in CA-G.R. No. 55914-R affirming that of the Trial Court and declaring private respondents the owners
of the lands in suit.
The antecedents of the case follow:

1. In 1930, PLACIDA Espiritu was the owner of five (5) parcels of rice land situated in Dingras, Ilocos
Norte.

2. Sometime during the last days of 1930, according to petitioners (Folio-8), or on September 7, 1931,
according to private respondents (Exhibit "7"), those five parcels were transferred from PLACIDA to
VICTORIA Mendoza (Folio-142).

3. Two of the five parcels were subsequently washed away by a river (Folio-10, Exhibit "1-B"). The
remaining-three parcels constitute the property subject of this case (the DISPUTED PROPERTY).

4. PLACIDA passed away in December, 1941 (Folio-9), the petitioners herein being her heirs.

5. VICTORIA died on April 19, 1937 (Exhibit "7"), succeeded by her mother Salvadora Feri, who died
in 1947 (Folio-9), succeeded by her daughter BENILDA Mendoza (sister of VICTORIA) who died on 11
November 1962 (Respondents' Brief, p. 3), and was succeeded by her adopted children, the private
respondents herein (Folio-9).

6. There is documentary evidence that BENILDA had claimed ownership of the DISPUTED
PROPERTY on May 23, 1947 (Exhibit "7"), reiterated on December 2, 1952 (Exhibit "6").

7. On April 3, 1970, petitioners instituted Case No. 4569-11 of the then Court of First Instance of
Ilocos Norte, which started the present proceedings, their claim being for the return to them of the
DISPUTED PROPERTY for the reason that possession thereof was transferred to VICTORIA by their
mother PLACIDA only by way of antichresis. Private respondents defended, stating that VICTORIA had
purchased the DISPUTED PROPERTY on September 7, 1931.

Previous to that case, Civil Case No. 3630-III was filed before the Court of First Instance of Ilocos
Norte by petitioners for the recovery of the DISPUTED PROPERTY but the same was dismissed
without prejudice.

8. On December 28, 1973, the Trial Court dismissed petitioners' complaint on the ground that
BENILDA having claimed ownership of the DISPUTED PROPERTY since 1952, and petitioners'
complaint having been filed only on April 3, 1970, or more than 10 years after December 3, 1952 (date
of registration of Exhibit "6"), private respondents should be deemed to have acquired title to the
DISPUTED PROPERTY through ordinary acquisitive prescription under the provisions of the present
Civil Code.

9. On appeal to respondent Appellate Court, the Trial Court's judgment was affirmed on June 21,
1976. Respondent Court further held that private respondents being in possession of the DISPUTED
PROPERTY m the concept of owner, the legal presumption should be that they have ownership under
a just title, which they need not show, pursuant to Article 541 of the Civil Code; and that petitioners had
failed "to show through convincing evidence that it was they who were the true owners; but their
evidence is purely oral." Respondent Court also upheld the argument that, assuming the antichresis,
petitioners' right to recover the DISPUTED PROPERTY accrued in 1941 (when "the alleged loan with
its interest at 6% had been fully paid"), and they incurred in laches in not having asserted such right
within a reasonable time, instead of waiting until 1962 (or 1970), or 17 or 29 years thereafter.

10. The Petition for Review on Certiorari was filed before this Court on October 4, 1976. It was
dismissed for lack of merit on November 26, 1976. The dismissal was reiterated in several subsequent
Resolutions, but the Petition was eventually given due course in the Resolution of October 19, 1977
(Folio-220).

We have decided to uphold the questioned judgment of respondent Appellate Court.

(a) The Appellate Tribunal correctly affirmed the Decision of the Trial Court based on ordinary
acquisitive prescription, except that the required period should have been stated as starting from May
23, 1947 when BENILDA executed the Affidavit, Exhibit "7", before Judge Simeon Ramos of the then
Court of First Instance of Ilocos Norte. In that Affidavit, BENILDA claimed ownership over the

DISPUTED PROPERTY. No judicial summons, which could interrupt possession for purposes of
prescription (Article 1123, Civil Code) had been served on BENILDA. Neither have private respondents
been served with judicial summons prior to the institution, on April 3, 1970, of Case No. 4569-11 of the
then Court of First Instance of Ilocos Norte.

(b) It is also our opinion that respondent Court correctly invoked Article 541 of the Civil Code 1 in
concluding that private respondents should now be deemed the owners of the DISPUTED
PROPERTY. Petitioners' claim that an instrument of antichresis had been executed by PLACIDA and
VICTORIA in the later part of 1930, based on testimonial evidence, cannot be considered legally
sufficient. An unregistered lease for 50 years, enforceable against the successors-in-interest of the
lessee, could have been as easily alleged. A comment which we might make is that on or about 1930,
an express contract of antichresis would have been unusual. 2

(c ) As to respondent Court's indirect finding of laches, we repeat hereunder the following statement
in Pangadil vs. Court of First Instance of Cotabato, 116 SCRA, p. 353:

"It is equally unbelievable that in the span of time from December 1941 up to the date that Civil Case
No. 2187 was filed on January 7, 1969, a period of more than twenty-seven years, the petitioners
would not have taken any step to verify the status of the land of their father which had been in the
possession of the private respondents during all the time, particularly as to the possibility of redeeming
the supposed mortgage their father had constituted thereon Their inaction for such a considerable
period of time reflects on the credibility of their pretense that they merely intended to confirm an oral
mortgage, instead of a sale of the land in question."

WHEREFORE, the Decision appealed from is affirmed, with costs against petitioners.

SO ORDERED.

Plana, Gutierrez, Jr., De la Fuente and Patajo, JJ., concur.

Teehankee, (Chairman), J., took no part.

--------------------------Footnotes

1. ART. 541. A possessor in the concept of owner has in his favor the legal presumption that he
possesses with a just title and he cannot be obliged to show or prove it.

Republic of the Philippines

SUPREME COURT
FIRST DIVISION
G.R. No. 142612. July 29, 2005
OSCAR ANGELES and EMERITA ANGELES, Petitioners,
vs.
THE HON. SECRETARY OF JUSTICE and FELINO MERCADO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari1 to annul the letter-resolution2 dated 1 February 2000 of the Secretary
of Justice in Resolution No. 155.3 The Secretary of Justice affirmed the resolution4 in I.S. No. 96-939
dated 28 February 1997 rendered by the Provincial Prosecution Office of the Department of Justice
in Santa Cruz, Laguna ("Provincial Prosecution Office"). The Provincial Prosecution Office resolved
to dismiss the complaint for estafa filed by petitioners Oscar and Emerita Angeles ("Angeles
spouses") against respondent Felino Mercado ("Mercado").
Antecedent Facts
On 19 November 1996, the Angeles spouses filed a criminal complaint for estafa under Article 315 of
the Revised Penal Code against Mercado before the Provincial Prosecution Office. Mercado is the
brother-in-law of the Angeles spouses, being married to Emerita Angeles sister Laura.
In their affidavits, the Angeles spouses claimed that in November 1992, Mercado convinced them to
enter into a contract of antichresis,5 colloquially known as sanglaang-perde, covering eight parcels of
land ("subject land") planted with fruit-bearing lanzones trees located in Nagcarlan, Laguna and
owned by Juana Suazo. The contract of antichresis was to last for five years with P210,000 as
consideration. As the Angeles spouses stay in Manila during weekdays and go to Laguna only on
weekends, the parties agreed that Mercado would administer the lands and complete the necessary
paperwork.6
After three years, the Angeles spouses asked for an accounting from Mercado. Mercado explained
that the subject land earned P46,210 in 1993, which he used to buy more lanzones trees. Mercado
also reported that the trees bore no fruit in 1994. Mercado gave no accounting for 1995. The
Angeles spouses claim that only after this demand for an accounting did they discover that Mercado
had put the contract of sanglaang-perde over the subject land under Mercado and his spouses
names.7 The relevant portions of the contract of sanglaang-perde, signed by Juana Suazo alone,
read:

xxx
Na alang-alang sa halagang DALAWANG DAAN AT SAMPUNG LIBONG PISO (P210,000), salaping
gastahin, na aking tinanggap sa mag[-]asawa nila G. AT GNG. FELINO MERCADO, mga nasa
hustong gulang, Filipino, tumitira at may pahatirang sulat sa Bgy. Maravilla, bayan ng Nagcarlan,
lalawigan ng Laguna, ay aking ipinagbili, iniliwat at isinalin sa naulit na halaga, sa nabanggit na
mag[-] asawa nila G. AT GNG. FELINO MERCADO[,] sa kanila ay magmamana, kahalili at ibang
dapat pagliwatan ng kanilang karapatan, ang lahat na ibubunga ng lahat na puno ng lanzones, hindi
kasama ang ibang halaman na napapalooban nito, ng nabanggit na WALONG (8) Lagay na Lupang
Cocal-Lanzonal, sa takdang LIMA (5) NA [sic] TAON, magpapasimula sa taong 1993, at magtatapos
sa taong 1997, kayat pagkatapos ng lansonesan sa taong 1997, ang pamomosision at
pakikinabang sa lahat na puno ng lanzones sa nabanggit na WALONG (8) Lagay na Lupang CocalLanzonal ay manunumbalik sa akin, sa akin ay magmamana, kahalili at ibang dapat pagliwatan ng
aking karapatan na ako ay walang ibabalik na ano pa mang halaga, sa mag[-] asawa nila G. AT
GNG. FELINO MERCADO.
Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na ako ay
bibigyan nila ng LIMA (5) na [sic] kaing na lanzones taon-taon sa loob ng LIMA (5) na [sic] taon ng
aming kasunduang ito.
Na ako at ang mag[-]asawa nila G. AT GNG. FELINO MERCADO ay nagkasundo na silang
mag[-]asawa nila G. AT GNG. FELINO MERCADO ang magpapaalis ng dapo sa puno ng lansones
taon-taon [sic] sa loob ng LIMA (5) [sic] taonng [sic] aming kasunduang ito. 8
In his counter-affidavit, Mercado denied the Angeles spouses allegations. Mercado claimed that
there exists an industrial partnership, colloquially known as sosyo industrial, between him and his
spouse as industrial partners and the Angeles spouses as the financiers. This industrial partnership
had existed since 1991, before the contract of antichresis over the subject land. As the years
passed, Mercado used his and his spouses earnings as part of the capital in the business
transactions which he entered into in behalf of the Angeles spouses. It was their practice to enter
into business transactions with other people under the name of Mercado because the Angeles
spouses did not want to be identified as the financiers.
Mercado attached bank receipts showing deposits in behalf of Emerita Angeles and contracts under
his name for the Angeles spouses. Mercado also attached the minutes of the barangay conciliation
proceedings held on 7 September 1996. During the barangay conciliation proceedings, Oscar
Angeles stated that there was a writtensosyo industrial agreement: capital would come from the
Angeles spouses while the profit would be divided evenly between Mercado and the Angeles
spouses.9
The Ruling of the Provincial Prosecution Office
On 3 January 1997, the Provincial Prosecution Office issued a resolution recommending the filing of
criminal information for estafa against Mercado. This resolution, however, was issued without
Mercados counter-affidavit.
Meanwhile, Mercado filed his counter-affidavit on 2 January 1997. On receiving the 3 January 1997
resolution, Mercado moved for its reconsideration. Hence, on 26 February 1997, the Provincial
Prosecution Office issued an amended resolution dismissing the Angeles spouses complaint for
estafa against Mercado.
The Provincial Prosecution Office stated thus:

The subject of the complaint hinges on a partnership gone sour. The partnership was initially
unsaddled [with] problems. Management became the source of misunderstanding including the
accounting of profits, which led to further misunderstanding until it was revealed that the contract
with the orchard owner was only with the name of the respondent, without the names of the
complainants.
The accusation of "estafa" here lacks enough credible evidentiary support to sustain a prima facie
finding.
Premises considered, it is respectfully recommended that the complaint for estafa be dismissed.
RESPECTFULLY SUBMITTED.10
The Angeles spouses filed a motion for reconsideration, which the Provincial Prosecution Office
denied in a resolution dated 4 August 1997.
The Ruling of the Secretary of Justice
On appeal to the Secretary of Justice, the Angeles spouses emphasized that the document
evidencing the contract of sanglaang-perde with Juana Suazo was executed in the name of the
Mercado spouses, instead of the Angeles spouses. The Angeles spouses allege that this document
alone proves Mercados misappropriation of their P210,000.
The Secretary of Justice found otherwise. Thus:
Reviewing the records of the case, we are of the opinion that the indictment of [Mercado] for the
crime of estafa cannot be sustained. [The Angeles spouses] failed to show sufficient proof that
[Mercado] deliberately deceived them in the "sanglaang perde" transaction. The document alone,
which was in the name of [Mercado and his spouse], failed to convince us that there was deceit or
false representation on the part of [Mercado] that induced the [Angeles spouses] to part with their
money. [Mercado] satisfactorily explained that the [Angeles spouses] do not want to be revealed as
the financiers. Indeed, it is difficult to believe that the [Angeles spouses] would readily part with their
money without holding on to some document to evidence the receipt of money, or at least to inspect
the document involved in the said transaction. Under the circumstances, we are inclined to believe
that [the Angeles spouses] knew from the very start that the questioned document was not really in
their names.
In addition, we are convinced that a partnership truly existed between the [Angeles spouses] and
[Mercado]. The formation of a partnership was clear from the fact that they contributed money to a
common fund and divided the profits among themselves. Records would show that [Mercado] was
able to make deposits for the account of the [Angeles spouses]. These deposits represented their
share in the profits of their business venture. Although the [Angeles spouses] deny the existence of a
partnership, they, however, never disputed that the deposits made by [Mercado] were indeed for
their account.
The transcript of notes on the dialogue between the [Angeles spouses] and [Mercado] during the
hearing of their barangay conciliation case reveals that the [Angeles spouses] acknowledged their
joint business ventures with [Mercado] although they assailed the manner by which [Mercado]
conducted the business and handled and distributed the funds. The veracity of this transcript was
not raised in issued [sic] by [the Angeles spouses]. Although the legal formalities for the formation of
a partnership were not adhered to, the partnership relationship of the [Angeles spouses] and

[Mercado] is evident in this case. Consequently, there is no estafa where money is delivered by a
partner to his co-partner on the latters representation that the amount shall be applied to the
business of their partnership. In case of misapplication or conversion of the money received, the copartners liability is civil in nature (People v. Clarin, 7 Phil. 504)
WHEREFORE, the appeal is hereby DISMISSED.11
Hence, this petition.
Issues
The Angeles spouses ask us to consider the following issues:
1. Whether the Secretary of Justice committed grave abuse of discretion amounting to lack of
jurisdiction in dismissing the appeal of the Angeles spouses;
2. Whether a partnership existed between the Angeles spouses and Mercado even without any
documentary proof to sustain its existence;
3. Assuming that there was a partnership, whether there was misappropriation by Mercado of the
proceeds of the lanzones after the Angeles spouses demanded an accounting from him of the
income at the office of the barangay authorities on 7 September 1996, and Mercado failed to do so
and also failed to deliver the proceeds to the Angeles spouses;
4. Whether the Secretary of Justice should order the filing of the information for estafa against
Mercado.12
The Ruling of the Court
The petition has no merit.
Whether the Secretary of Justice Committed
Grave Abuse of Discretion
An act of a court or tribunal may constitute grave abuse of discretion when the same is performed in
a capricious or whimsical exercise of judgment amounting to lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of positive duty, or to a virtual
refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and
despotic manner because of passion or personal hostility.13
The Angeles spouses fail to convince us that the Secretary of Justice committed grave abuse of
discretion when he dismissed their appeal. Moreover, the Angeles spouses committed an error in
procedure when they failed to file a motion for reconsideration of the Secretary of Justices
resolution. A previous motion for reconsideration before the filing of a petition for certiorari is
necessary unless: (1) the issue raised is one purely of law; (2) public interest is involved; (3) there is
urgency; (4) a question of jurisdiction is squarely raised before and decided by the lower court; and
(5) the order is a patent nullity.14 The Angeles spouses failed to show that their case falls under any
of the exceptions. In fact, this present petition for certiorari is dismissible for this reason alone.
Whether a Partnership Existed

Between Mercado and the Angeles Spouses

The Angeles spouses allege that they had no partnership with Mercado. The Angeles spouses rely
on Articles 1771 to 1773 of the Civil Code, which state that:
Art. 1771. A partnership may be constituted in any form, except where immovable property or real
rights are contributed thereto, in which case a public instrument shall be necessary.
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in money
or property, shall appear in a public instrument, which must be recorded in the Office of the
Securities and Exchange Commission.
Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the
partnership and the members thereof to third persons.
Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an
inventory of said property is not made, signed by the parties, and attached to the public instrument.
The Angeles spouses position that there is no partnership because of the lack of a public instrument
indicating the same and a lack of registration with the Securities and Exchange Commission ("SEC")
holds no water. First, the Angeles spouses contributed money to the partnership and not immovable
property. Second, mere failure to register the contract of partnership with the SEC does not
invalidate a contract that has the essential requisites of a partnership. The purpose of registration of
the contract of partnership is to give notice to third parties. Failure to register the contract of
partnership does not affect the liability of the partnership and of the partners to third persons. Neither
does such failure to register affect the partnerships juridical personality. A partnership may exist
even if the partners do not use the words "partner" or "partnership."
Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract
showing a sosyo industrial or industrial partnership, contribution of money and industry to a common
fund, and division of profits between the Angeles spouses and Mercado.
Whether there was
Misappropriation by Mercado
The Secretary of Justice adequately explained the alleged misappropriation by Mercado: "The
document alone, which was in the name of [Mercado and his spouse], failed to convince us that
there was deceit or false representation on the part of [Mercado] that induced the [Angeles spouses]
to part with their money. [Mercado] satisfactorily explained that the [Angeles spouses] do not want to
be revealed as the financiers." 15
Even Branch 26 of the Regional Trial Court of Santa Cruz, Laguna which decided the civil case for
damages, injunction and restraining order filed by the Angeles spouses against Mercado and Leo
Cerayban, stated:
xxx [I]t was the practice to have all the contracts of antichresis of their partnership secured in
[Mercados] name as [the Angeles spouses] are apprehensive that, if they come out into the open as
financiers of said contracts, they might be kidnapped by the New Peoples Army or their business
deals be questioned by the Bureau of Internal Revenue or worse, their assets and unexplained
income be sequestered, as xxx Oscar Angeles was then working with the government. 16

Furthermore, accounting of the proceeds is not a proper subject for the present case.
For these reasons, we hold that the Secretary of Justice did not abuse his discretion in dismissing
the appeal of the Angeles spouses.
WHEREFORE, we AFFIRM the decision of the Secretary of Justice. The present petition
for certiorari is DISMISSED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

Footnotes
1

Under Rule 65 of the Rules of Court.

Penned by Secretary of Justice Serafin R. Cuevas.

Series of 2000.

Penned by 4th Assistant Provincial Prosecutor Carlos I. Acain, recommended for approval
by 1st Assistant Prosecutor Felipe L. Arcigal, Jr., and approved by Provincial Prosecutor
George C. Dee.
4

Article 2132 of the Civil Code provides: "By the contract of antichresis the creditor acquires
the right to receive the fruits of an immovable of his debtor, with the obligation to apply them
to the payment of the interest, if owing, and thereafter to the principal of his credit."
5

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 3191

January 26, 1907

LADISLAO PATRIARCA, plaintiff-appellee,

vs.
JUANA ORATE, defendant-appellant.
Buencamino & Diokno for appellant.
Pedro Concepcion for appellee.

ARELLANO, C.J.:
This case having been duly submitted to this court, it appears:
That the plaintiff alleges (1) that he was the lessee of a certain tract of land requiring 3 cavanes of
seed to plant, the boundaries of which are described in the complaint, the land being situated in the
barrio of San Juan of the Town of San Francisco de Malabon, Province of Cavite; (2) that "the
improvements upon the said land had been mortgaged by him to Inocencio Olimpo and his wife
Juana Orate, the former having since died, . . . which said mortgage was for the purpose of securing
a loan of 323 pesos;" and (3) that "when he, the plaintiff, attempted to redeem the said land prior to
the death of the said Olimpo, the latter refused to consent to it, making various pretexts for such
refusal."
The defendant answered as follows: (1) "That she admits the first paragraph of the complaint and
alleges that since the year 1860 the lease of the land described in the complaint was taken from the
tenant, Ladislao Patriarca, and given to Inocencio Olimpo and his wife, the defendant Juan Orate, by
the administrator of thehacienda;" (2) that she denies the second paragraph of the complaint for the
reason that the improvements upon the land held under lease (it is not known what the
improvements were) can not be mortgaged; and (3) that she also denies the allegations contained in
paragraph 3 of the complaint, for the reason that in the deposition referred to in the complaint as
having been made by Inocencio Olimpo on the 22d day of June, 1900, the latter asserted that he
had purchased the improvements on the land in question, paying to the plaintiff the sum of 323
pesos in consideration thereof, and denied the existence of the alleged mortgage referred to in the
complaint.
It seems that the finding of the contract below upon this point is not altogether in harmony with the
foregoing facts. The court found as follows: "Both parties have admitted that the land in controversy
is within the boundaries of the hacienda of San Francisco de Malabon, which formerly belonged to
the friars, and that the plaintiff, while a tenant thereof, mortgaged to the defendant and her deceased
husband, for the purpose of securing a loan of 323 pesos, Philippine currency, the land and the
improvements thereon, such as the buildings and crops thereon." (Bill of exceptions, pp. 12, 13.)
The first part of the foregoing conclusion was, in fact, admitted by both parties, but not so the latter
part thereof. What the defendant contends is, that her husband had been in possession of the land
since 1860 under and by virtue of the contract of lease made by the administrator of the hacienda,
and that the improvements thereon he acquired by purchase from the plaintiff for 323 pesos. The
second error assigned by the appellant should therefore be sustained.
There should be excluded, therefore, in the consideration of this case, the question as to the land
itself, as the subject of the controversy is the improvements thereon.
What such improvements, thus transferred, either by mortgage or by sale, were, has not been
shown. One of the witnesses for the plaintiff, Melecio Valbuena, was asked: "Do you know what the
improvements consisted of?" He answered: "In the extension, in the crops, according to my best
knowledge and understanding." (Record p. 6.) According to the judgment, these improvements
consisted of buildings and crops standing upon the land. (Bill of exceptions, pp. 12, 13.) But no
evidence has been introduced upon this point which would enable us to form an opinion as to the
nature of such improvements, and the rights which might arise therefrom. Consequently the seventh
error assigned by the appellant should be sustained.
The defendant has shown by the testimony of Pedro Portugal, Manuel Columna, and Ignacio
Astao, whose statements have not been contradicted, that Olimpo had been in possession of the

land since 1859 or 1860; that the owner of the land was Vicente Aviles, who was the former owner of
the hacienda now belonging to the Augustinian Friars; that Olimpo was the lessee of the said land,
and by the testimony of Quiterio Olimpo, a man 43 years of age, the defendant proved that the said
Quiterio was the son of Inocencio Olimpo, by his wife Juana Orate (p. 9); that Inocencio Olimpo, the
father, had been in possession of the land since the witness had reached the age of discretion, and
that the land had been sold by the plaintiff to his father (p. 10).
It is evident from the complaint itself, as well as from the evidence of record, that the property sought
to be recovered in the complaint does not consist of land, but of the improvements thereon alleged
to have been transferred by the plaintiff to the deceased husband of the defendant; that the land
which the defendant is required in the judgment of the court below to return to the plaintiff constitutes
a part of the hacienda which belongs to a third party and consequently is not the property of either
plaintiff or defendant; and that the land referred to in this action had been occupied by Inocencio
Olimpo for about forty years, not by virtue of a sublease of the same to him by Ladislao Patriarca,
but under a lease obtained by him directly from the owner of thehacienda himself. However that may
be, it has not been shown of what the said improvements consisted, nor how the right thereto arose.
To direct this lessee to deliver to another person the land of which he has been in possession with
the consent of the owner, is equivalent to depriving him of the civil right which can not be taken from
him except by the person who conferred it upon him. It would be equivalent to disposing of property
belonging to one person so that another might use it and enjoy it, without the knowledge or consent
of the owner, and without giving the latter an opportunity to be heard. The owner would be deprived
of his property as a result of such an order, said order implying a right to dispose of the property.
Such a right appertains exclusively to the owner, who, on the other hand, has given no cause for
such an essential right being abridged or interfered with by the court. The third and sixth errors
assigned by the appellant should therefore be sustained.
The delivery of property by virtue of a judicial order can only be the result of an action in rem or an
action for possession, while the delivery ordered in the judgment here appealed from as a
consequence of the right to redeem can only be the result of an action in personam, the
consequence of a stipulation, the effects of which can only affect the legitimate owner of the property
who, as in this case, was not a party to such a stipulation, not a party to the proceedings, and was
not affected by the judgment.
This action in personam if it existed at all, and were still enforcible, was not directed against the
immediate successor to the obligation, against whom it should have been directed, and against
whom the judgment rendered in these proceedings in favor of the mother of such successor can not
be enforced. The mother as a coparticipant in the use of the land can not be bound by the said
judgment, as would be the case here if she waived her entire rights in favor of the plaintiff, as a
result of the judgment of the court below. The direct successor of the obligation which is legally
presumed to exist had nothing to do with the acts imputed to his mother and was not a party either to
the proceedings in this case or to the judgment rendered therein. The result would be that his rights
would be jeopardized without his having first had an opportunity to be heard and defend such rights.
Therefore, the fifth assignment of error should be sustained.
The improvements referred to are considered as having been transferred to Olimpo under a contract
which it may be said constituted a mortgage in so far as it was intended to secure the performance
of an obligation and a contract of antichresis in so far as it provided for the delivery of the fruits of the
real property. But the mortgage and antichresis relate to real property presumed to belong to the
debtor, and to be sufficient in itself or with the products thereof to secure the payment of the debt,
and in the present case the real property which it is sought to recover in the complaint did not belong
to the plaintiff and there is no means of ascertaining what the alleged improvements thereon were

for the purpose of determining whether they could give rise to an action in rem or a mere action in
personam.
However it may be, that contract in regard to the so-called improvements on the land, different in its
effects from those contracts of security mentioned in the present Civil Code, must depend for its
existence upon some local custom, and a local custom as a source of right can not be considered by
a court of justice unless such custom is properly established by competent evidence like any other
fact, which has not been done in this case, where neither the nature, the effects, nor the extent of
that singular contract was proved. That contract, as has been said before, was neither a mortgage
nor an antichresis, nor a purchase on condition of redemption.
These being the only contracts relating to real property in the nature of contracts of security, known
to the Civil Code, and prior to the promulgation of the Civil Code there was some similar contract
with the same effect mentioned in the judgment of the court below, different, however, from the
contracts of mortgage and purchase and sale, such contracts could not be enforced at this time, as
article 1976 of the Civil Code repealed all laws,usages and customs which constituted the common
civil law in all matters which are the subject of this code.
For the reasons hereinbefore set out, and not considering errors 1, 4, 8, and 9 set out in the appeal,
the judgment appealed from is reversed, without special provision as to the costs of this instance.
After the expiration of ten days from the entry of final judgment the case will be remanded to the
court below for execution. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-49240

December 20, 1946

LAUREANO MARQUEZ, in his own behalf and in representation of the intestate of Eusebia
Capiral, PATROCINO MARQUEZ and NORBERTO L. DILAG, petitioners-appellants,
vs.
VICENTE VALENCIA, respondent-appellee.
Vicente J. Francisco for petitioners.
Delgado, Dizon and Flores for respondents.

PARAS, J.:
A document (Exhibit B), purporting to be a pacto de retro sale of a fishpond situated in the barrio of
Marulaw, municipality of Hagonoy, Bulacan, is assailed by the petitioners on the ground that it does
not reflect the true agreement between the parties: antichresis. The respondent invokes the letter of

the contract. Petitioner's theory was sustained by the Court of First Instance of Bulacan wherein this
case was commenced. The Court of Appeals, however, rendered a decision of reversal. Appealing
by way of certiorari, the petitioners in the main argue that the Exhibit B should be held effective only
as an equitable mortgage. The next following six paragraphs, taken verbatim from the decision of the
Court of Appeals, contain the basic findings of fact.
(1) On December 4, 1928, the spouses Laureano Marquez and Eusebia Capiral leased to defendant
Vicente Valencia, by the document Exhibit A, the herein mentioned fishpond for a period of ten
years, expiring December 31, 1938. The stipulated yearly rental was P1,000, payable every month
of January. Valencia held the fishpond and paid the rents for the years 1929, 1930 and 1931.
According to plaintiffs, Valencia could make a net profit of P2,000 every year.
(2) Before July 31, 1931, Laureano Marquez had a litigation with Fortunato Santiago, and to settle it,
he got that month seven thousand pesos (P7,000)from Vicente Valencia who did not want to give it
"unless Laureano Marquez signed the document Exhibit B." Although Marquez actually received the
amount of P7,000 only, the document Exhibit B listed the sum of P11,290 as purchase and
repurchase price in accordance with the items written by Vicente Valencia in Exhibit C, as follows:
320 160 Amillaramiento x 2
8,470 7,000 at 10% 700 x 2 1470
2,000 2,000 mejora
500 500 por 5 meses no consumados
11,290
(3) Vicente Valencia admitted having written Exhibit C, and explaining the item of P8,470 said "the
amount of P7,000 the capital, corresponds to the amount received by Mr. Marquez, at 10 per cent
rate of interest per year compoundedly, that sums P700 for the year and 1,400 for two years. Now
the P700 at 10 per cent again, that is 10 per cent of P700 gives P70. That, in all, makes P1,470.
Summing up, the total becomes P8,470." (Page 27, t.s.n.) He added that he had paid P1,000 in
January, 31, as rent, and inasmuch as in July, 1931, he ceased being a lessee (he became
purchaser), the amount of P500 was due to him for reimbursement that accounts for the P500 in
Exhibit C.
(4) As to the amount of P2,000, he declared that it represented the value of the improvements he
had made on the fishpond, as lessee, during the years previous to 1931, which improvement he
would necessarily lose upon repurchase by plaintiffs. Plaintiff Marquez had to agree that the P2,000
represented "mejoras," although he implicitly asserted, without corroboration, that it represents the
"mejoras" which the defendant had agreed to build on the land.
(5) It appears that on the same day when Exhibit B was executed, Laureano Marquez and
companion signed Exhibit D, . . .
(6) Defendant explained that under this exhibit, if plaintiff, upon repurchase, should execute another
lease in his favor, he would allow them to repay only P8,790, thereby waiving the indemnities he
would otherwise charge them (a) for the improvements he had made (P2,000) which he would
again enjoy under the lease and (b) the P500 for the unexpired five months of his lease.
Limiting our curiosity within the narrow confines of the foregoing narration of facts, we find petitioner
Laureano Marquez in urgent need of P7,000 in order to settle a litigation with Fortunato Santiago,
and respondent Vicente Valencia unwilling to give that amount unless Laureano Marquez signed the

document Exhibit B. What could he do? "The distress for money under which he then was, places
him in the same condition as other borrowers, in numerous cases reported in the books, who have
submitted to the dictation of the lender under the pressure of their wants; . . . . Necessitous men are
not, truly speaking; free men; but, to answer a present emergency, will submit to any terms that the
crafty may impose upon them." (Villa vs. Santiago, 38 Phil., 157, 164.)
Now, it is easy to understand (a) why the petitioners were required to pay land taxes; (b) why they
were charged compound interest at the rate often per cent; (c) why they received only P7,000, when
the alleged purchase and repurchase price was P11,290; (d) why the amount actually received by
the petitioners coincided with the total rental for the unexpired term of the lease, Exhibit A; (e) why
the respondent Vicente Valencia spoke of "the amount of P7,000, the capital;" and ( f ) why the sum
actually received by the petitioners, or even the alleged purchase and repurchase price of P11,290,
was much below the assessed value.
Of course neither the payment by the vendor of the land tax, interest, or other additional charges,
nor any of the circumstances above enumerated, taken singly, will preclude the existence of a pacto
de retro sale; and stipulation essentially not germane to a sale may be legally or morally acceptable.
In this particular case, however, the collective weight of such considerations, in our opinion,
sufficiently reveals the intention of the parties to enter into a loan agreement with security, that is, an
equitable mortgage. "While it is true that the contracting parties may establish any agreements,
terms and conditions they may deem advisable, provided they are not contrary to law, morals, or
public order(article 1255, Civil Code), the validity of these agreements is one thing, and the juridical
qualification of the contract resulting therefrom is very distinctly another." (Aquino vs.Deala, 63 Phil.,
582.)
In further elaboration, we may state that, in spite of the terms of Exhibit B (in which, according to the
Court of Appeals, "there is surely no ambiguity nor uncertainty"), the respondent frankly admitted
that the amount of P7,000 was the capital and the sum of P1,470 the compound interest for two
years. Such admission is clearly descriptive of a loan, rather than of a sale.
lawphil.net

The fishpond contains an area of more than 29 hectares and, on the date of Exhibit B, was
admittedly assessed at P18,260. With this as a basis, and considering that the petitioners were
receiving a yearly rental of P1,000, it is believed that the sum of P7,000 actually received by them
the very amount that would have been realized by the petitioners under the unexpired term of the
lease Exhibit A was too inadequate a consideration. While the purchase and repurchase price is
alleged to be P11,290, an owner will naturally look only to actual cash values. Indeed, even the
respondent concerned himself with the interest on P7,000, and not on P11,290. While it may be a
fact, also, that the guardian of one of the petitioners had admitted in a sworn motion filed in civil case
No. 3785 that he "could not secure better conditions," it should be remembered that it was part of the
course of action he had to pursue in order to extricate himself from a predicament. It may be argued
that, generally, a person sells his property in view of some sort of necessity, but in all such cases the
nature of the transaction is always made clear and unmistakable not only by their terms and
incidents but by the subsequent conduct of the parties.
The payment by the petitioners of the land tax, as usual burden attached to ownership, helps in
showing that the intended deal was a loan; otherwise, there seems to be no fairness in requiring the
vendors, who have ceased to be owners, to still pay the same. At any rate, the arrangement (even if
legally permissible) emphasizes the extent to which the petitioners "have submitted to the dictation
of the lender under the pressure of their wants;" for, while the petitioners were strict and careful
enough to require, in the lease, Exhibit A, the respondent (the lessee) to pay the land tax, they had
become so meek and accommodating as to assume that obligation under Exhibit B.

The supposition of the Court of Appeals that the respondent could not have preferred the loan to his
more advantageous lease, Exhibit A, is plausible only if the loan is said to be antichretic, and not, as
justified by the facts found by the said court, simply an equitable mortgage under which the
respondent enjoyed the possession of the fish pound, in addition to interest and other indemnities to
be paid by the petitioners.
There is no merit in the contention that the petitioners have adopted a change of theory on appeal.
Although the petitioners' complaint in the Court of First Instance alleges a case of antichresis, there
is no fundamental difference between that contract and an equitable mortgage, in so far as the
principal subject matter is concerned, namely, a loan. It is noteworthy that the present decision is
predicated solely on facts appearing in the judgment of the Court of Appeals, although the
conclusion we have drawn therefrom was reached upon arguments overlooked or otherwise
erroneously rejected by said court. ". . . The change in emphasis from one phase of the case as
presented by one set of facts to another phase made prominent by another set of facts, all of which
facts were received in evidence without objection as clearly pertinent to the issues framed by the
parties in their pleadings, does not result in a change of theory, and particularly not where the two
sets of facts are so closely related both as to time and nature that they are to all intents and
purposes inseparable." (Limpangco Sonsvs. Yangco Steamship Co., 34 Phil., 597, 608.).
It is therefore, our judgment that the petitioners should be held liable for the payment to the
respondent of the sum of P7,000. Under the facts found by the Court of Appeals, we are justified in
concluding that the respondent is guilty of usury or answerable for the products of the fishpond. The
most that can be done, on equitable grounds, is to consider the stipulation regarding interest and
other indemnities imposed upon the petitioners, as offset and satisfied by the income obtained by
the respondent during the period of his possession.
The decision of the Court of Appeals is hereby reversed and the petitioners sentenced to pay P7,000
to the respondent, who shall be entitled to remaining possession of the fishpond in question until the
said amount is fully paid. So ordered, without costs.
Perfecto, Padilla and Tuason, JJ., concur.

Separate Opinions
HILADO, J., concurring:
Up to the time of voting and even till the present I had been, and still am, of opinion that, considering
that the decision sought to be reviewed was rendered by the "Court of Appeals of Central Luzon" of
the "Republic of the Philippines " on April 29, 1944, and said decision having been appealed to the
Supreme Court of the said "Republic," which was not this Court, the case has not been appealed to
this Court of the genuine Republic of the Philippines. However, at the voting there would have been
a deadlock if I had refused to go into the merits. And in order to break that deadlock I have
consented to vote on the merits, having also participated in the consideration of the questions
involved in the case during the liberation. In doing so, I voted with my breathren who have signed the
majority opinion prepared by Mr. Justice Paras, in which opinion, without abandoning my stand on
the legal question above indicated, I concur.
BRIONES, M., conforme:

Es a todas luces evidente que el contrato de que se trata no es venta con pacto de retro, sino
prestamo con garantia (equitable mortgage). Y para arribar a esta conclusion no es necessario,
como se afirma en la disidencia, revisar las apreciaciones de hecho establecidas en la sentencia del
Tribunal de Apelacion, cosa que desde luego no podemos hacer. Sin apartarse ni en lo mas minimo
de dichas apreciaciones, tal conclusion es forzosa. Es mas: me basta con un solo hecho admitido y
establecido en la sentencia apelada para considerar el contrato como prestamo no venta con pacto
de retro. Ese hecho es el pago de intereses sobre el capital y no como quiera sino hasta intereses
compuestos. El pago de intereses es la caracteristica distintiva por excelencia del prestamo y es
absolutamente incompatible en esta jurisdiccion con el concepto de la venta con pacto de retro.
Notese que Valencia, el supuesto comprador a retro, al interpretar el Exhibit C en donde se
computan los intereses, habla de capital y no de precio. Se dice capital cuando se trata de un
prestamo; precio cuando es una venta. Esto tanto en el lenguaje vulgar como en el juridico.
Un comentario de Manresa ha dado lugar a cierta confusion, haciendo creer al Tribunal de
Apelacion y a algunos miembros de esta Corte que el cobro de intereses es compatible con la
nocion de la venta con pacto de retro. Pero, aparte de que el comentario no esta apuntalado por
ninguna sentencia del Tribunal supremo de Espaa, mi contestacion al argumento es que en esta
jurisdiccion en Filipinas tenemos sobre el particular una jurisprudencia propia, formada al calor
e influjo de fenomenos y circumstancias locales. Esa jurisprudencia se ha ido desenvolviendo poco
a poco sobre un fondo economico-social en que la usura, con sus diversas formas de expoliacion,
ha encontrado una aliada eficaz, un instrumento ductil en la modalidad juridica llamada venta
conpacto de retro. Ya abiertamente, ya de un modo encubierto, bajo la formalidad de un modo
encubierto, bajo la formalidad de un contrato accesorio de arrendamiento en que los intereses
exorbitantes se disimulan a guisa de alquileres, la venta con pacto de retro ha sido por mucho
tiempo case el unico instrumento de credito conocido en nuestros nueblos.
Asi que en esta jurisdiccion nunca se ha mirado con favor la venta con pacto de retro. El meollo,
el leit-motif de la doctrina ha sido el siguiente: en el curso de una larga seria de decisiones, siempre
que la terminologia del contrato ha sido ambigua, o alguna circunstancia hiciese dudosa la intencion
de las partes, esta Corte ha dictaminado invariablemente en el sentido de optar por el contrato de
condiciones menos onerosos, esto es, el prestamo simple, o lo mas, el prestamo con garantia
(equitable mortgage). Y el cobro de intereses es, en sentir de esta Corte, una de las caracteristicas
mas distintivas del prestamo. No se puede citar una sola sentencia de esta Corte en que el cobro de
intereses se haya declarado compatible con el concepto de la venta con pacto de retro. Por eso que
cualquiera que sea la validez y fuerza del comentario de Manresa en Espaa (repito que se ha
citado en su apoyo ninguna sentencia del Tribunal Supremo de aquel pais), es indudable que no
puede prevalecer aqui donde una doctrina contraria de firmes lineamientos hace innecesario el
acudir a fuentes de derecho extranjera.
Ademas, la equidad gravita fuertemente por el lado de los apelantes. El apelado ha estado
poseyendo y disfrutando de la finca hace 18 aos, ganando P2,000 al ano, segun la sentencia
apelada. Esta ganancia es mucho mas de lo que el apelado hubiese cobrado en intereses, aun a
razon de 12 por ciento al ano. Habiendo ganado P36,000 hasta ahora, ya ha recobrado cinco veces
su capital de P7,000. Mal puede quejarse, pues, cunado en nuestra sentencia todavia se le permite
recobrar este capital, y aun quedarse con la finca si los apelantes no tuviesen o no encontrasen
P7,000 para el rescate.
Se revoca la sentencia.
MORAN, C. J., dissenting:

In an appeal by certiorari to this court from a decision of the Court of Appeals, only questions of law
may be raised, and this Court has no authority to change, alter or modify the findings of fact made by
the Court of Appeals if it implies review of the evidence. (Rule 46, section 2; Guico vs. Mayuga and
Heirs of Mayuga, 63 Phil., 328; Mateo vs. Collector of Customs and Court of Appeals, 63 Phil., 470;
Mamuyac vs. Abena, 67 Phil., 289; Meneses vs. Commonwealth of the Philippines, 69 Phil., 647;
Onglengco vs. Ozaeta and Hernandez, 70 Phil., 43; Hernandez vs. Manila Electric Co., 71 Phil., 88;
Nazareno vs. Samahang Magwagi, 71 Phil., 101; Gerio vs. Gerio, 71 Phil., 106; Garcia de
Ramos vs. Yatco, 71 Phil., 178; Zubiri vs. Quijano 74 Phil., 47; People vs. Benitez, 73 Phil., 671).
The decision of the Court of Appeals, reversed by this Court, is as follows:
On July 27, 1931, Laureano Marquez, Eusebia Capiral and Marcelino Marquez, as guardian
of Patrocinio Marquez, notirized the "Venta con pacto de retro" (Exhibit B) whereby, for the
sum of P11,290, receipt whereof they acknowledged, they sold a fishery in the barrio of
Marulaw, municipality of Hagonoy, to defendant Vicente Valencia, reserving, however, the
right to repurchase the same within two years, for the same amount. The vendors failed to
exercise the convenanted right of redemption.
However, on May 28, 1936, Laureno Marquez, in behalf of himself and of his co-signers, filed
a complaint, alleging that their contract with defendant, Exhibit B, was in effect a usurious
loan, and not a pacto-de-retro sale; that defendant had already been repaid with the
products of the fishpond, which should now be returned to them after appropriate
accounting.
Defendant denied complainants' allegation and averred the bargain was a veritable pactode-retro sale.
The Court of First Instance of Bulacan heard the evidence and the parties, and rendered
judgment holding that the document Exhibit B represented an antichresis agreement.
consequently, it ordered, "al demandado a que paque a los demandantes la suma de
P9,000, mas la cantidad de P2,000 cada ano desde la fecha del contrato Exhibit B hasta
que la presqueria en cuestion es entregada por el demandado a los
demandantes; . . . que entregue a los demandantes la presqueria en cuestion y a pagar las
costas del juicio."
Defendant appealed.
On December 4, 1928, the spouses Laureano Marquez and Eusebia Capiral leased to
defendant Vicente Valencia, by the document Exhibit A, the herein mentioned fishpond for a
period of ten years, expiring December 31, 1938. The stipulated yearly rental was P1,000,
payable every month of January. Valencia held the fishpond and paid the rents for the years
1929, 1930 and 1931. According to plaintiffs, Valencia could make a net profit of P2,000
every year.
Before July, 1931, Laureano Marquez had a litigation with Fortunato Santiago, and to settle
it, he got that month seven thousand pesos (P7,000) from Vicente Valencia, who did not
want to give it "unless Laureano Marquez signed the document Exhibit B". Although Marquez
actually received the amount of P7,000 only, the document Exhibit B listed the sum of
P11,290 as purchase and repurchase price in accordance with the items written by Vicente
Valencia in Exhibit C, as follows:
360 160 Amillaramiento x 2

8,470 7,000 at 10 % 700 x 2 8470

8,000 2,000 mejora
500 500 por 5 meses no consumados
11,290.
Laureano Marquez, declaring in this case, avers that Exhibit B was not the true contract he
had made with Vicente Valencia, who promised by a gentleman's agreement not to carry it
out; and without using the word "loan" or "antichresis," he spoke of P7,000 as the "capital"
earning more than 10 per cent interest.
The trial court, seeing that interest was charged for two years that vendors had to pay real
state taxes and that the price was inadequate, concluded that the transaction was a usurious
antichresis loan and made the order appealed from.
Vicente Valencia admitted having written Exhibit B, and explaining the item of P8,470 said
"the amount of P7,000, the capital corresponds to the amount received by Mr. Marquez at 10
per cent rate of interest per year compoundly, that sum P700 gives P70 at 10 per cent again,
that is 10 per cent of P700 gives P70. That, in all makes P1,470. Summing up, the total
becomes P8,470." (P. 27, t.s.n.) He added that he had paid P1,000 in January, 1931, as rent,
and inasmuch as in July, 1931, he ceased being a lessee (he became purchaser), the
amount of P500 was due to him for reimbursement that accounts for the P500 in Exhibit
C.
As to the amount of P2,000, he declared that it represented the value of the improvements
he had made on the fishpond, as lessee, during the years previous to 1931, which
improvement he would necessarily lose upon repurchase by plaintiffs. Plaintiff Marquez had
to agree that the P2,000 represented "mejoras," although he implicity asserted, without
corroboration, that it represents the mejoras which the defendant had agreed to build on the
land.
It appear that on the same day when Exhibit B was executed, Laureano Marquez and
companion signed Exhibit D, the pertinent provisions of which read as follows:.
Por cuanto en esta misma fecha se ha otorgado una escritura de venta con pacto de
retro por Laureano Marquez, Eusebia Capira
. . . a favor del Dr. Vicente Valencia, con relacion a la siguiente parcela de terreno: (same
fishpond)
xxx

xxx

xxx

Por tanto para el caso de que ejercitaramos el derecho de retracto reservado en la escritura
arriba mencionada dentro del plazo estipulado y otorgaremos simultaneamente otra
escritura de arrendamiento a favor del Dr. Vicente Valencia con las siguentes condiciones a
saber: en dicho caso el precio del retracto sera solamente la suma de OCHO MIL SIETE
CIENTOS NOVENTA (P8,790) PESOS en vez de la cantidad de ONCE MIL DOSCIENTOS
NOVENTA PESOS (P11,290) mencionada en dicho contrato de venta conpacto de
retro; . . . . Entendiendose, ademas, que si nosotros optaramos para no otorgar el contrato
de arrendamiento arriba mencionado en dicho case el precio de la recompra sera la suma

de ONCE MIL DOSCIENTOS NOVENTA PESOS (P11,290) tal como se dispone en la

escritura de venta con pacto de retro arriba mencionada.
Defendant explained that under this exhibit, if plaintiff, upon repurchase, should execute
another lease in his favor, he would allow them to repay only P8,790, thereby waiving the
indemnities he would otherwise charge them (a) for the improvements he had made
(P2,000) which he would again enjoy under the lease and (b) the P500 for the
unexpired five months of his lease.
It has long been established in this jurisdiction that a written document of pacto-de-retro sale
may be shown to be a mortgage by oral evidence (Rodriguez vs. Pamintuan and De Jesus,
37 Phil., 876; Villa vs.Santiago, 32 Phil., 157).But in every case where courts uphold such
showing they have done so either because the terms of the documents were ambiguous, or
because the circumstances surrounding its execution or performance were incompatible or
inconsistent with the theory that a conventional redemption was intended by the parties.
(Tolentino and Manio vs. Gonzales Sy Chiam, 50 Phil., 558.) And the oral evidence must be
"clear and convincing," if it so to overcome the presumption of validity and genuineness
which attaches to a public document. (Asido vs. Guzman, 37 Phil., 652;
Masongsong vs. Kalaw, 55 Phil., 787.)
There is surely no ambiguity nor uncertainty in the writing Exhibit B, and the supplementary
agreement Exhibit D. The first contains all the essential stipulations of conventional
redemption which the conduct of the parties tend to corroborate; the purchaser took the
property into his possession; for five years after the contract, plaintiff made no move to
reform the deed; upon the expiration of the redemption period, Vicente Valencia consolidated
his ownership and inscribed the property in the tax record in his own name; Laureano
Marquez and Marcelino Marquez in a motion which they filed in civil case No. 3785, declared
under oath that this transaction was a venta con pacto de retro, and that Valencia's terms
were the most advantageous.
In weighing the oral evidence of both sides, we notice firstly that only Laureano Marquez for
the plaintiffs and only Vicente Valencia declared in opposition. Marquez was uncertain in his
statements, and inconsistent with his theory. The complaint which he knew and ratified, said
that P1,970 was the amount of "interest"; at the trial he swore it was 10 per cent over the
capital (P1,400). Then instead, of the loan of P7,000 which he impliedly said he obtained the
amount was "advanced rentals" under the lease contract. His memory does not seem to be
very good. He could not well account for the P500 item for which Valencia had given a
truly logical explanation. His cross-examination was significant:
Q. And why did you have to return the P500 appearing in Exhibit C if it did not correspond to
interest? A. That is always the case of a usurer, that they always had the interest on the
unexpired time.
Q. Do you mean to say that P500 mentioned in Exhibit C correspond also to interest which
you had to pay for the P7,000?. A. That could be possible to be in that way, but what I
know is that I have not received that amount.
Q. Are you not positive to what that P500 correspond to? A. My previous declaration in
regards to P500, I stand by it.
Q. And what is your previous declaration? A. I am afraid I might change my previous
declaration. (Page 19, t.s.n.)

On the other hand, the data in Exhibit C, and the documents of lease (Exhibit A), pacto de
retro (Exhibit B) and compromise "de dar en arrendamiento" (Exhibit D), all consistent with
each other, reasonably bear out the assertions of Vicente Valencia that the parties had really
agreed to the stipulations attested to by (Exhibit B), namely, a contract whereby, for having
received P7,000, plaintiffs sold the fishpond to him, reserving, however, the right to reacquire it for the total sum of P11,290, with the qualification that if they should release it to
him, the redemption money could be reduced to P8,790. The fact that the vendor a
retro promised to pay upon repurchase, not only the sale price but also certain other
additional charges, such as taxes (Lichauco vs. Berenguer, 20 Phil., 12), and even interest
does not convert a plain unambiguous document of pacto de retro sale into one of loan
unless, of course such form of agreement is resorted to for the purpose of distinguishing truly
usurious loans. (Cf. Manila Trading and Supply Co. vs.Tamaraw Plantation Co. 47 Phil.,
513.) Manresa, interpreting article 1518 of the Civil Code, says:
No vemos, por lo tanto, inconveniento en que se pacte que el precio o mejor dicho, que la
cantidad que se restituya sea mayor o menor que el precio de la venta (lo ultimo sera muy
raro); pues tal convencion implica un pacto licito, de cuya eficacia no se nos alcanza motivo
para dudar. No tendremos quiza entonces el pacto de retro que reglamenta el Codigo, pero
tendremos evidentemente un derecho de retraer de caracter convencional y que producira
efectos jurisdicos.
Analoga consideracion se nos ocurre sobre la pregunta que muchos formulan referente a si
el vendador tendra que pagar los intereses del precio por el tiempo que lo haya tenido en su
poder. El Codigo no habla de tales intereses, los cuales, por lo tanto, no se deben
naturalmente. Puede, sin embargo pactarse su abono y en este caso, tratandose, a nuestro
juicio de un pacto de licito, es visto que el vendedor tendra que satisfacerles. (10 Manresa
4.a ed., pag. 310.).
In fact, Vicente Valencia could not have voluntarily consented to the termination of his lease,
to enter upon a loan of P7,000 at interest of 10 per cent, as appellees' theory seems to be.
Why? Because under a loan, he would be earning only P700 a year, according to plaintiffs;
however, in a pacto-de-retro deal, in addition to the 10 per cent he was to receive upon
repurchase, he had the attractive chance of owing the fishery should Marquez and his
companions neglect or fail to redeem.
With regard to the price, there is evidence that before concluding the bargain with Valencia,
Marquez approached several people; but could not secure better conditions. Indeed that is
what he informed the court in the civil case No. 3785, in the sworn motion herein before
mentioned.
In view of the preceding considerations, we are, at least not persuaded that the document
Exhibit B did not represent the true intent and agreement of the parties. The Supreme
Court's words may here be recalled:
As obnoxious as contracts of pacto de retro are, yet nevertheless, the courts have no right to
make contracts for parties. They made their own contract in the present case. There is not a
word, a phrase, a sentence or paragraph, which in the slightest way indicates that the parties
to the contract in question did not intend to sell the property in question absolutely, simply
with the right to repurchase. People who make their own beds must lie thereon. (Tolentino
and Manio vs. Gonzalez Sy Chiam, 50 Phil., 558, 677, 578.).

Wherefore, the appealed decision will be revoked and the complaint dismissed. Cost in both
instances against the plaintiffs. So ordered.
Upon motion for reconsideration filed by petitioners, the Court of Appeals issued the following
resolution:
The Court has given careful attention to the appellees' motion for reconsideration but is
unable to reach a different conclusion.
The argument that Exhibit B should be regarded as an equitable mortgage, because P7,000
is inadequate price for the fishpond assessed at P22,040, is unmeritorious; firstly, the price
for which Vicente Valencia acquired the land was not P7,000, but P11,290, and the land was
assessed at P18,260 (Exhibit F); secondly, the tax assessment appears to be unreliable as a
test of the lands actual value, because Laureano Marquez himself agreed to the sworn
statement in Exhibit A, that Valencia's offer was the best obtainable in the market; and thirdly,
even supposing that the assessment was a correct indication of value, the resulting
disproportion is not so marked as to be incompatible with a real pacto de retro covenant.
(SeeFeliciano vs. Limjuco and Calacalzado, 41 Phil., 147 [price P500, assessed value
P1,000] and Villarosa vs.Villamor, 43 Phil., 350 [price P3,000, assessed value around
P5,850].)
Attempting to repute our reasoning "that Valencia could not have voluntarily consented to the
termination of his lease to enter upon a loan of P7,000 with interest at 10 per cent," the
appellees express the belief that this Court "has utterly failed to consider the fact that the
fishpond mentioned in Exhibit B, during the period of redemption was to remain, as it did
remain, in the possession of appellant. As this Honorable Court has stated, without
qualifications, that the fishpond in question produces an income to appellant of P2,000 a
year, it becomes clear that for the P7,000 given by appellant to appellees, the former was to
profit a total of P2,700 for the first year, and P2,770 for the second year. For besides getting
the produce from the fishpond, in the amount of P2,000 a year, he would still secure from
appellees an interest of 10 per cent on P7,000 compounded annually.
There was no such oversight. Under appellees' theory of antichretic loan which we
rejected on the assumption that Valencia would not have voluntarily accepted a less favored
position the products of the fishpond (P2,000) were to pay the 10 per cent interest and the
capital. Consequently, there is no warrant for the assertion that under the alleged loan
arrangement, Valencia would get 10 per cent interest plus the products (P2,000).
The motion to reopen is denied.
It may thus be seen from the decision of the Court of Appeals that, on the issue of whether the true
agreement between the parties is a pacto de retro sale or merely an equitable mortgage, both direct
and circumstantial evidence have been adduced by the parties. The direct evidence consists of
Exhibits A, B, C, D and 2 together with the testimony of petitioner Laureano Marquez and
respondent Vicente Valencia. The circumstantial evidence consists of the alleged payment of taxes
and interests together with the alleged disproportion between the sale price and the assessed value
of the property in litigation. The conclusion of the Court of Appeals that the true agreement between
the parties is a pacto de retro sale, is based on all these proofs considered as a whole. This
conclusion of fact cannot be reviewed by this Court without reviewing the whole evidence, and it has
no authority to review the testimonial evidence under the provisions of the Rules of Court above
mentioned. And because it lacks such authority, the majority decision reverses the decision of the

Court of Appeals on the basis of only of the evidence, omitting completely the testimony of the
witnesses, and this is certainly illegal and unfair.
In cases like this, the utterances of the parties at the time of their negotiation leading to their written
agreement, are the best evidence. And the testimony of witnesses directly on such utterances is of
great importance and may be decisive. If, as in the instant case, the testimonial evidence,
corroborated by public documents, is such as to persuade the Court of Appeals that the true
agreement between the parties is a pacto de retro sale, circumstances such as the payment of taxes
or interests in case of repurchase, cannot convert the true contract into a mere equitable mortgage.
There is nothing illegal or immoral in a vendor agreeing to reimburse upon repurchase the taxes paid
by the vendee, and to pay the interests which the vendee's money would have earned prior to the
repurchase. (Lichauco vs. Berenguer, 20 Phil., 12; 10 Manresa, 4th ed., p. 310.).
The Court of Appeals said: "In weighing the oral evidence of both sides, we notice firstly that only
Laureano Marquez testified for the plaintiffs and only Vicente Valencia declared in opposition.
Marquez was uncertain in his statements, and inconsistent with his theory." And the Court proceeded
to show the uncertainty and inconsistency of Marquez' testimony and at the same time the veracity
of Valencia's testimony which was found to be in perfect harmony with the documentary evidence
Exhibits A, B, C and D as well as with the subsequent conduct of both parties.
According to Exhibit A, on December 4, 1928, the spouses Laureano Marquez and Eusebia Capiral
leased to respondent Vicente Valencia the property in litigation for ten years expiring on December
31, 1938. The stipulated annual rent was P1,000 payable in advance. All improvements made by the
lessee on the property during the lease were to belong to the lessor upon the expiration of the lease.
In July, 1931, Laureano Marquez had a litigation with Fortunato Santiago involving the same
property. To settle this litigation, Laureano Marquez needed the amount of P7,000 and he
approached several persons to sell the property in order that, with the proceeds of the sale, he could
pay said amount to Fortunato Santiago. Due to the uncertainty of the title to the property occasioned
by the pending litigation with Fortunato Santiago, and, also, due to the lease contract in favor of
respondent which had still seven and a half years to run, the prospective buyers were unwilling to
purchase the property under the terms desired by Laureano Marquez. Thus, the latter offered to sell
the fishpond with a right to repurchase to herein respondent. The offer was accepted and Exhibit B
was executed. This documents is not uncertain or ambiguous.
On the same date and in another document, Exhibit D, the parties agreed that, upon repurchase, the
vendors could again lease the same property to Vicente Valencia, in which case the price for
repurchase would be P8,790 instead of P11,290; but in case they chose not to lease the property
again to Valencia then the price for repurchase would remain the same, namely, P11,290. This
agreement, Exhibit D, confirms the pacto de retrosale, Exhibit B. It clearly cancelled lease Exhibit A,
which would not have been done had the contract in issue been merely an antichresis or equitable
mortgage. In other words, if the contract, Exhibit B, is merely an artichresis or equitable mortgage,
then the agreement contained in Exhibit D would have no effect or purpose. It must be noted that
Exhibit D is not assailed as not expressing the true intention of the parties.
On November 4, 1931, according to Exhibit A, a motion, under oath, was filed in special proceedings
No. 3785 of the Court of First Instance of Bulacan, entitled "In re Guardianship of Minor Patrocinio
Marquez," wherein Laureano Marquez and Marcelino Marquez prayed for the approval of the
contract, Exhibit B, referred to specifically in said motion as "venta con pacto de retro" and as "las
mas ventajosa tanto para la menor como para sus padres." This motion was granted and the
contract approved by the Court as a pacto de retro sale which was duly registered in the registry of
deeds of Bulacan.

And now the majority says that this sworn motion deserves no credit because "it was a part of a
course of action he (the movant) had to pursue in order to extricate himself from a predicament."
That such was the reason for the motion is a mere assumption contrary to the findings of the Court
of Appeals. After weighing all the evidence, including the testimony of witnesses, the Court of
Appeals held the sworn motion to be a deliberate expression of truth taken by the probate court of
Bulacan as ground for approving the contract in an order that has already become final at least as
regards the movants themselves. The majority decision, however, in effect considers the sworn
motion as a perjury, and, what is worse, the perjury is made one of the grounds for deciding in favor
of the perjurers.
The mere fact that petitioners were very badly in need of money does not argue against the pacto
de retro sale. Sales are often made by needy people. The trouble in the instant case is that
petitioners do not know what their true agreement is. In the Court of First Instance they said it was
antichresis; but in the Court of Appeals they said it was an equitable mortgage.
Other considerations of minor importance appearing in the majority decision are fully answered by
the Court of Appeals' decision which I believe to be in conformity with law.
For all the foregoing, I vote for the affirmance of the judgment rendered by the Court of Appeals.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 40908

September 8, 1934

NATALIO A. ENRIQUEZ, SUSANA GALA, MOISES A. GALA and AVELINA ELEAZAR, plaintiffsappellants,
vs.
COSME RAOLA, administrator of the estate of the deceased Fructuosa Cadiz, defendantappellee.
PEDRO HERRERA and MARTIN MENDOZA, intervenors-appellants.
Azada and Veluz for plaintiffs-appellants.
Godofredo Reyes for intervenors-appellants.
BUTTE, J.:
The appellants as plaintiffs on September 29, 1932, filed suit in the Court of First Instance of
Tayabas against Cosme Raola as administrator of the estate of Fructuosa Cadiz Praying for a
personal judgment for P30,000 with interest and the foreclosure of a mortgage securing said debt.
This mortgage was a first lien on a parcel of land with improvements described in certificate of title
No. 878 of Tayabas and containing an area of 809,609 square meters assessed at P28,150. It is

alleged that neither Fructuosa Cadiz in her life time nor her representative since her death has paid
the said past due loan or the interest thereon since June 27, 1930, although due demand was made.
The answer of the defendant administrator of the late Fructuosa Cadiz admits all of the allegations of
the petitioner but prays to be relieved of the payment of attorney's fees and costs.
On January 18, 1933, by permission of the court, Pedro Herrera and Martin Mendoza filed a petition
of intervention in which it is alleged that the intervenor Herrera has an interest in said land under and
by virtue of his purchase thereof at a sheriff's sale which is noted on the back of the said certificate
of title No. 878. The intervenor Mendoza claims an interest in said land alleging that the said
Fructuosa Cadiz in her life time on January 20, 1930, transferred to the said Mendoza by sale
with pacto de retro a portion of said land containing 400 coconut trees for the sum of P3,500.
The intervenors further allege that in 1931 the defendant administrator delivered possession of the
said mortgaged property to the plaintiffs by way of antichresis for the remaining portion of the fiveyear period stated in the original contract of mortgage with the understanding that the plaintiffs
should apply the products of the land to the payment of the mortgage debt and interest; that by virtue
of said agreement of antichresis there has been a novation of the obligation and the plaintiffs cannot
foreclose the mortgage executed by Fructuosa Cadiz before the expiration of five years from the
date of the said mortgage, that is to say, June 27, 1935, and hence the action of the plaintiffs is
premature. They pray that the contract of mortgage be declared novated by the subsequent contract
of antichresis, that the plaintiffs be required to render an account; that the petition of the plaintiffs be
dismissed with costs.
On March 7, 1933, the plaintiffs filed their answer to the petition of intervention in which they allege
that the plaintiffs are the owners of the land described in said certificate of title No. 878 by virtue of
the fact that they purchased the same from Francisco Paulino who in his turn purchased the same at
a sheriff's sale under an execution upon a judgment against said Fructuosa Cadiz in case No. 2807
which sale and purchase is registered in the office of the register of deeds and noted on the back of
said certificate No. 878. The answer denies that the intervenors acquired any right under their
alleged purchases.
As stated, the defendant administrator of the estate of Fructuosa Cadiz makes no defense to the
plaintiffs' demand. Only the intervenors and the plaintiffs have appealed.
The plaintiffs except to that portion of the decision of the trial court which denied the prayer of the
plaintiffs for a personal judgment for P30,000 with interest on the debt secured by the mortgage
aforesaid. The trial court held that when the plaintiffs acquired through Francisco Paulino the equity
of Fructuosa Cadiz in the very same lands conveyed to them as mortgagees, a merger of rights
(confusion de derechos) took place which had the effect of extinguishing the debt of Fructuosa Cadiz
in favor of the plaintiffs, under the provisions of articles 1156 and 1159 of the Civil Code. If that were
not true, the plaintiffs would acquire the legal and equitable title to lands assessed at P28,150 for the
sum of P857.31 paid by them to Francisco Paulino without giving Fructuosa Cadiz or her estate
credit for anything, leaving the said estate still owing the plaintiffs the P30,000, plus interest, for
which the lands stood security. This extinction of the obligation and merger of rights by which the
plaintiffs became owners of the land, occurred when they acquired the rights of Francisco Paulino,
that is to say, on February 24, 1931.
Subsequent thereto, that is to say, on August 31, 1931, the intervenor Herrera at a sheriff's sale
purchased all the rights, title and interest that remained in Fructuosa Cadiz in the said land, which,
as correctly held by the trial court, were in fact exhausted by the prior conveyances.

As to the intervenor Martin Mendoza, it appears from his Exhibit 1 that Fructuosa Cadiz, on January
20, 1930, executed in his favor a document entitled venta con pacto de retro affecting a portion of
the land embraced in said certificate of title No. 878; but said document was never registered or
noted on the certificate of title in conformity with section 50 of Act No. 496. Hence it could not affect
these plaintiffs. Although he appealed, we do not find in the brief for the intervenors any argument
challenging the conclusion of the court in this respect.
The intervenors' appeal rests essentially upon the proposition that novation of the contract of
mortgage occurred when the plaintiffs agreed that they should take possession of the land before
the maturity of the mortgage, and credit the products thereof to the payment of the principal and
interest of the debt, thus converting the mortgage to a contract of antichresis. The evidence fails
entirely to establish said alleged agreement. The defendant administrator, the widower of the
deceased Fructuosa Cadiz, makes no such claim. The plaintiffs contend that they did not take
possession until after they became owners by virtue of the conveyance from Francisco Paulino, that
is to say, toward the end of the month of February, 1932, which was after the year for redemption of
Francisco Paulino's purchase by the judgment debtor had expired.
The intervenors in their brief take grave exception to the orders of the trial court suspending the final
effect of the judgment in this case in favor of the appellants until they obtained a certificate of title.
On October 30, 1933, the plaintiffs notified the court that they had obtained certificate of title No.
7465 upon cancellation, of certificate of title No. 878, thus complying with the order of the court of
August 21, 1933. Whatever apparent irregularities of procedure there may have been in this
connection, we are convinced that the intervenors have not been deprived of any substantial rights
by the final decision of the court. The judgment is affirmed with costs to be divided equally between
the plaintiffs-appellants and the intervenors-appellants.
Malcolm, Villa-Real, Imperial and Goddard, JJ., concur.