Dino vs.

Jardines
G.R. No. 145871 January 31, 2006

FACTS: Petitioner Leonides filed a petition for Consolidation of Ownership with the RTC of Baguio City alleging that on January 31, 1987, respondent Jardines executed in her favor a Deed of Sale with Pacto de retro over a parcel of land with improvements which amounted to P165,000.00. It was stipulated that the period for redemption would expire in six months or on July 29 1987 however none among Dino and his heirs were able to redeem the property. Jardines countered that the true contract of the parties was that of a loan and the deed with pacto de retro sale was a mere security to such loan. The amount of the property was around half a million and respondent averred that it was unthinkable for her to sell the property for only P165,000.00 In fact, the loan was even covered by interest at the rate of 9% to be paid monthly. The court rendered its decision declaring the contract as one of deed of sale with right to repurchase or pacto de retro and that petitioner acquired whatever rights Jardines had over the parcel of land, and she now became owner of the same. However, upon appeal to the Court of Appeals, the judgment was reversed with the finding that the contract was one of Equitable Mortgage and not one of Pacto de Retro. Issue: Whether or not the contract was one of Pacto de Retro or an Equitable Mortgage Held: The Supreme Court upheld the ruling of the Court of Appeals. The findings of said court are based on documentary evidence and on admissions and stipulation of facts made by the parties. It was strengthened by the fact that a) respondent is still in actual physical possession of the property; b) respondent is the one paying the real property taxes on the property; and c) the amount of the supposed sale price, P165,000.00 earns monthly interest. Under Article 1602 of the Civil Code: The Contract shall be presumed to be an equitable mortgage, in any of the following cases: 1. When the price of a sale with right to repurchase is unusually inadequate; 2. When the vendor remains in possession as lessee or otherwise; 3. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; 4. When the purchases retains for himself a part of the purchase price; 5. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to usury laws. It was held in the case of Legaspi vs. Ong that the presence of even one of the above-mentioned circumstances as enumerated in Article 1602 is enough basis to declare a contract of sale with pacto de retro as an equitable mortgage. Further, under Article 1603, in case f doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. The circumstances under paragraphs 2 and 5 are present in the case at bar. The property is still in the hands of petitioner and it is clearly shown that intention of the parties was merely for the property to stand as security for the loan.