The Supreme Court has denied a petition for review on certiorari and affirmed the rulings of both the Regional Trial Court (RTC) and the Court of Appeals (CA), holding that a purported Deed of Absolute Sale over a residential lot in Zamboanga City was in truth an equitable mortgage — a transaction that secures the payment of a debt rather than transferring ownership outright. The petitioner was ordered to reimburse the respondent the amount of PHP 3,625,607.75 that the respondent had advanced to settle the petitioner's delinquent housing loan.
The Case
Petitioner is the registered owner of a residential lot at Casas de Amor Subdivision, Lunzuran, Zamboanga City, covered by Transfer Certificate of Title (TCT) No. 129-2014002556. To finance a housing loan with the Home Development Mutual Fund (HDMF), petitioner mortgaged the property. The loan, initially PHP 1,080,000.00, was later increased to PHP 3,281,600.00, payable over 30 years with interest. Petitioner paid only two monthly amortizations in 2016 before defaulting. By March 30, 2017, the outstanding obligation had grown to PHP 3,612,962.07. On April 12, 2017, the HDMF warned petitioner that foreclosure would be initiated if the amount due was not paid by April 17, 2017.
Petitioner was working abroad in Dubai at the time. Her mother sought the respondent's assistance. Respondent, then based in Davao City, agreed to advance the amount needed to fully settle the HDMF loan, on the condition that a Deed of Absolute Sale over the property would be executed in her favor, with petitioner retaining the right to repurchase upon full repayment. On April 12, 2017, respondent paid the HDMF PHP 3,625,607.75 via a manager's check. Despite full settlement of the loan, the owner's duplicate copy of the title was released to petitioner's brother, Edlin, pursuant to a Special Power of Attorney (SPA) executed by petitioner — not to respondent. No deed transferring ownership to respondent was ever registered. Petitioner admitted she received, signed, and returned the Deed of Absolute Sale and an SPA to respondent, but without notarization, later explaining she had changed her mind. Subsequent demands failed, prompting respondent to file a complaint for specific performance and damages before the RTC.
The Issue
The central question before the Court was whether the transaction between the parties — evidenced by the Deed of Absolute Sale — constituted a valid contract of sale or an equitable mortgage intended merely to secure the repayment of the amount advanced by respondent.
The Ruling
The Supreme Court denied the petition. In its dispositive portion, the Court declared: "FOR THESE REASONS, the present Petition for Review on Certiorari is DENIED. The Decision dated January 26, 2023, and Resolution dated July 7, 2023, of the Court of Appeals in CA-G.R. CV No. 06124-MIN are AFFIRMED."
By the Numbers
- Original HDMF loan: PHP 1,080,000.00
- Increased loan amount: PHP 3,281,600.00 (payable over 30 years with interest)
- Outstanding obligation as of March 30, 2017: PHP 3,612,962.07
- Amount paid by respondent to HDMF on April 12, 2017: PHP 3,625,607.75
- Consideration stated in the Deed of Absolute Sale: PHP 1,000,000.00
- Attorney's fees awarded by the RTC: PHP 50,000.00
- HDMF payment deadline given to petitioner: April 17, 2017
- RTC Decision date: January 15, 2021
- CA Decision date: January 26, 2023
- CA Resolution date: July 7, 2023
The Court's Reasoning
The Court upheld the finding that the transaction bore the badges of an equitable mortgage under Article 1602 of the Civil Code. Three circumstances supported this conclusion: (1) the consideration of PHP 1,000,000.00 stated in the Deed of Absolute Sale was grossly inadequate compared to the PHP 3,625,607.75 actually advanced by respondent; (2) petitioner and her family remained in possession of the property in the concept of owner; and (3) the surrounding circumstances of the negotiations showed the Deed of Absolute Sale was intended merely to secure the payment of petitioner's obligation. The Court noted that the presence of any one of the circumstances enumerated under Article 1602 is sufficient to give rise to the presumption of an equitable mortgage. Citing Spouses Reyes v. Court of Appeals, the Court reiterated that the decisive factor is the intention of the parties, shown not by the name of the document but by their contemporaneous and subsequent acts. The Court further held that petitioner's failure to have the documents notarized did not invalidate her consent, as she had already signed and returned the documents. The Court also ruled that even assuming the contract was defective, petitioner remained liable to reimburse respondent under the principle of solutio indebiti — a quasi-contract arising when one party pays the debt of another — and under Article 1236 of the Civil Code, since the payment was undeniably beneficial to petitioner. The Court stated that to allow petitioner to retain the benefits of respondent's payment while refusing to reimburse her would contravene the basic principle against unjust enrichment.
Source: Supreme Court of the Philippines, G.R. No. 269085, Third Division. The ponente's name is not fully legible in the published excerpt; the decision was attested by Associate Justice Ramon S. Caguioa as Division Chairperson.
This report summarizes a public Supreme Court decision and is not legal advice.