FACTS
Margarita Sarabia owned
two (2) lots with a residential house built on one of the lots in Poblacion,
Kalibo, Aklan. Spouses Reynaldo and Editha Lopez were renting the
second floor of the house for P300.00 per month. On the other lot was a
building rented by Dr. Nilda Tambong for P600.00 a month, with two (2) boarders
upstairs paying P440.00 a month. Sometime in March 1984, the Spouses Lopez approached
Margarita and asked her if they could construct additional rooms for their
growing children. Margarita told them that she did not have the money for such
construction project. They then proposed that they could apply for a Pag-ibig
Housing Loan DBP and use Margarita's property as collateral. Margarita,
however, informed them that her property had already been mortgaged to the PNB in
1978 in the amount of P20,000.00, and was, in fact, in danger of being
foreclosed for non-payment of amortization. Her outstanding loan balance as of
March 1984 had already ballooned to about P63,000.00.
The
Spouses Lopez tried to convince Margarita that it was better to
transfer the mortgage to the DBP where interest rates were lower. They told
Margarita that the PNB loan balance could be paid off from the proceeds of the
loan from the DBP, and the excess could be used for the construction of the
rooms. In order to facilitate the loan, it was, however, necessary that the
property be in the name of the Spouses Lopez.
Relying
on the couple's good faith and assurances that they would religiously pay the
amortization, Margarita agreed to their proposition. A document was thus
executed denominated as "Assumption of Mortgage with
Quitclaim." In said document, the Register of Deeds was
authorized to cancel the old TCT over the two (2) parcels of land and issue new
TCT's under the name of the Spouses Lopez. The
Spouses Lopez then mortgaged the properties to DBP where they
obtained a loan in the amount of P163,000.00. They paid the PNB, which then
released the mortgage of Margarita. The Spouses Lopez ceased paying
rentals to Margarita and even collected the rentals from the other lot as part
of the payment of the monthly amortization.
Sometime
in October 1987, Reynaldo Lopez approached Margarita and informed her
that he needed P30,000.00 to update their loan payments. Margarita gave him the
amount as part of the refund to the payment of the PNB loan. She expected
Reynaldo to give her an official receipt from the DBP, but did not receive any.
Sensing something irregular, she went to the DBP to inquire about the status of
the loan. She was aghast to find out that the loan amortization had not been
paid and that her property was again in danger of being foreclosed.
Margarita
was constrained to file an action with the RTC against the
Spouses Lopez for annulment of document, specific performance and
reconveyance with damages.
However,
according to Spouses Lopez, that it was Margarita who approached them to help
her redeem her property from the PNB because it was going to be foreclosed. She
was aware that the couple wanted to buy a house and lot of their own, and
offered her property to them instead. The Spouses Lopez told her that
they did not have the money to redeem the property, but if Margarita was
certain in selling her house to them, they could arrange for a loan from the
DBP, the proceeds of which the PNB loan could be paid in full and would form
part of the purchase price. The balance would also be taken from the proceeds
of the DBP loan. Pursuant to their mutual and verbal agreement, Margarita
executed a Deed of Assumption of Mortgage with Quitclaim, authorizing
the couple to assume her loan with the PNB over the two lots, together with all
the improvements thereon and renouncing all her rights over the property.
RTC:
rendered decision in favor of Margarita. The trial court found that the true
intentions of the parties were not really embodied in the
documents/instruments. The documentary, as well as parol evidence, clearly
showed that Margarita did not really intend to convey her property to the
petitioners. She agreed to sign the pertinent documents with the
understanding that they were requirements of the bank in processing the loan
applied for by the Spouses Lopez. The trial court continued to rule that
the Spouses Lopez were in bad faith, so whatever improvements were
made on the land were forfeited in favor of Margarita.
CA:
affirmed the RTC finding that the nature of the transaction between Margarita
and the Spouses Lopez was, verily, an equitable mortgage and not a
sale. The CA, however, declared that the petitioners were builders in good
faith. According to the CA, Margarita was aware and approved the
construction/improvements undertaken by the Spouses Lopez; thus, forfeiture
of the improvements in favor of Margarita was unwarranted.
Spouces
Lopez filed petition for review on certiorari to SC.
ISSUE
Whether
or not the transaction between the parties is a contract of sale.
HELD:
There
is no dispute that the transaction between the parties is one of equitable
mortgage and not a sale. It bears stressing that the law favors the least
transmission of rights and interests over a property in controversy (Art.1378).
The purpose of the law is to prevent circumvention of the law on usury and the
prohibition against a creditor appropriating the mortgaged property.
Additionally, it is aimed to end unjust or oppressive transactions or
violations in connection with the sale of the property. The wisdom of these
provisions cannot be doubted, considering many cases of unlettered persons or
even those with average intelligence invariably finding themselves in no
position whatsoever to bargain fairly with their creditors.
Reasoning:
- 1. The owner, Margarita, remained in possession of the house. If she really intended to sell her house, then she would have looked for another place to live.
- 2. It was inconceivable that Margarita would sell her house and the two lots just to pay the PNB loan. She would have necessarily retained one parcel of land which she could have called her own.
- 3. The acknowledgement receipt signed by Reynaldo Lopez showing that they were paid by Margarita the sum of P30,000.00 is quite telling.
- 4. The Spouses Lopez never paid the monthly amortization. If they were truly the owner, then they would have protected their own property from being foreclosed.
No
doubt in this case, the Spouses Lopez took advantage of Margarita's
advanced age and urgent necessity for money, which explains why she agreed to
sign the documents without being fully aware of their meaning and contents.
"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." What was intended to be a mere loan so as to enjoin the
foreclosure by the bank of her property, ended up as a transfer of property to
the Spouses Lopez, which was not the real intention and agreement of the
parties in the first place. This is a fact which the
Spouses Lopez cannot deny. From all indications, the
Spouses Lopez were quite dishonest in attempting to appropriate the
property as their own when this was not their agreement with Margarita.
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